2nd Nov 2018 11:49
LONDON (Alliance News) - Edinburgh Dragon Trust PLC said Friday its net asset value slightly outperformed its benchmark in the year ended August, as the company's Chairman Allan McKenzie announced that he will his retire in July 2019.
The FTSE 250-listed Asian-focused investment trust believes the region has learned from the 1997 financial crisis as it faces new "robust challenges"
Edinburgh Dragon's net asset value per share at the end of the financial year was marginally lower at 421.54 pence. The trust's net assets decreased 2.4% to GBP788.0 million from GBP807.3 million the year before.
For the year ended August, the trust's net asset value total return increased by 2.3%. Edinburgh Dragon's benchmark, the MSCI All Country Asia - excluding Japan - Index gained 2.2% in the same period.
Edinburgh Dragon declared a final dividend of 4.00p, a 21% increase on the 3.30p paid last year.
"Like the rest of the emerging markets, the situation in Asia appears bleak at first glance, especially in view of the US dollar liquidity crunch, the US induced trade war, the tensions in the South China Sea and the Fed's planned interest-rate hikes," said Mckenzie.
He continued: "Deeper analysis suggests that Asia does not face the same challenges as those emerging economies currently under such close scrutiny. This is because none of the Asian countries is in the same boat as those in the other troubled regions, having learnt well the lessons from the 1997 financial crisis."
McKenzie believes that due to inflation being "relatively low", the economic growth in the region is "still resilient" with central banks being "uncompromising" in their approach.
Edinburgh Dragon's portfolio benefited from an increase in exposure to Chinese equities. Half of the trust's top ten contributors to portfolio performance were from China, including China International Travel, China Conch, Kweichow Moutai, Shanghai International Airport and China Resources Land.
These companies are benefiting from China's emerging structural technology and growing domestic consumption trends.
In the period, the region was disrupted by three main factors: the squeeze on US dollar liquidity, US hostility resulting in tariffs and the heightened worry of "contagion afflicted" emerging markets.
In advance of the trust's three yearly continuation vote at its annual general meeting on December 17, Edinburgh Dragon has proposed a tender offer for 30% of the company's issued shares at a discount of 2% to formula asset value, which is NAV less the costs of the tender offer.
Edinburgh Dragon said its largest shareholder, City of London Investment Management, has provided an "irrevocable undertaking" to vote in favour of the continuation vote and tender offer.
The trust said it "strongly recommends" shareholders vote in favour of the continuation resolution.
The tender offer is subject to the continuation vote being passed.
Edinburgh Dragon has also appointed James Will as non-executive director on October 1. Will is the former chairman of law firm Shepherd & Wedderburn LLP and currently is chairman of Scottish Investment Trust.
Shares in Edinburgh Dragon Trust were up 1.8% at 347.00 pence each.
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