abrdn Asia Focus plc 9
Strategic Report Governance Overview General Portfolio Corporate Information Financial Statements
It is also easy to forget the multitude of administrative
matters that need attending to on a daily basis to ensure
the smooth running of the Company. Over the years, the
staff at abrdn have provided a seamless and efficient
service and I would like to thank Charles Mearns, who has
acted as Company Secretary for over 20 years and
William Hemmings, who as head of Investment Trusts for
18 years has been a source of valuable advice together
with my thanks to all the support staff in London, Aberdeen
and Singapore both past and present.
In my last Annual Report as Chairman before stepping
down in November, I am pleased to see the Trust has in
place the necessary measures to take it to even greater
strengths in the next 25 years and beyond.
Overview
Volatility was already creeping into global markets even
before the onset of Russia’s war in Ukraine. In 2022, central
banks have been preoccupied with the prospect of
recession and fending off inflation caused by rising
commodity prices. Asian markets have proved more
resilient during this unsettling period compared with other
emerging markets. Inflation has been more moderate
and, with post-Covid restrictions lifting, returning tourists
and increased consumer spending from pent-up
demand have led to a notable recovery in Southeast
Asia, for example.
China was an exception. The country’s ‘zero-Covid’ policy
meant lockdowns continued to be imposed as authorities
tried to contain new virus outbreaks. This dampened
domestic activity and put further pressure on an economy
that was already slowing as a result of a weak property
market and tight regulatory conditions. As a result, China
was among the region’s worst performing markets during
the period. It will be interesting to see if the much heralded
20th Communist Party Congress at the end of this month,
besides extending the term of office of President Xi, signals
any significant changes in policy; there have been hints of
Central Bank easing of policy which the team in Singapore
will be monitoring closely.
The Company’s relatively light exposure to China buoyed
performance relative to the index, but we believe the
country remains a great opportunity for diligent stock
pickers. With an indiscriminate sell-off in the market, your
Manager added two new holdings, capitalising on more
attractive valuations and reflecting a desire to gradually
increase the Company’s exposure to China (you can read
more about this in the Investment Manager’s Review
section of this report).
Two changes implemented to your Company this year will
help in this regard. The first is the removal of the US$1.5
billion market cap limit (at the time of initiation), which was
agreed at the General Meeting in January 2022. This limit
was proving a little restrictive in larger markets – especially
China – and the Board believes that the removal of the
cap will give your Manager greater flexibility to invest in
the most compelling smaller companies in the region.
Secondly, and as referred to above, we have
strengthened the investment team. During the period, we
welcomed Flavia Cheong, abrdn’s Head of Equities – Asia
Pacific, as joint Manager alongside Hugh Young and
Gabriel Sacks, and Neil Sun, who joins as an investment
manager. These additions add depth and experience to
your Company and will be beneficial as the team
considers a potential increase in allocation to North Asia,
leveraging off abrdn’s deeper insights on Chinese small
caps built over the past few years.
Looking elsewhere across the portfolio, there was strong
share-price performance from commodity-related
businesses or markets, such as those in Indonesia, or those
more positively impacted by rising inflation, such as the
shipping industry. Nevertheless, more export-oriented
markets fared poorly, especially those associated with the
tech supply-chain, such as Taiwan. Despite the marked
correction in a few of the Trust’s holdings, your Manager
remains convinced of the structural growth for these
businesses and would argue that the sell-off has thrown
up opportunities to buy high-quality companies in
this space.
We have also benefitted from a low exposure to Chinese
domestic companies. While these have suffered in the pull
back of markets, there will be considerable opportunities
in the growing Chinese markets and this current reduction
in values will present opportunities which will bear fruit in
future years.
For a more detailed report of the Company’s
performance and portfolio changes, please read the
Investment Manager’s Review.
Dividend
In accordance with the enhanced dividend policy
approved by shareholders, the Board has achieved the
target dividend of 6.4p per Ordinary Share for the financial
year ended 31 July 2022 (adjusted for the five for one
share split that occurred on 4 February 2022) (2021
equivalent full-year dividend 3.2p after adjustment for the
five for one share split) representing a 100% increase on
the level of dividend paid in 2021. Dividends of 3.2p, 1.6p
and 1.6p were paid in March, June and September 2022.