Nigel Cayzer

The company’s results have been published in full this morning and revealed that its net asset Value (NAV0 total return also increased by 21.2%. This compares with the MSCI AC Asia Pacific ex-Japan Small Cap Index’s advance of 20.5% and the 19.7% return of the large cap MSCI AC Asia Pacific ex Japan Index.

The firm’s share price discount to NAV narrowed slightly, from 11.4% to 11.0%. At the time of publication, the discount had narrowed further to 9.3%.

Over the past decade, the company’s NAV has returned 9.2% on an annualised basis. This compares to the returns of 5.5% and 8.7% of the MSCI AC Asia Pacific ex-Japan Small Cap Index and the large cap MSCI AC Asia Pacific ex Japan Index respectively.

With global stock markets enjoying a remarkable rebound in the six months to 31 January 2021, the prospect of a global economic recovery came with a greater risk appetite for Asian small caps, which began to rise faster than large caps during the review period.

This reversed the trend of the past three years, when Asian small caps rose by 14%, trailing their larger counterparts which gained 27%. Against this backdrop, the Company’s net asset value total return saw an increase of 21.2% (in sterling terms).

This compared to returns of the MSCI AC Asia Pacific ex-Japan Small Cap Index of 20.5% and 19.7% of the large cap MSCI AC Asia Pacific ex Japan Index.

Nigel Cayzer, chairman of Aberdeen Standard Asia Focus Plc, said: “Smaller Asian companies’ shares rose sharply over the six months, with gains across all markets. Investors welcomed the rollout of vaccines in many countries, alongside improved prospects for the region’s economic recovery.

“Adding to the cheer were hopes that the US$1.9 trillion pandemic relief bill proposed by US President Joe Biden’s administration would boost demand for their exports.

“On the economic front, the region generally fared better than countries in the western hemisphere. Among markets that comprise a sizeable portion of Aberdeen Standard Asia Focus PLC holdings, Taiwan did particularly well. The island grew even faster than China, the only major economy to expand last year. Taiwan and South Korea have a dominant role in the semiconductor supply chain and benefited from accelerated demand for electronics during the pandemic.”

A recent introduction to the portfolio, Singapore’s Nanofilm Technologies, boosted performance. Its competitive edge lies in its proprietary technology in coatings for smartphones, laptops and tablets.

The coating adds both functional and aesthetic characteristics, improving the parts by making them more resistant to wear and tear. Although its revenues are largely derived from the Apple supply chain, this also means its growth is hitched to the popularity of Apple’s products.

The company’s investment managers have said they are confident of its long-term prospects, as it is on the cusp of commercialising new products in existing markets while expanding into new ones. Nanofilm is one of several companies introduced during this period in interesting technological niches that are well-placed to be winners in the longer term.

Mr Cayzer commented on the outlook for the Company and region, adding: ““Swift responses to curb the spread of the coronavirus have set the stage for a sharp rebound in Asian economic activity, and consequently corporate earnings. In most of North Asia, life has largely returned to a new normal.

“Moreover, the rest of Asia is supported by resilience in China, given its importance as a key trading partner to many regional markets. There is also optimism around a wider economic recovery, given the vaccine rollouts and the prospect of greater US federal spending, following last year’s loose monetary policy worldwide. With these in mind, I believe Asian smaller companies are well-positioned to outperform after a long period of underperformance relative to their larger counterparts.”

He concluded: “More broadly, Asia remains the powerhouse of global growth, with huge potential for wealth creation over the coming decades. The portfolio offers exposure to sectors supplying hardware, software and platforms for the latest consumer electronics, artificial intelligence and the Internet of Things.

“Moreover, it is also positioned in more traditional sectors, addressing the region’s increasing urbanisation and infrastructure needs, as well as rising demand for healthcare and more aspirational consumer goods. Your Manager’s focus on quality businesses ensures that the portfolio is well-placed to benefit from these trends and the overall growth in the region.”