Fund Profile

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Overview
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Overview

Asia Dragon (DGN) owns a portfolio of Asian companies selected for their resilient earnings and strong balance sheets. The portfolio is well-spread across countries and sectors, with important overweights to technology and to more cyclical and value sectors such as financials too. The managers, Adrian Lim and Pruksa Iamthongthong, aim to generate steady long-term growth and moderate the volatility of the region’s markets.

DGN has produced solid outperformance of the index in recent years, as we discuss in the Performance section. The weighting to China and technology has significantly risen over the past five years, which has helped drive performance. However, the portfolio has always remained balanced across styles and sectors. This means it has not kept up with those trusts that have more exposure to these two themes.

Adrian and Pruksa have used the volatility during the pandemic to pick up high quality businesses when their valuations have fallen in systemic sell-offs. New ideas continue to arise (see Portfolio), with green energy being one area of interest, buoyed by the Chinese government’s commitment to net zero by 2060.

Adrian and Pruksa are members of the Aberdeen Standard Asian Equities Team, a locally based team of analysts and managers who take a consistent, disciplined approach to stock selection which places great importance on quality characteristics, valuation and ESG – particularly governance.

Despite its strong recent performance, DGN remains on a discount of 9.7%. This compares to the five-year average of 11.7% but is wide when compared to the sector average of just 5.3%.

Analyst's View

We think DGN is a strong core option for investing in the Asia ex-Japan region. While it does have significant positions in the technology and ecommerce sectors and in China, these are balanced by positions across other themes such as middle class consumption, the development of financial services and the rapid growth in smaller regional economies. This diversity could make it more resilient in any broad-based sell-off or tough economic period.

The managers note that Asian markets are not cheap relative to their history, when measured through the lens of earnings multiple methods, as the pandemic has impacted profitability across the region. In addition to a recovery, they are also continuing to find new ideas for inclusion in their portfolio. This, and a cautiously optimistic outlook, means they are willing to continue to run a modest amount of gearing. We would add that Asia is likely to continue to grow in importance in the world economy and stock markets over the long run, whatever the short-term volatility.

DGN’s focus on quality should, in theory, lead to a portfolio better able to navigate the aftermath of the pandemic, as even if the medical situation is improving there are economic ramifications to work through and companies with strong balance sheets and good competitive positions should do better in a weak economy. However, with a high exposure to China relative to its peer group, the returns in that market are likely to remain critical.

The discount of the share price to NAV may give some downside protection, but we note it is currently narrower than the five-year average. However, performance has improved over that period, and a continuation of that trend could conceivably lead to a re-rating.

bull bear
The revamped strategy has led to a period of better performance
Higher exposure to technology has brought with it higher beta than the trust had in the past
Deep resources and highly experienced management
Structural gearing, although modest, can increase downside risks (while helping on the upside)
The quality approach should ordinarily lead to outperformance in troubled markets
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…
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...
01 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...
View all

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