30th May 2019 12:01
LONDON (Alliance News) - Schroder Oriental Income Fund Ltd on Thursday reported a drop in net assets at the end of the first half but was able to outperform its benchmark index.
At February 28, the fund's NAV per share stood at 242.62 pence compared to 252.94p at August 31, a 4.1% decrease. Compared to the same point 12 months ago, Schroder Oriental's NAV per share was down 4.9%.
The fund's net assets fell 2.1% to GBP628.9 million in the first half from GBP642.7 million a year ago. Schroder Oriental declared two interim dividends, totalling 3.60p - a year-on-year rise of 5.9%, in the interim period.
Schroder Oriental's NAV total return in the first half was negative 1.5%, outperforming its benchmark index - the MSCI AC Pacific ex Japan Index - which lost 2.9% in the same period.
The fund said its performance represents a "volatile period" for the Asia regional markets.
"Unlike previous reports, the impact of foreign exchange rates on the value of the portfolio has been minimal. Concerns over tightening global liquidity, a stronger dollar, slower growth across developed markets outside the United States, slowing data from China, rising trade tensions and weaker trade trends weighed on regional markets in the latter months of 2018," the fund's investment manager said.
Schroder Unit Trusts, the investment manager, continued: "Stock selection was more resilient, particularly in Australia, China, Korea, Thailand and Singapore, partly offset by shortfalls in New Zealand and Taiwan. Country positioning overall was also positive, primarily thanks to our overweighting in Hong Kong. The position in Japan and underweighting in China detracted."
The manager noted its stock picks in Indonesia and Hong Kong were the "outstanding performers".
"Hong Kong, Australia, Taiwan and Singapore remain significant exposures in the company's portfolio, and have been joined by Korea where we added to the holdings over the period. We somewhat reduced the China exposure - although it remains just above 10% of the company's portfolio. Although it remains a small exposure in absolute terms, we added to Japan to continue to take advantage of stock opportunities. We closed the period with gearing of 5.5%, slightly above the level six months ago," the manager added.
Looking forward, Chair Peter Rigg said: "As in previous years, the majority of companies in our portfolio have continued to increase their dividends in local currency terms. Such consistency is reassuring as these increases are a key metric for us. We believe that we have the investment strategy - and the income reserve - to meet our goals provided the portfolio companies continue to maintain or increase distributions."
"There will always be macro-economic uncertainties, but overall I believe the economies of the Asian region continue to provide a dynamic environment which is supportive of the company's objectives and I look forward with confidence to the second half of the financial year," Rigg added.
Shares in Schroder Oriental were up 0.9% Thursday at 248.20 pence each.
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