Asia Dragon Trust has increased its share price by 14.4% in its 2024 financial year to end of August, but currently trades at a 12% discount, according to the AIC.
The yearly results come after Asia Dragon Trust’s proposed merger with Invesco Asia. While net asset value rose 9.3% in the 2024 financial year, up from 2023’s loss of 16.7%, it still performed below the MSCI AC Asia Index return of 12%.
James Will, chairman of the Asia Dragon Trust, said performance stabilised for the trust after a portfolio “reset” when the company combined with the abrdn New Dawn Investment Trust in November 2023.
“I would also highlight that China, which was the biggest detractor from performance over the interim period, remained a key detractor for the full financial year,” Will said.
“As I mentioned in my interim statement, the manager has undertaken a thorough review of the company’s Chinese holdings, and resized exposures where appropriate. This was implemented in view of the near-term headwinds in China, namely, a slower than expected consumer recovery and a still-weak property sector, amid a broader soft macro backdrop.”
During the year to 31 August, Asia Dragon Trust bought back 9.5 million shares for £34.2m. Since August, the trust has bought a further 891,000 plus shares for £3.7m.
By region, investment managers Pruksa Iamthongthong and James Thom identified Hong Kong and China as the largest detractors from performance, pointing towards the remain effects of Covid 19 and saving culture for Chinese consumers.
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“We do like many of the domestic consumption-oriented companies in China. They have been largely insulated from the geopolitical headwinds buffeting the country for years now,” Iamthongthong and Thom said.
“They have also been broadly aligned with domestic policy and the multi-year effort to shift China’s economic growth model away from a reliance on exports and investment to one that is domestic consumption-driven. Most importantly, many of these companies are evidently high-quality stocks with great brands, superior margins and return metrics, healthy cashflow and balance sheets. They still offer huge long-term growth potential tied to the rise of the Chinese middle class.”
The troubles in China led to the team exiting holdings including China Tourism Group Duty Free, GDS, Glodon and Wuxi Biologics in an overall reduction of exposure to the market.
Asia Dragon Trust and Invesco Asia proposed its merger on 28 October, to be renamed Invesco Asia Dragon. The deal is anticipated to become effective in early 2025.
