29th May 2020 11:13
(Alliance News) - Schroder Oriental Income Fund Ltd on Friday said it lagged behind its benchmark in the first half of financial 2020, thanks to its underweight position in China.
The FTSE 250-listed company's net asset value total return for the six months ended February 29 was negative 5.4%, while reference benchmark, the MSCI AC Pacific ex-Japan in sterling terms, fell 0.7%.
"The key performance issues have been in Hong Kong and China. The under-weighting in China has been the biggest single factor, compounded by the outperformance of the large-cap internet names which, with minimal or no dividends, are not held in the portfolio," the company's investment manager, Schroder Investment Management Ltd, explained.
Two interim dividend were declared in the half-year period, amounting to 3.80 pence per share compared to 2.30p per share the year prior.
Chair Peter Rigg said: "The Covid-19 lockdowns have adversely affected the operations of many of the companies in the portfolio. While almost none can tell when they will be fully back to normal, in some cases this will lead to cuts in their dividends. That in itself should not be a problem this year for your Company's own dividends - investment income has fallen before, and it is why the board has built up the revenue reserves to nearly nine months of the current level of dividends. The key question is how long it takes for the companies to return to growth.
"The visibility of the company's income prospects will remain hindered for a while, but at this stage I do not want to be too cautious. Asia was hit by the virus first, so parts of it will be among the first to unwind the lockdowns".
Rigg expressed optimism that the company is in a good position to maintain its approach to dividend payment and "return to generating long term capital gains in due course".
Shares in Schroder Oriental were 0.1% higher at 203.17p in London on Friday morning.
By Anna Farley; [email protected]
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