ABRDN ASIAN INCOME FUND switches focus away from China in search of income

Latest Update: 08:41 AM, August 27th, 2023

The success of Abrdn Asian Income, an investment trust, is closely tied to happenings in China, as is the case for all funds that invest in this region.

Whenever China confronts difficulties, such as its current struggles in the real estate market and a deceleration in economic expansion, all stock markets across Asia become anxious.

However, the directors of this fund valued at £330 million, which is listed on the stock market, are making every effort to reduce its influence. They have restricted the fund's involvement with Chinese stocks, all the while striving to secure a substantial portion of profit for shareholders through dividends generated by its 65 investments.

Despite experiencing a 5 percent decline in the previous year, the trust has managed to make progress in generating income. For this ongoing fiscal year, the board of the trust anticipates distributing dividends amounting to 10.6 pence per share to its shareholders.

If that hope is fulfilled, it will result in a 15th consecutive year of increasing dividends and a 6 percent enhancement compared to the previous year. The earnings amount to an annual dividend rate of 5.1 percent.

Yoojeong Oh, the trust's co-manager, expresses optimism regarding the income aspect. According to her, the dividend payments to shareholders will be entirely supported by the earnings acquired from our holdings. Hence, there will be no need to utilize the income stored in the trust's reserves, as was required in the previous two years, 2021 and 2022.

The foundation currently holds an amount that is greater than half a year's worth of earnings stashed away in savings, which can be utilized when needed.

According to Oh, who is located in Singapore, the future of dividend payouts in Asia is looking promising. This is because numerous publicly traded companies in the region have solid financial positions and minimal debt. Speaking specifically about China, Oh mentions that the trust has allocated slightly over 10% of its assets to this country. This percentage is significantly lower than the 28% represented by its benchmark index.

She mentions that it is challenging for us to anticipate the methods through which the Chinese government will facilitate growth while simultaneously supporting the real estate industry.

However, Oh mentions that there are some positive aspects to consider - for instance, there are still Chinese individuals who remain willing to invest, particularly in the area of tourism. As for the political conflicts between China and Taiwan, as well as China and the United States, Oh is hesitant to provide a detailed opinion.

'Indeed, they are of significance,' she affirms. 'However, Taiwan continues to attract investments from overseas. Numerous possible outcomes exist for these tensions, and they are not exclusively detrimental.'

According to her, nations like Vietnam and Malaysia are reaping the rewards of foreign investments, since western nations are aiming to lessen their reliance on China as a key supplier of goods.

Additionally, she holds the belief that the global demand for artificial intelligence presents a considerable opportunity for chip makers like TSMC in Taiwan (the largest investment held by the fund) and Samsung, headquartered in South Korea.

Sunonwealth Electric, a company situated in Taiwan, has been an outstanding performer in the portfolio of the trust over the previous year. Their primary focus lies in manufacturing cooling fans for computers and data storage devices.

The value of its shares has increased by over 240%, mainly due to the positive reception of stocks associated with artificial intelligence.

The largest country holdings of the trust include Taiwan and Singapore, and it also holds significant positions in Australia.

The Abrdn trust is among the five trusts aiming to produce a blend of revenue and profit from Asian stock markets. The competing funds are overseen by Invesco, JP Morgan, Janus Henderson, and Schroders.

The overall yearly expenses of the fund amount to slightly more than 1 percent, and it can be identified in the market with the code B0P6J83 and ticker symbol AAIF.

ABRDN Asian Income Fund: Income Search Shifts From China

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