Risk-averse investors may rightly worry that a trade war between the US and China could crimp the performance of Asian markets, but with 85% of the globe’s population living in Asia and the emerging markets which are expected to generate the lion’s share of global growth in the decades ahead, this diverse continent is simply too big to ignore.
The stamping ground of many great companies with strong fundamentals and fortress balance sheets, Asia offers scope for double-digit earnings growth and exposure to exciting growth themes such as AI, while the region’s equities trade at discounts to comparable US peers.
One collective which looks compelling on a wide 12.6% discount to NAV (net asset value) is Schroder AsiaPacific Fund (SDP), the largest trust by assets among the quartet in the AIC’s (Association of Investment Companies) Asia Pacific sector.
The sector’s best one-year share price total return performer, Schroder AsiaPacific Fund has outperformed its benchmark, the MSCI All Country Asia Index excluding Japan, since launch in 1995, and is one of the 50 trusts which would have made investors more than £1 million had they invested their full annual ISA allowance in the fund from 1999 to 2024, according to recent AIC research.
CASTING THE NET FAR AND WIDE
Investing in Asian equities is never plain sailing, but with the experienced hands of Richard Sennitt and Abbas Barkhordar on the tiller, Schroder AsiaPacific aims to achieve long-term capital growth by investing in a diversified portfolio of around 60 of the best quality companies across Asia. There were 56 rigorously-selected names in the fund at last count.
Bottom-up stock pickers Sennitt and Barkhordar principally invest in companies located in the continent of Asia excluding Japan and the Middle East, together with the Far Eastern countries bordering the Pacific Ocean.
They cast their net far and wide to find the region’s brightest corporate prospects, including in markets as diverse as India, Vietnam, Hong Kong, China, Singapore, Taiwan and Malaysia, not to mention South Korea, Thailand, the Philippines, Indonesia, Pakistan and Sri Lanka.
The managers seek to mitigate the risk of investing in Asia by focusing on quality companies, favouring firms with sustainable earnings, robust balance sheets, efficient capital allocation and good corporate governance.
The bull case for Asia remains strong, driven by a positive economic outlook, long-term growth potential from favourable demographics and a growing middle class fueling strong domestic consumption. And, far from trailing the west, many companies in the region are global leaders in their fields.
FOLLOW THE LEADERS
Albeit London-based, the managers are able to draw upon the rich resources of Schroders’ Asia Pacific equities research team. They seek quality-yet-undervalued companies with the potential to sustainably generate returns above their cost of capital.
Exciting growth themes in the portfolio range from technology leadership and innovation to Chinese consumption and services and Indian finance.
Commonplace among Schroder AsiaPacific Fund’s holdings are technology hardware names, including semiconductor producers in Korea and Taiwan, consumer discretionary and financial stocks, including regional banks exposed to increasing credit penetration in the likes of populous India and Indonesia.
Shares believes investors can draw comfort from the fact the portfolio is spread over multiple countries and industry sectors without any major bias towards growth or value investment styles.
As at 28 February 2025, the fund’s top geographical allocation was to China at 23.3% of assets, though Schroder AsiaPacific is significantly underweight the index, which mitigates some of the country-specific risk, while the next largest allocations are to Taiwan, India, Hong Kong, Singapore and South Korea.
Top 10 holdings include the world’s leading chip manufacturer TSMC (2330:TPE), and fellow Taiwanese fabless semiconductor product powerhouse MediaTek (2454:TPE), as well as Chinese technology conglomerate Tencent (0700:HKG) and South Korean memory chips-to-smartphone maker Samsung Electronics (005930:KRX).
Investors are also buying exposure to India-based financial services giant HDFC Bank (HDFCBANK:NSE) and the largest publicly-traded life insurance group in the Asia-Pacific region, AIA Group (1299:HKG).
Adorned with a five-star rating from research provider Morningstar, Schroder AsiaPacific Fund’s ongoing charge is a reasonable 0.9% and there is no performance fee to complicate cost considerations for investors.
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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