Results analysis from Kepler Trust Intelligence

Schroder AsiaPacific Fund PLC

21 May 2024

 

Schroder AsiaPacific (SDP)

21/05/2024

Results analysis from Kepler Trust Intelligence

Schroder AsiaPacific (SDP) has released its interim results for the period ending 31/03/2024. Over the period, the trust saw its NAV increase by 5.7% on a total return basis, ahead of 5.3% for the trust's benchmark, the MSCI AC Asia ex Japan Index. The AIC Asia Pacific sector delivered a weighted average return of 7.9% over the same period.

Relative performance has primarily been driven by good stock selection. Highlights include the allocations to technology firms particularly in Taiwan. Philippines, Indonesia and Hong Kong all provided positive stock selection also.

However, an overweight allocation in Hong Kong detracted from performance. Similarly, whilst their Indian holdings performed well, the underweight position impacted relative returns.

The underweight allocation to China did contribute positively as the country struggled. The country's difficulties have contributed to the region underperforming global markets over the period and adding to negative sentiment towards the region.

Despite the relative outperformance, the discount on the shares widened. The board continued to undertake share buy backs with over 3.5m shares bought back in the period.

Chair James Williams commented on the changing outlook saying "the outlook is again better positioned for [Richard and Abbas] to find opportunities to capitalise on the current conditions."

Kepler View

Schroder AsiaPacific (SDP) managers Richard Sennitt and Abbas Barkhordar have navigated the challenging period covered by the interim statement well and have delivered another period of outperformance, contributing to long-term relative returns. 

Positives in the period have come from the managers' tech holdings as well as the underweight position in China which has struggled due to a range of factors and contributed to SDP's outperformance.

Both allocations are examples of the managers' stock selection approach which has again been a major driver of performance. This has also come from less mainstream markets such as the Philippines and Indonesia. We believe this demonstrates the strength and depth of the research capability supporting Richard and Abbas.

There have been some drawbacks to relative performance, most prominently from an underweight in India. Whilst it is still one of the largest absolute allocations, the slight underweight has been a drag on relative performance. Furthermore, the managers have an overweight position in Hong Kong which has hurt. This has offset some of the risk of being underweight China, though stock selection was still positive in Hong Kong. The managers believe that the negativity towards China has been priced into stocks though, which could offer some investment opportunities. We note that there has been a strong rally in the region following the period end.

Despite the outperformance and subsequent rally, the discount has remained wide. We believe the current level isn't representative of the managers' stock selection capability, nor does it reflect the NAV performance. As such, we believe the current level could be seen as an attractive entry point for long-term investors.

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