abrdn New India 28 July 2023
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.
To achieve long-term capital appreciation by investing in companies which are incorporated in India, or which derive significant revenue or profit from India.
abrdn New India
James Thom; Kristy Fong; Pruksa Iamthongthong;
Association of Investment Companies (AIC) Sector
Dividend Distribution Frequency
Latest Market Capitalisation
Latest Net Gearing (Cum Fair)
Latest Ongoing Charge Ex Perf Fee
(Discount)/ Premium (Cum Fair)
Daily Closing Price
abrdn New India Investment Trust's (LON:ANII) managers aim to invest in the highest-quality companies which are exposed to the outstanding long-term secular growth trends in India. Managers Kristy Fong and James Thom, of the abrdn Asian Equities Team, look for companies with sustainable earnings growth potential, strong balance sheets and, crucially, good governance. The focus on quality means there is a bias to less cyclical companies which can grow sustainably over time.
Kristy and James argue that India is in a strong position over the short to long term. The macro fundamentals look stable, while a reforming government has created a pro-business environment and multinationals are looking at India as a site for investment. They highlight a surge in capex, boosted by government expenditure, which is creating opportunities for a number of Portfolio companies.
ANII trades at a discount of 20% at the time of writing. The board has been active in buying back shares, while 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, there are encouraging signs that the market is shifting back to favour ANII’s style. In particular, the decision on governance grounds to not hold Adani Group companies or Reliance Industries has been helpful over recent months, which we think may be a sign that governance issues are more important to investors than they have been in recent years.
We think India is one of the most exciting growth stories in markets today. It has a young, educated population and the current government has created a business-friendly environment, which seems to be creating opportunity for companies and encouraging investment. Additionally, the global geopolitical situation is playing into India’s hands: not only is the country winning manufacturing business from China, but it is in a position where it can trade with both the US and its rivals. India looks set to see a rapid rise in living standards in the coming years, which will provide earnings growth opportunities for companies.
ANII has an attractive strategy for investing in this growth story. The focus on governance has added value for investors in recent years, through allowing the managers to avoid the fallout from the Adani Group. We think this is a valuable reminder that ignoring the quality of governance can be dangerous in the long term, even if it leads to good returns in the short term. Additionally, we think the focus on dependable earnings streams is an attractive characteristic for a long-term core strategy, as it should in theory bring resilience and lower volatility. Performance has been disappointing in recent years, but we think this is, in part, due to style. High-growth companies and then value companies have been in favour, while more defensive growth companies have not. We think this could change as the global economy adjusts to higher interest rates and weak growth in key countries, and this could provide scope for improved performance.
- 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
- 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