Results analysis from Kepler Trust Intelligence

RNS Number : 3485K

JPMorgan Asia Growth & Income PLC

20 December 2022

 

JPMorgan Asia Growth & Income (JAGI)

20/12/2022

Results analysis from Kepler Trust Intelligence

For the financial year ending 30/09/2022, JPMorgan Asia Growth & Income (JAGI) reported a NAV total return of -16.2% and a share price return of -17.2%. The MSCI All Countries Asia ex Japan Index, JAGI's benchmark, declined by -13.9% over the same period.

Performance during the year reflected an extremely tough period for Asian equities, which impacted JAGI particularly because of its overweight to China and limited exposure to India, one of few bright spots in the region. With the exception of India, every market that JAGI invests in was trading below its 10-year historical price-to-book average on 30/09/2022.

Dividends for the period totalled 16.5p. JAGI pays a quarterly dividend, equal to 1% of NAV on the final day of each quarter. This does mean dividends will rise or fall in line with performance but it also gives the managers greater flexibility when making investment decisions.

Chairman of the Board Bronwyn Curtis said: "Asia's long-term growth prospects remain bright. JPMorgan Asia Growth and Income is a low-cost way for investors to gain diversified exposure to the region's best businesses, while also providing shareholders with a competitive income of approximately 4%. And with share price valuations now at historical lows in many regional markets, we share the Investment Managers' excitement about the many opportunities now available to purchase interesting, world-class companies in various sectors across Asia, at particularly attractive prices."

Kepler View

JPMorgan Asia Growth & Income (JAGI) offers investors an option for core, long-term exposure to companies in Asia. The trust makes use of its closed-ended structure to pay dividends from capital, with an objective of paying a quarterly dividend equal to 1% of NAV on the final day of the quarter. This gives the managers flexibility when investing, meaning they can tilt the portfolio towards more growth-oriented companies if they believe this is where the best opportunities lie, without having to worry about whether those companies will generate enough income to meet dividend objectives.

Asian markets have been rocked this year, partly because of the war in Ukraine which drove up commodity prices - a serious problem for energy importers like India and China. Another major factor has been China's ongoing 'Zero Covid' policy, which has created huge supply chain jams and prevented factories and ports from operating. Outside of China, a global economic slowdown may be starting to dent exports from countries across the region, including South Korea, Taiwan and India. For JAGI specifically, being underweight to India, which the managers argue is expensive relative to peers and historical levels, and having exposure to higher growth companies in China and Taiwan led to underperformance.

Despite trading at a 1.2% premium in December 2021, JAGI's discount has since widened to approximately 10% as at 14/12/2022, likely reflecting investors' fears about further near-term volatility. That's understandable but we think the long-term prospects of Asia remain positive and note that the managers have a strong track record of investing in the region. We think the trust is a solid option for Asia exposure and it's possible the discount will tighten if we see a positive turn in investor sentiment in the region.

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