Fund Profile

Aberdeen Standard Asia Focus 11 February 2020

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by abrdn Asia Focus. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
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Overview

Aberdeen Standard Asia Focus (AAS) aims to identify market leading businesses in Asia with high and sustainable earnings when they are trading on attractive valuations and invest in them for the long term.

In 2018 the trust implemented a number of changes intended to improve long-term performance, after which it has become more concentrated, increased its weighting to technology companies and reorganised the investment team to be more ruthless with stocks that don’t match up to expectation. Hugh Young has taken more personal control and responsibility for the trust’s portfolio, although he has worked on the team since AAS was launched in 1995, and heads up Asia at Aberdeen Standard.

Over the long term, AAS’s performance has been outstanding. Over ten years, it has more than doubled the average annual NAV total return from the MSCI AC Asia Pacific ex Japan Small Cap Index. However, the trust did underperform in the 2016 and 2017 rally in China and tech-related names. Performance has improved since these changes were made to the process, helped by a change in market dynamics (as we discuss in the Performance section).

Since the changes, which were accompanied by a change of name from Aberdeen Asian Smaller Companies, the discount has been significantly tighter on average, although it is still wide at 11.5%. This is in line with its closest small-cap peer, but wider than the average of the all-cap AIC Asia Pacific sector, which is 7.8%.

Dividend growth has been strong in recent years, and the board does aim to maintain or grow the dividend. However, the yield is relatively low at 1.8%.

Kepler View

The changes made to the process since late 2018 – and which are now almost fully completed – have resulted in a more balanced portfolio, in our view. However, the trust still maintains the traditional characteristics which have served it well over the long term: a focus on quality above all else, and then on buying at attractive valuations. As we understand it, what has really changed has been the appreciation of value in higher growth names, so some loosening of the manager’s definition of value in certain sectors, rather than a weakening of the quality characteristics.

The portfolio still displays highly attractive, resilient characteristics in our view: low leverage, high return on equity and return on assets, and a reasonable level of valuations. The rock-solid balance sheets of the underlying companies should protect the portfolio in any falling market, and should also ensure the companies benefit from operating leverage and the ability to invest in themselves in any rising market. Over the long run we would expect these advantages to lead to good results for shareholders.

Taking a long-term view, we think the discount is attractive as an entry point. Investors have flocked to large caps in Asia in recent years as they have led the market – chiefly internet and tech-related names. This has led small-cap trusts such as AAS to trade on wider discounts than large-cap-focussed trusts. However, we would expect long-run returns to be higher from small caps, although it is hard to pinpoint exactly when the current trend might change.

bull bear
The investment process has been highly successful over the long term
Structural gearing increases the downside risks
A reinvigorated portfolio, under Hugh Young’s personal control
Highly active country allocations can lead to large under- or overperformance at times
Region-wide discount to NAV
Yield is low
Continue to Portfolio

Fund History

18 Jul 2024 abrdn Asia Focus
Gabriel Sacks
Join this webinar as part of our July online series 'Small caps - take two' hosted by the team at Kepler Trust Intelligence...
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25 Jun 2024 Fund Analysis
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03 May 2023 Fund Analysis
AAS offers a lower-risk approach to the high-growth potential of Asian smaller companies…
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11 Oct 2022 Fund Analysis
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20 Apr 2022 On the hunt
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04 Feb 2022 Fund Analysis
AAS’ board is building on a period of strong performance with crucial improvements to the strategy…
29 Sep 2021 Slings and arrows
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28 Jul 2021 Fund Analysis
AAS offers exposure to exciting growth companies in Asia, and has traditionally done very well after global crises…
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30 Jun 2021 Inflation – a real threat or hot air?
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10 Mar 2021 Spring Conference '21
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04 Mar 2021 Slides and Audio: Aberdeen Standard Asia Focus
Download the presentation and listen to the audio from our 'Ideas for your ISA' Spring Conference on 02 March...
04 Feb 2021 Fund Analysis
AAS’s quality approach to Asian small caps saw it outperform after the last two global crises…
24 Sep 2020 Bull in the Chinese market?
The Chinese stock market has been a notable winner thus far in 2020. Should investors stay the course, or take profits?
20 Aug 2020 Fund Analysis
AAS’ high quality portfolio should be robust in a troubled economic environment...
05 Mar 2020 Don't panic: the case for investing in Asia this ISA season
We examine the relationship between stock market and GDP growth, before debating the case for an allocation to Asia...
11 Feb 2020 Fund Analysis
AAS has been reinvigorated following Hugh Young taking more personal control…
21 Aug 2019 All change: a closer look at the AIC's revised sectors
We examine the AIC's revised sector classifications and discuss whether further improvements could be made...
05 Aug 2019 Fund Analysis
Aberdeen Standard Asia Focus (AAS) aims to generate long-term capital growth from a valuation-sensitive approach to Asian smaller companies..
01 May 2019 Sweet or sour?
Three months in, we check up on the progress of our discount opportunities portfolio...
13 Feb 2019 Sweet treats
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04 Feb 2019 Fund Analysis
The trust returned to form last year with strong relative returns as its focus on quality was rewarded in rough markets...
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