Invesco Asia Trust (LSE: IAT)

Last close As at 17/05/2024

GBP3.31

1.00 (0.30%)

Market capitalisation

GBP219m

Invesco Asia Trust’s (IAT’s) objective is to provide long-term capital growth by investing in a diversified portfolio of Asian companies. Its approach is team based, bottom up and valuation focused, with IAT’s portfolio of c 50–70 stocks representing the manager’s highest-conviction investment ideas over a three- to five-year horizon.

Equity proposition

There are four reasons why Invesco Asia Trust represents an exciting investment case.

1. IAT’s flexible strategy delivered strong long-term returns from Asian equities

IAT’s unconstrained approach gives its investment manager the flexibility to pick the best ideas across Asia and respond to changing market conditions. It is an ‘all-weather’ trust with a balanced approach to growth and income, which means it is not restricted to stocks that are pure dividend plays. Its strategy allowed the trust to outperform both its benchmark and the AIC Asia Pacific Equity Income peer group average over the last 10 years. This superior track record is underpinned by the close to 30-year experience of Ian Hargreaves (the trust’s manager), who is supported by the co-manager Fiona Yang and an experienced team of Asia investment specialists.

2. The trust pursues a successful, contrarian approach to identifying undervalued Asian franchises

IAT follows a bottom-up approach, looking for ‘unloved’ investments with strong fundamentals trading at undemanding valuations. Its active, valuation-aware strategy makes it well-positioned to capitalise on valuation discrepancies across Asian markets, seizing on opportunities to buy businesses for less than they are worth. We believe that good stock picking has been an important contributor to IAT’s long-term performance. Furthermore, IAT’s portfolio is designed in a way which translates into lower balance sheet risk than the benchmark, with many of its portfolio holdings having net cash. IAT’s investment philosophy helped it to limit capital losses during times of market weakness and in outperforming the benchmark on the upside.

3. Asian economies have the potential to outgrow the rest of world

A portfolio of equities in emerging and developing Asia may benefit from secular tailwinds supporting economic growth above the global average across several countries in the region. This is illustrated by the International Monetary Fund’s forecast mid-single-digit percentage average GDP growth across the region in the next few years. Some important themes to explore include: 1) growing consumer spending driven by the rising income of large populations, an expansion of the middle class and urbanisation; 2) the role of countries such as South Korea and Taiwan in the global tech value chain; 3) reconfiguration of supply chains; and 4) green transition, including renewable energy and electric vehicles.

4. IAT introduced an enhanced dividend distribution policy and performance-related conditional tender offer in 2020

Based on IAT’s revised dividend distribution policy, the board now aims to pay six-monthly dividends in November and April each year, each equivalent to 2% of NAV at the end of September and February, respectively. Moreover, we note that IAT introduced a performance-related conditional tender offer for up to 25% of its issued share capital at a discount of 2% to the prevailing NAV per share (after deduction of tender costs) in the event that the trust fails to outperform its benchmark by 0.5pp per year over the five-year period to 30 April 2025. During the three years that have already passed, IAT outperformed the benchmark by 3.3pp per year.

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Equity Analyst

Milosz Papst

Milosz Papst

Director, Financials

Key Management

  • Ian Hargreaves

    Fund manager

  • Fiona Yang

    Fund manager

  • Neil Rogan

    Chairman

Share Price Performance

Price Performance
% 1M 3M 12M
Actual 9.6 10.3 2.8
Relative 1.6 1.0 (5.5)
52 week high/low 348.0p/286.0p

Overview

Invesco Asia Trust’s (IAT’s) one-year NAV total return (TR) of negative 3.7% (vs negative 3.5% for the benchmark) was limited by the measured Chinese re-opening rebound, as the trust moved to an overweight position in China and Hong Kong earlier this year (now at c 43% of portfolio, c 3–4pp above benchmark weight). That said, the managers uphold their conviction in IAT’s Chinese stock picks, and the trust maintained its long-term outperformance of the benchmark and its AIC Asia Pacific Equity Income peer group. IAT still has a cyclical bias, favouring themes such as technology (including semiconductors), consumer and internet, the automotive sector (including growing EV penetration), as well as sustained credit growth and demand for insurance products in Asia.

Research

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