Aberdeen Asian Income Fund posts strong annual results

Yoojeong Oh

Aberdeen Asian Income Fund Limited, a fund managed by Aberdeen Standard Investments (ASI), has posted strong results for the year ended 31 December 2020. 

Over the 12 months ended 31 December 2020, the Company’s net asset value (NAV) increased in sterling terms +12.9%, compared to the MSCI All Countries Asia Pacific ex Japan High Dividend Yield Index’s -1.4% decline over the same period and the MSCI All Countries Asia Pacific ex Japan Index, which increased by +19%.

Over the reporting period the company’s share price’s total return, at 31 December 2020, had increased by +12.1%.

The fund continues to be a “next generation dividend hero” as recognised by the Association of Investment Companies (“AIC”), having raised dividends for at least 10 years.

Four quarterly dividends were declared over 2020. The first three were paid at the rate of 2.25p with the fourth interim at 2.55p for the year, representing a small increase in total dividends from 9.25p to 9.3p for the year.

Charles Clarke, chairman of Aberdeen Asian Income Fund, said: “Aberdeen Asian Income Fund Limited managers remain focused on finding companies that will benefit from the Asian growth story, while also paying an attractive yield…result(ing) in a well-balanced portfolio of defensive and growth companies to deliver attractive returns for shareholders, even in uncertain times.

“The indiscriminate sell-off in March 2020 provided the Investment Manager with opportunities to fine-tune the portfolio. This included taking advantage of any mispricing, as the valuation of high-quality companies fell to attractive levels, allowing the introduction of high-quality stocks to the portfolio at reasonable prices.

“The manager’s bottom-up approach to stock selection helped boost performance, particularly with the company’s increased exposure to the technology and real estate sectors. This drove much of the company’s returns over the year.”

Yoojeong Oh, investment manager, added: “Asia is home to some of the most exciting companies in the world, offering exposure to a variety of future growth themes that continue to support earnings growth expectations in the coming years.

“For example, a digital future needs technology enablers such as Taiwan’s TSMC and Korea’s Samsung Electronics which provide the key building blocks for all devices that support our ability to access 5G networks, to work from home, to home school our children, to digital interconnectivity and growing cloud storage needs. Having taken some profit from our TSMC position this year we have reallocated into undervalued companies that are set to benefit from economies re-opening.”

On the outlook, Charles Clarke continued: “The return of lockdowns as new infections spike and the discovery of more transmissible strains in many countries are an important reminder that the pandemic is not yet behind us. Already, stock markets globally are starting to wobble despite the start of Covid-19 inoculations.

“The reality is that the rollout of vaccines at scale has been patchy and distribution challenges remain in many countries. Monetary and fiscal support extended by governments and central banks worldwide, while reassuring, is finite and there is uncertainty about how much longer some of these policies can be sustained. Furthermore, the last few weeks of the Trump administration added more volatility to markets due to the confusion around Executive Orders restricting US investments into select Chinese companies.

“In Asia, many countries have fared better than their Western counterparts, have relatively healthier fiscal positions and are further along the re-opening journey; schools and offices have already been re-opened and selective travel corridors are successfully operating with appropriate quarantine measures.”

He added: “Moreover, the recent signing of the Regional Comprehensive Economic Partnership agreement among Asia-Pacific nations and the EU-China Comprehensive Agreement on Investment along with several others already in place, should greatly equip the region for trade, investment and infrastructure financing. Additionally, with the new US President at the helm, geopolitical tensions with China could ease. Although the strategic rivalry between the two is likely to persist, there are hopes for a more constructive dialogue, which would help improve market stability.

“Having said that, the drivers that underpin Asia’s long-term growth story still hold true. A relatively young population, rising wealth levels and more sophisticated consumption patterns are long-term trends that will remain despite the near-term uncertainties. These will support the growing adoption of technology, which will in turn, underpin the promising prospects for companies in the region.

“The company’s managers will remain focused on selecting quality companies with solid fundamentals and robust ESG standards, underpinned by an attractive dividend yield. Whilst 2021 has seen a correction in growth names on concerns of rising bond yields, this is coming off a low base and neither high interest rates nor high inflation are going to be welcomed by any policy maker at this time.”

Mr Clarke concluded: “Aberdeen Asian Income Fund managers remain focused on finding companies that will benefit from the Asian growth story, while also paying an attractive yield. This should result in a well-balanced portfolio of defensive and growth companies to deliver attractive returns for shareholders, even in uncertain times.

“This combination of capital growth coupled with an attractive 4.1% yield are particularly welcome against the backdrop of low interest rates at home.”

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