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Fund Profile

Disclaimer

This is a non-independent marketing communication commissioned by abrdn. 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
ANII outperformed the MSCI India benchmark in 2023…
Overview

abrdn New India (ANII) offers exposure to the outstanding growth potential in India via a portfolio of predominantly large-cap, high-quality companies. Managers Kristy Fong and James Thom implement the long-standing process of the Asian Equities Team in the Indian market, looking for companies with strong balance sheets, sustainable earnings potential and good governance.

India has performed well in recent years, buoyed by significant reforms by the Modi government and geopolitical tensions between the US and China. A huge infrastructure spend is currently underway which is boosting companies providing materials for it, as well as those in the real estate sector, and ANII has benefited from positions in both industries over 2023, a year in which it outperformed the market (see Performance).

Whilst they are conscious of global economic challenges in the short term, on a three-to-five-year view, the managers have a very positive outlook for the market and have been broadening their holdings in the financials and industrials sectors to take advantage. They also note some exciting developments in the broadening of the Indian stock market to include more digital businesses and more in the renewable energy space.

ANII trades at a discount of 19% at the time of writing. The board has been active in buying back shares, whilst there is also a tender offer scheduled to be made in 2027 if performance targets are not met (see Discount), and a continuation vote to be held in the same year.

One reason for the discount is likely to be the disappointing medium-term Performance. However, we note that performance has tended to be weaker when the market has been led by companies of lower quality or poorer governance, which speaks to the efforts Kristy and James take to avoid the risks in these companies.

Analyst's View

The Indian growth story is one of the most attractive investment opportunities in the emerging markets, in our view. It is striking that the real estate market has been healthy and GDP growth strong even whilst interest rates have been significantly hiked to tackle inflation. This speaks to the huge advantages India has: a young and educated workforce, a sophisticated stock market, and business culture operating in a better regulatory environment than in the past, and a strong geopolitical position which sees Western corporates keen to find alternative partners to China. Whilst Kristy and James are wary of valuations in the short term, they still see outstanding opportunities in certain sectors and companies for earnings growth over the medium term.

ANII’s quality-growth approach brings some defensiveness which we think could be attractive for a core holding. Whilst performance has been disappointing at times, much of this has been down to not holding companies of questionable governance standards. Nonetheless, ANII outperformed the index in 2023. We think the wide discount adds to the attractions at this point, with a tender offer possible in 2027 should the relative performance not improve.

Bull

  • ESG pedigree has proven its ability to add value
  • Bias towards quality provides defensive characteristics
  • Trades at a wide discount, with buybacks and tender offer to support the rating

Bear

  • As a single-country emerging market fund, it has higher political risk and volatility
  • Has underperformed over the medium term
  • Gearing can add to downside losses
Continue to Portfolio

Fund History

27 Feb 2024 Fund Analysis
ANII outperformed the MSCI India benchmark in 2023…
04 Aug 2023 Investing in Indian stocks, with ANII Manager Kristy Fong - Podcast: Trust Issues #20
We talk high valuations, the upcoming election, and corporate governance...
28 Jul 2023 Fund Analysis
ANII’s wide discount may present an attractive entry point…
03 Mar 2023 Fund Analysis
ANII’s wide discount may present an attractive entry point…
15 Sep 2022 Same same but different
We discuss the case for emerging markets at different stages of development…
03 Aug 2022 Fund Analysis
High quality Indian companies at a discount...
30 Mar 2022 You say tomato…
Do it yourself or put it into a global fund and leave it to the experts - our analyst debate the merits of each approach...
01 Feb 2022 Fund Analysis
ANII aims to invest in world-class, well governed companies at the heart of India’s growth…
13 Oct 2021 Beyond the Middle Kingdom
As momentum falters in the emerging markets powerhouse, we examine the options for investors outside China...
28 Jul 2021 Fund Analysis
ANII offers exposure to exciting growth stories in India…
21 Jan 2021 Fund Analysis
ANII is the top-performing India trust over five years…
07 Oct 2020 Five ways to play Indian equities
India is struggling economically – but could there be a value opportunity in the stock market?
09 Sep 2020 Fund Analysis
ANII’s quality characteristics could stand it in good stead in a weak economic period…
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...
26 Feb 2020 Fund Analysis
ANII is the top-performing Indian trust over the last five years…
16 Jan 2020 Drifting apart: how emerging markets have become less correlated
We examine how correlations between different emerging markets have evolved, and whether single country strategies could diversify returns going forward....
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…
20 Aug 2019 Fund Analysis
Aberdeen New India buys high quality stocks exposed to the fast-growing Indian economy….
12 Dec 2018 Fund Analysis
The trust has outperformed the market handsomely over the past five years thanks to strong stock selection...
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