Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Asia Dragon. 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
DGN offers core exposure to a fast-growing region…
Overview

Asia Dragon (DGN) is intended to provide core long-term exposure to the exciting growth potential in Asia. Adrian Lim and Pruksa Iamthongthong of the abrdn Asian Equities Team aim to identify high-quality businesses which can grow faster than the market over the long run. Finding growth opportunities is key, but the managers are sensitive to the valuations they buy at. Adrian and Pruksa aim to be long-term in their thinking and have been using the recent volatility in Asia to add to their preferred stocks which have sold off and to secular growth areas which have hitherto been prohibitively expensive – like green energy, as we discuss under Portfolio.

DGN has outperformed the index considerably over the long run, as we outline in the Performance section. Absolute returns have been negative over the past year as Asia has sold off, led by China. DGN held up reasonably well until a crash in the shares of the Chinese internet-related stocks hurt some of its largest positions. However, Adrian and Pruksa believe they have the market leaders in these industries, and the valuations have become even more attractive. The Discount is in absolute terms wide at 11.4% at the time of writing.

DGN’s portfolio is best characterized as balanced: the trust tends to have a quite neutral geographic spread and a mixture of growth and value characteristics with highly active single stock positions. This is intended to provide steady long-term outperformance rather than boom and bust cycles.

The trust tends to run with a modest level of gearing to enhance long-term returns and was 10.3% geared at the end of February.

Kepler View

DGN looks to be an interesting long-term Asia holding which provides exposure to the growth potential in the region without taking massive country, style or sector bets. That said, there is a bias to growth stocks rather than value versus the index, which could hurt in certain market environments and has held back relative returns in 2021 and 2022. We note investors buying now are getting a higher beta animal than they would have five years ago, with greater exposure to e-commerce, technology and to China leading to greater market sensitivity, but equally creating a portfolio with more exposure to growth in the digital space as well as traditional emerging market themes such as consumption growth and urbanisation.

We think the quality focus of the portfolio could prove attractive in the current market environment. The global economy is still recovering from the pandemic, and the war in Ukraine and the return of lockdowns in China have thrown further spanners into the works. In a tough economic environment, it should be market leaders and the companies with pricing power that can turn it to their advantage. While DGN’s discount is not wide in historical terms, it is in absolute terms, and following the sell-off of the past year, the portfolio itself is arguably cheaper than it was.

Bull

  • Blend of growth and value characteristics plus geographical spread provides core exposure to Asian markets
  • The quality approach should ordinarily lead to outperformance in troubled markets
  • Asian equities are relatively cheap after a poor year for returns

Bear

  • Higher exposure to technology has brought with it higher beta than the trust had in the past
  • Structural gearing, although modest, can increase downside risks (while helping on the upside)
  • The portfolio has high exposure to China, with concomitant political risks
Continue to Portfolio

Fund History

06 Apr 2022 Fund Analysis
DGN offers core exposure to a fast-growing region…
25 Mar 2022 Slides and Audio: Asia Dragon
Download the presentation and listen to the audio from our 'Ideas for your ISA' virtual Spring event on 16 March...
23 Mar 2022 Fifteen ideas for your ISA
Slides and audio from our event last week, featuring fund managers running money in every major market in the world...
08 Dec 2021 We are the (ESG) champions
Investment trusts tend to be amongst the best-performing ESG strategies in the combined open- and closed-ended universe…
09 Sep 2021 Fund Analysis
DGN offers core exposure to high quality Asian companies and trades on a wide discount…
25 Aug 2021 Is the UK’s debt a ticking time bomb?
Our analyst argues Rishi is right to worry about government debt and borrowing…
31 Mar 2021 East End boys and West End girls
Our analysts debate whether the US or Asian stock markets will deliver the best returns over the next decade…
24 Feb 2021 Fund Analysis
DGN has returned to form with strong five-year performance despite extremely volatile markets…
08 Sep 2020 Fund Analysis
DGN’s focus on quality could prove attractive if the economic situation in Asia deteriorates…
26 Aug 2020 Trump v. Biden
Two of our analysts debate who will win the US election and what that means for markets…
24 Mar 2020 First in, first out?
We ask whether the brave should be raising their allocation to Asia...
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...
13 Feb 2020 Fund Analysis
DGN has been performing strongly thanks to good stock-picking…
28 Aug 2019 Quality street: can the dominant style continue to outperform?
For several years, quality as an investing style has dominated, outperforming both value and growth. We examine why the case for quality remains strong and the importance of taking an active approach…
12 Aug 2019 Fund Analysis
This Asia focused trust remains on a far wider discount than its peers despite a marked improvement in performance...
10 Oct 2018 Information overload
Our analysis shows the long-term case for emerging markets remains largely unaffected by much of the negative newsflow surrounding the sector...
02 Oct 2018 Fund Analysis
This Asia Pacific ex Japan trust has undergone a significant transformation in recent years, with exposure to technology and China reflecting a new tilt towards quality...
26 Jan 2016 Fund Analysis
26 Jan 2016 Buy with confidence
We employ a new technique to reveal five trusts on discounts which offer the cheapest entry point in a decade...
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