Speaker 0:
Hello and welcome to investment Trust Outlook With me, Mark Colgate Today we are looking at the outlook for Asian equities and we're better to turn to than to two fund managers based in the region. Let's meet them for Aberdeen Asia Income Fund. We are joined today by Yu JO from Singapore and from Hong Kong by Stephen Kam, investment director at Schroders Representing the Schroder Asian Total Return Investment Company.

Speaker 0:
Let's get things underway. You Jo, if I can start with you, what are some of the risks that you see in the Asian market at the moment that you think are attractively priced and are worth backing? And what are some of the things that you're looking to avoid in the portfolio?

Speaker 1:
Yeah, So I think volatile markets are an exciting time if you're a stock picker. Um so some of the risks that we are looking to take in the fund is to find attractively valued companies, um, that show potential for earnings growth. And I think the beauty of investing in Asia is that there's such a broad, um, variety of different thematic exposures available to us that we can find, uh, companies in the growing wealth segment in the going

Speaker 1:
green segment and the technology enabling segment. So really a lot of big trends working in Asia, where we can find a broad base of different companies that are trading on, um, pretty decent valuation still, and offering us good dividend yield. Um, because we're picking stocks from a bottom up perspective, it does mean that sometimes we end up with a lack of

Speaker 1:
of exposure to certain areas, and I guess those are the risks that we are looking to avoid. So if I look at our fund and see where we are underweight relative to the benchmark, then it would be places like, um, China, for example, where perhaps we can find better growth opportunities at better prices, with better resilience in terms of earnings growth elsewhere in the region.

Speaker 0:
And Stephen, how about you? What? What's the view from Hong Kong?

Speaker 0:
Um, I would agree that, uh, I think the volatility has created some good opportunities for us. Um, actually, the year has turned out a little bit differently than I think many investors had originally expected. With the reopening in China being a bit disappointing,

Speaker 0:
Um, we within the portfolio had actually not been playing that too much and in fact, much more focused on longer term structural opportunities in areas like technology. Um, and it is really very much across the board. We continue to see good opportunities across the region, but we, again taking a bottom up approach, are looking at select opportunities at the

Speaker 0:
company level. Um, even in China today, uh, especially with the underperformance, we're actually starting to add a little bit more largely to existing positions. Because I think our view on China is one that is, um I think, relatively cautious, given what is going on from a top down perspective, but again across the region India, ASEAN, Korea, Taiwan in particular, where we already have exposures.

Speaker 0:
These are places where we continue to find some very good opportunities. And Stephen, there's quite a lot of, uh, investment trusts that are available to to to UK investors that are that are investing in the Asia region. So what would you say are the the U SPS of the Asia Total return vehicle?

Speaker 0:
Well, I think that we take for the Asia Total Return vehicle a little bit of a different approach. One, it's very unconstrained. We very much ignore the benchmarks. But at the same time, I think that what we do provide is a bit of downside protection. We recognise that longer term, these markets are relatively volatile. So we actually do introduce a bit of downside protection via index hedges, and that helps to again soften some of the inherent volatility that we do see in these markets.

Speaker 0:
Uh, but as an offering itself, very much a best ideas approach. Typically around about, uh, 55 60 stocks in the portfolio. Uh, and in fact, given longevity of, uh, and stability of the money, we're able to take, um, a few more M and small cap positions. Just, uh, given the amount of time that it may take for the investment, uh, thesis to to play out you you were mentioning the the the range of stock opportunities in Asia. But to what extent are you somewhat constrained because you've got an equity income mandate?

Speaker 1:
Yeah, So this income fund is really a total return strategy, and we're focused on the income and growth potential of Asia's most compelling and sustainable companies. Um, so we're not trying to curb our potential for capital growth in any way. We're really trying to find

Speaker 1:
those companies that offer us good earnings growth as well as dividend growth, so that we can pay a growing a dividend per share to our shareholders every year. Um, if you look at our dividend track record, then it's actually been pretty good. So we're on our 13th year of consecutive dividend growth per share. Um, so that's very pleasing to see.

Speaker 1:
But we're also using some of the tips and tools that, uh, Stephen mentioned. So I think as a closed end fund and one of the benefits we have is to take on a little bit of gearing, um, to try and enhance our returns modestly where we can, um, and we can also go down that market cap scale, uh, spectrum, as Steven mentioned. So I think that's one of the benefits of having this, uh, closed end

Speaker 1:
fund structure. Um, to be able to play in that, uh, small cap space as well. Because even here in Asia, you get small cap stocks, good balance sheets, good management. Uh, good quality companies who are willing to share what they earn, uh, in terms of cash flows with their shareholders as well. Um, so I think those are quite good, uh, opportunities for us. Uh, even though we have income in our title,

Speaker 0:
would just you mentioned gearing? There you jog, but just by way of a follow up. What? What is the gearing level on the trust at the moment?

Speaker 0:
How does that compare to to long term average? And if we are in a world of rising interest rates? Is that affecting your decision as to how much gearing you want to take out? And for how long?

Speaker 1:
Yeah, that's right. So at the moment, our gearing level is just under 10%. Um, so we are by no means enjoying the same sorts of, uh, interest rates that we did a couple of years back. Um, but I think it's worthwhile taking a tactical amount of gearing a structural amount of gearing, uh, on this fund just given it is closed. End. Um, so we have this 10% amount, which we use just to gently enhance our returns. Um, I think that's quite modest given,

Speaker 1:
um, what we are able to go up to in this fund, Uh, and I think It's also, um a a nice way to try and just, uh, lever up the fund into an equities market that still has some legs. Um, if we look at earnings growth in the region, then we're looking at double digit, uh, EPS growth for Asia. Um, certainly, for the next 12 months. Um, so I think being a little bit geared into that is something that will work in our favour.

Speaker 0:
Thank you. And Steven, you were sounding quite bullish on the outlook for for your portfolio a little earlier. So how bullish are you on on gearing?

Speaker 0:
Uh, I think in terms of gearing for our portfolio, it's, uh, stands at around 6%. Uh, and I think that what, um influences how much gearing we do take is really the opportunity set that we're looking at. Um, I would admit, though, uh, with respect to how, uh, interest rate have moved, it's certainly gotten a lot more expensive to borrow. Um, that just requires all that much greater potential upside in the opportunities that we're looking at to take on gearing. But I would say that with respect to how we're seeing markets today,

Speaker 0:
um, especially given the the move in the markets that we have seen year to date. Uh, we are being a little bit more careful. And I would say again, with respect to the downside protection that we're adding to the portfolio, uh, we are gradually adding, uh, a little bit more, uh, just given, uh, the rapid move that we have seen, uh, in markets in particular, uh, some of the North Asian markets like Korea and Taiwan. And Stephen, I think you mentioned a little earlier technology as a sector is one of these structural

Speaker 0:
growth areas for for for, uh, for investors. But to what extent is that a pure growth play? Um, and to what extent is is this a sector that there where quite a lot of income is thrown off off as well? Because I think from from having a little look at the trust, um, income is quite an important part of your total return strategy.

Speaker 0:
Absolutely. I think that we certainly like to buy companies that are willing to pay back some of those cash flows as dividends. Um, our own experience, certainly in terms of total returns made over the years for Asian investors, a lot of that does come from income. Now, I think the Taiwanese market in particular, um is a little bit unique. Uh, you would think that many of these technology names, uh, are very much grows

Speaker 0:
names, which they are. But at the same time, I think that they are well run businesses that are ultimately throwing off a lot of cash flow. To that extent, we get a good combination of companies that are both growing, as well as providing that total return element via dividends to investors. And to that extent again, many of the blue chip technology names that we do hold in the semiconductor space in the testing and packaging space. These are companies that

Speaker 0:
are well, run. Um, good cash flows, uh, and enjoying. I think the, uh the rally that we are seeing and the excitement that we're seeing, uh, around areas of growth like a I. So again, I would say we have confidence. Um, a very positive outlook, um, and view on the outlook for technology as a whole. Tech hardware. Everyone understands. I think the importance of technology and,

Speaker 0:
uh, semiconductor chips most, uh uh, most specifically, um, for our future. And to that extent, we have a structurally positive view on many big names. Uh, that are trading in these in these markets.

Speaker 0:
Thank you. Well, let let's stick with with Taiwan and semiconductors for a minute. Uh, you you've got TS MC, uh, Taiwan Semiconductor manufacturing as as one of your largest holdings. And I think it it is as well in the in the Schroeder trust. Um, can you talk us through it? It is a dividend play because a lot of the headlines around TS MC at the moment about how much it has to reinvest to stay ahead.

Speaker 0:
Uh, how capital intensive that is, how they're having to diversify their supply chain with building factories in the United States, for example, how much money have they got left to pay out as dividends?

Speaker 1:
Yeah, so they are very capital intensive, and that's what gives them this big A moat in their business. So they're global leaders in terms of foundry, which is making semiconductor chips for other people.

Speaker 1:
Um, and in a world where there's so many foundry operators across so many different countries trying to be as good as TS MC, they've actually managed to maintain dominant market share despite um, all the money being thrown into this industry at the moment. I mean, that really helps them to be able to be profitable, uh, through the cycle. They make good cash flow returns through the cycle, and so they're sitting on a net cash balance sheet, and they recently had results where they

Speaker 1:
raise their dividends for this year as well. So it's been a pretty constant dividend growth story, regardless of what the share price is doing. So I think if you look at TS MC on a yield basis, then sometimes it's high yielding. Cost share prices have been weak, and sometimes it's, um, low yielding cause. Share prices have been strong. Uh, but if you look at the dollar amount of dividends that they've been paying per share, then this has certainly been on a growth trend. Um, pretty consistently,

Speaker 1:
I think it makes it a very good, uh, dividend stock. And if you look at Taiwan for us, it's one of the biggest country weights in the fund, and that's no surprise, given it's one of the top three yielding markets in the Asia region, and we also have quite high exposure to technology, which is the biggest overall sector we in this income fund, which might sound very unusual. But if I look at the other tech companies in Taiwan, then we've got companies like Sun on Wealth and Taiwan

Speaker 1:
Union, which are both $1 billion market cap companies. Uh, midcap companies that do little things that go into computers. So we mix the fans that cool down your PC and servers. Uh, whereas Taiwan Union is making the lamination that go on printed circuit boards, um, so small but mighty in the sense that they're doing something very core. And both of these stocks, I think have gone up over 100% over the past three months. So these are stocks that were trading at very cheap

Speaker 1:
valuations, and they were offering us very good yields. But obviously, today, if you look at them, then the yields have, um, half as the share price has doubled. Um, but that's something we're happy to take if it's giving us capital growth in the portfolio. So I don't think it's about just looking at the big name TS MC and Samsung Electronics in the technology sector. I think there's quite an exciting supply chain in Asia supporting that growth, who all benefit from the same trends that Steven mentioned as well.

Speaker 0:
And Steven, if I can broaden this out just just on the Taiwanese market, if I may, Because I I Last time I looked your trust had, I think 23.4% exposure to to Taiwan. Um, the benchmark waiting is roughly 15 15.5%. So you've got an overweight there. Uh, as indeed, does the, uh, does, uh, Aberdeen Asian Income. It's not quite as large overweight, but

Speaker 0:
what what's, uh can you talk us through a little bit more detail what you like about Taiwan in the round and just how you fact and also how you factor in the valuation? Because certainly at the start of the year, there was a lot of worries about Taiwan, particularly its relationship with China.

Speaker 0:
Yeah, I think that with respect to our Taiwan exposure, it's primarily within the semiconductor space, uh, and again, testing and packaging. I would say that what we look for in companies, uh, trading in Taiwan less so the domestic names because I think the domestic, uh growth story. Um, it's there, But, uh, certainly, I think, uh, with respect to some of the global cyclical names, uh, that trade within that market, uh, the growth rates are more attractive there. We also like companies that are

Speaker 0:
are again, more globally competitive. Some of the bicycle makers, uh, that trade in Taiwan again are attractive businesses. Uh, from our perspective, uh, and the trends around obviously bicycles, um, uh, has been very, very strong. Um, so to that extent again, the Taiwanese market offers opportunities to us, uh, largely within the semiconductor space, but where we can find globally competitive companies, uh, that trading are that are trading at reasonable valuations. We are happy to own those as well.

Speaker 0:
Hm. And you, you you mentioned there are some Asian markets that are naturally higher yielding than others. Uh, to to what extent? At a national level. Are there some countries that encourage companies to pay dividends that the the sort of taxation of them is encourages dividend payment? And are there parts of Asia where she's perhaps sort of more in favour of things like the share buyback?

Speaker 1:
Yeah. So I think it really links back to how developed the markets are. So if you look at the highest yielding countries in Asia, then it's Australia, Singapore and Taiwan. And these are markets that have very strong sort of retail support. Uh, mutual fund support, Um, and really one of the biggest drivers of dividends is that shareholder pressure for companies to pay more and share more with their shareholders? I mean, I think that's stronger

Speaker 1:
in markets where you have a strong income collecting retail fan base. Um, so these three countries have the highest yields, uh, in the region. And then we also have slightly higher growth, uh, countries where dividends have not been as prioritised by shareholders. So countries like India, um, Korea, for example. Uh, so I think it really depends on how the market has developed. It doesn't mean to say that there are no high yielders in India or that

Speaker 1:
all stocks in Australia, for example, pay you a high yield. Of course, there are differences by sector and how old the company is and what their Capex plans are for the future. Um, but I think in general it's it's fair to say that those three countries are where we find the richest sort of dividend hunting grounds. And then that gives us a little bit of freedom to go to some of these more growth. Uh, more emerging markets within the Asia region to find a little bit more capital growth.

Speaker 0:
OK? And? And Steve, just to double check I is Is Australia New Zealand their their potential investment areas for for trade? Um, Total return fund as well? Yes, absolutely. We're, um, happily invested because some of the best companies within the region, I think can be found in Australia. Uh, they're the Australian miners. Uh, they are the healthcare companies again. Very globally competitive businesses that are again very well managed and trading at very reasonable valuations.

Speaker 0:
And you? We're talking about country exposure to that. And the one that really stood out for me when I looked at your portfolio was Singapore. It's about roughly 3% of the benchmark. You've got about over 20% of the fund here. What? What do you like about Singapore so much at the moment?

Speaker 1:
Yeah. So I'm based in Singapore, and a lot of people ask me, can I market this fund? Is that a home bias? Um but I don't know if you can tell from my name, but I'm actually Korean. Uh, so probably not a home bias at play. But if I look at the companies in our fund that are listed in Singapore,

Speaker 1:
um, then that's really where they've chosen to be listed in terms of stock exchange, uh, and and Singapore regulators of give us a very conservative, sort of prudent regulatory regime for these companies to operate in. But they've really had to grow over the history into the surrounding growth areas to find growth. Because, of course, Singapore is not big enough to support big consumer growth stories. Um,

Speaker 1:
enough to fund this market. So I think one of the best things about Singapore is that it is very open, Um, and that has given Corporates the opportunity to expand into the Southeast Asia region. We've got companies like O CBC, which is a big bank here in Singapore that, um, has acquired, uh, small and, uh, sorry, has acquired a MidCap Bank in China that gives us access to that Chinese space.

Speaker 1:
We've got wealth management fees growing in Singapore as well, because it's often used as a financial hub for a lot of people. And then outside of financials, we've got property companies paying good yields. But each property company has a different exposure to offer us. And we have data centre, uh, rates. We have infrastructure rates, and we have a re that invests in business parks in India. Um, all of them listed here in

Speaker 1:
giving us that dividend, giving us that well regulated, uh, disclosure requirements as well, but also giving us exposure to different growth areas within the Asia region. So I wouldn't think of it as a Singapore, uh, exposure within the portfolio. I think it's very much adding to that growth and income potential of some of the best, uh, companies across the region.

Speaker 0:
Hm. Thank Stephen taking all of that on board. I mean, your trust is about 9% roughly speaking in Singapore. So again, what? What do you like about it As a well, let's call it a regional hub rather than a national market. And and what are some of the stocks or sectors that you, you think really offer opportunity there at the moment? II. I think that in terms of how we see Singapore again,

Speaker 0:
uh, we take less the country view, and And look at it from a bottom up perspective, I think we do have actually some common holdings. Uh, with the Aberdeen fund, Uh, in the sense that we do like some of the banks, uh, within that market, the likes of D BS, a strong player within the market that is again benefiting from a lot of the trends that we are seeing in terms of wealth management.

Speaker 0:
Internally, they're making, uh, a lot of investment via technology to improve efficiency and profitability. And and all of that ticks our boxes in terms of what makes, uh, a good company and a a good investment. Um, so it is very stock selective? I wouldn't say. Uh, it's so much the market. Uh, but in the individual opportunities that you can actually find from a bottom up perspective within that space,

Speaker 0:
you you mentioned, uh, a banking stock or two there, Steve. So again, I know you're very stock specific, but in the real, what's the outlook for financials and banking in particular at the moment? Do you? You favouring those in the portfolio?

Speaker 0:
Um well, I think we have a slight overweight to financials as a whole on the basis of what we own. From a bottom up perspective, as I mentioned, we own the Singapore banks. We also like the Indian private banks, uh, within the portfolio, the likes of HDFC, which is an extremely well run bank. And the story there really is about private banks taking market share from stodgy

Speaker 0:
state owned banks. Not only is it well run, but again that industry backdrop is one which affords them a lot of growth opportunities. Um, equally, we own, uh, banks, Uh, in Indonesia. Uh, there, Um, essentially, you're looking at a turnaround story. Uh, a company with a new management team which is managing the business, managing its asset quality, uh, managing its growth

Speaker 0:
much better than the previous, uh, prede predecessors. And so those turnaround stories are very attractive to us as well. Um, again, the valuations have been, you know, broadly speaking, relatively undemanding, uh, for many of these cyclical names, and as a result, uh, we have had a good exposure to the financial space, but less so from a top down perspective, it's much more that bottom up story.

Speaker 0:
And so just to clarify when you say private banks in India. Do you mean, as opposed to owned by the state, or do you mean II? I suppose in the UK context, if someone says a private bank, they mean high net worth individuals. And that's that's a bit different from, you know, the world of a bank branch network and, yes, absolutely owned banks, as opposed to the the state owned banks. Uh, let's make that differentiation of a very important one.

Speaker 0:
And you can you can you talk us through some of the your sort of favoured holdings a bit more detail in that financial sector And how that links in with how the the consumer growth story is is shaping up in Asia at the moment.

Speaker 1:
Yeah. So actually, in the start of 2022 we went quite heavy into banks. And that was precisely because of what you're saying that we were using it as a way to play. Um, the beginning of that reopening trade. If you think back two years ago, um, the dividend handcuffs were coming off a lot of these banks. Um, and we really wanted to use them as a way to play the loan growth opportunity, um, post all the lot

Speaker 1:
that we had seen in the region. And But what we've seen this year is that we've had some financial issues, uh, globally. So things in America, things in Europe. And obviously there's a risk to global financial systemically, um, arising from these banks across the world. Uh, So what we've done is we've been taking money out of financials this year, Um, especially those ones that are reliant on wholesale funding.

Speaker 1:
And instead, we want to focus on the banks that have that access to deposits as their main source of the funding. Um, because I think that's a very good story to play still in Asia. Um, linking back to the consumer story. If we think about demographics here, um, we've still got that growing sort of middle class. We've still got good sort of population, uh, demographics across a large part of the region. Um, so I think banks that are able to play into that trend are the ones that

Speaker 1:
we want to maintain within the portfolio. And that doesn't just have to be banks. I've mentioned some of the Singapore banks that we own, but we also own a I A, which is the insurance company uh, listed in Hong Kong. And again, I think that's a great way to play that rising middle class and aspirational consumer story in the region. Because now we are selling wealth management and protection products to consumers who are becoming more middle class, becoming more wealthy,

Speaker 1:
who want to protect wealth or maybe work on an inheritance that they want to pass down for the first time in their families. Um, so I think this is a really good growth trend for, um that kind of, uh, protection product and insurance firms. So someone like a IA, I think, gives us good exposure to that angle as well. So we're really using that financial sector to try and cover off, Um, that aspirational consumer growth that we still think is very strong in the Asia region.

Speaker 0:
Steven, can I get your thoughts on that? But in addition, is there any danger as consumers start to use their balance sheets more efficiently that they become over leveraged? Um, you know, it's great. There's financials offering the mortgages. But if there's rising rates and property prices aren't shooting up, they they might find themselves in trouble?

Speaker 0:
No, certainly it's the case where I think you do need to consider that backdrop with regard to leverage amongst households. And again, I think that the markets that we have tended to play specifically India and Indonesia tick the box just with regard to under penetration and under leverage, you have good growth and opportunities in in markets like those.

Speaker 0:
I think the demographics are working in their favour, and more recently we've actually also added to some of our banks exposure in the Philippines, where again, uh, the the macro backdrop is very conducive. Um, at the at the end of the day, for us, it's really about that underlying story. It's really about the company management and and how we see them, Um, as it relates to consumer again, it's very similar to

Speaker 0:
To To what? Um uh, Yuzhong was saying, with regard to some of the exposures that we have, the insurance names, uh, certainly feature within our portfolio as well. And a IA, I think, is well regarded, um or well, well understood to be a very well well managed business. Uh, and it does give us exposure to that consumer growth story. Um, And, uh, that's

Speaker 0:
household income growth story that we are seeing across the region. Um, and it's a great way, um, via which to play, Um, that that growth story. Hm. And Stephen a little earlier on in the programme, I think you both mentioned you are underweight mainland China. I mean, to what extent is it something investing like in a I AAA way of getting indirect exposure to the world's second largest economy? Even if you don't want to be sort of investing in it directly?

Speaker 0:
Uh, well, I think that certainly it is a good way to for indirect exposure. I. I don't think that we're necessarily playing, um, a I a to to get around things, so to speak. Um, I think with respect to the China exposure, we are quite careful in terms of what we own there. I think that there's certainly, uh, good companies that you can still own, despite a backdrop, which I think has been a little bit more challenging for investors globally. Uh, that being, I think, um uh, an awareness that ultimately, uh, with regard to

Speaker 0:
the risks of higher regulation in particular, um, and and uncertainty around that that makes it a little bit more difficult for investors to be investing in that market. So I think that we are quite careful. Um, but at the same time, China remains very investable for us. Uh, not only through names like a I A, but also, uh, some of the consumer companies, uh, that are again, uh, the best managed companies, Uh, within the space. Um, um, and a smattering of other, uh, good opportunities that would that we find on the ground

Speaker 0:
you How are you playing at China exposure either directly or indirectly at the moment.

Speaker 1:
Yeah, very similar. So we are looking for good quality companies regardless of where they are located. Um, so we would be happy to have more in China. We very much believe in that consumer growth story in China.

Speaker 1:
Um, but sometimes we just don't find the right company that's trading at the right price. That's also giving us either dividend growth or dividend yield. So every stock that comes into this fund must be paying dividends. We don't take a barbell approach to this portfolio. Um, so that's been one of the biggest reasons we don't have much exposure to China and to India, for that matter. Um, but we are very aware that we would like access to that growth.

Speaker 1:
I've mentioned, uh, O CBC already, which has, uh, access to that, um, SME lender in China Wing. Hang, um, a I A as well. Um, I think BHP and Rio could be thought of as sort of indirect exposure to China as well. We own some property companies like Hang, which operate some of the shopping malls in China. So we really want to find, um, the best way to play that consumer growth story while still collecting

Speaker 1:
a dividend. And while still being able to rest assured in the evenings that what we have is not going to be taken away from us.

Speaker 0:
You you mentioned property in in China. I mean, the the headlines about that tend not to be positive at the moment. So why exposure to to things like shopping malls? I think you've got China Resources land in there as well. So what is it about them specifically as stocks? That means you want to commit investor capital there.

Speaker 1:
Yeah. So, even with China Resources Land, which is a Chinese listed property company. This is not something that you will have read about in the FT. Whilst you are reading about all the, uh, china property, Um, issues that have been coming out of the woodwork over the past 18 months or so. Um, so when we first initiated it, this would have been maybe five or six years ago. It came after we did our own due diligence. We looked through their land bank. We looked through their balance sheet, and we looked at how they finance new property developments.

Speaker 1:
Um, so China Resources has an investment property portfolio where they get a very steady rental income, and they use that cash flow to develop new properties. So they're not the speculative developers. They are not borrowing, uh, in US dollars when when rates were cheap to try and fund, um, speculative sales in china. Um, so I think the big difference here is that these guys have not, uh, taken advantage of any cheap debt. They have not tried to blow up their balance sheet by,

Speaker 1:
um, over leveraging themselves. They don't have any, uh, borrowings from friends that we can't trace back. Uh, so so very different calibre of quality. And I think that's what makes, um, the investment process work. Still here in Asia is that if you have people, if you have analysts on the ground based in China, looking at these companies, um, meeting them every quarter after results doing their

Speaker 1:
due diligence, it gives you a very different flavour for the different types of owners. That there are in the markets here in Asia relative to trying to read about them in the FT or trying to, um, analyse them from a distance. Uh, so I think that's been one of the big sort of advantages to the Aberdeen process. Is having this network of 40 plus analysts and fund managers all speaking different languages here in Asia? And I think

Speaker 1:
that's very useful to be able to, um, assess that quality of a company in their home language read all like the local newspapers and and and media, uh, news about the different, uh, families and the different owners. Um, so I would say that gives us a great way to try and assess the divergent quality here and pick the companies that you know won't be the ones that give you issues later

Speaker 0:
Yeah, well, still picking up on that, Stephen, How many boots on the ground have you got across Asia? I mean, it's a huge region. And how can you give us some idea of how that's changed over the over the years, as it's as it's opened up as an investor, as a series of, you know, investable markets? Yeah. Similarly, we have about, uh, close to 50 analysts on the ground, uh, supporting a broader team of, uh, P MS across the region.

Speaker 0:
Uh, again, I think it's critical that you do have boots on the ground as, uh as was saying, because I think it's critical that we understand the local markets, uh, before we're investing, and it gives us a better sense of really what's going on at any point in time. Um, so again, uh, the resources that we have, we've dedicated and, um,

Speaker 0:
a huge amount, uh, to that effort. And I think that given the approach that we do take that being bottom up, uh, essentially, it's critically important that we have, uh, people that can really analyse these companies, uh, and provide us with the conviction to to take big bets in in individual companies

Speaker 0:
a little earlier on, um, you were both mentioning demographics and being the right side of of demographic trends, particularly around the consumer. But you What? What about What are some of the countries that those demographic trends are beginning to to go negative? I think we hear a lot about China, I think. Similarly, Korea's long term demographics are Don't look, uh,

Speaker 0:
perhaps as as healthy as they might. How does that start to impact on the stock selection? How do you feed that into the mix? And I said I, for example, I think Samsung Electronic is your largest holding thing. And that's in Korea.

Speaker 1:
Yeah, that's right. Um, so I think if you look at the stocks that we have in Korea, then they're definitely not the ones that serve the domestic market. Um, So I think you try and play the export stocks in countries where the home demographic profile is not as attractive. Um, and instead, you try and play the consumer story in markets where you have that favourable population pyramid still working in your favour, uh, and and wealth growth and middle class growth as well.

Speaker 1:
So if we look at countries like Korea, then there's probably more innovation there to try and get that extra dollar out of each consumer. So there's a lot of work in the, um, fintech space, for example, it's a pretty rich, uh, ground to find private, unlisted, uh, fintech companies. Um, but if you look at the retail side, it's it's not really that interesting compared to some of the consumer stories you can find in India in Indonesia, uh, in in the broad sort of ASEAN region. So we choose

Speaker 1:
not to invest in consumer stocks there, mostly because we don't see the growth. But if you look at what we have in Korea, then it will be Samsung Electronics, which is obviously a global exporter as well as LG chem preference shares, which are, um, which is, uh, the battery maker for EV, um, electric vehicles as well as energy storage solutions globally. So again very much trying to play that international growth story where we don't find, um, the domestic population support.

Speaker 0:
But but you even when you're talking with those companies and they sort of talk about the future, I presume over time a smaller number of graduates are going to be coming through from Korean universities. So what do they do? They do They just end up in more competition for those graduates? Do they say? Well, actually, it's really

Speaker 0:
important we keep the culture, but we start recruiting people from completely different parts of the world. I mean, how how do and and sort of internationalise more. How do they? What are those sort of discussions? How how are they building out to sort of compensate for the lack of manpower coming through from, um, the home market?

Speaker 1:
Yeah. So you'll be surprised how many overseas educated professionals are coming back, um, to markets like Korea, even to India, to be honest. So a lot of these students flew out to get their western education dreaming of sort of great growth, uh, in the American economy or in Europe, perhaps. Um but then we went into a recession. We've seen lockdowns. I mean, a lot of these people have come back home, Um, so they are well educated.

Speaker 1:
They've had great jobs in international firms overseas. Uh, and now they're looking for placement in companies within their home markets here in Asia. So there have been some really good success stories from, um, that retrenchment of talent back to Asia, I think also, Asian companies are becoming more attractive to, uh, international talent. Um, so they're doing more things to try and make themselves, um,

Speaker 1:
more approachable to, uh, international talent. So they're recruiting at overseas universities. They're trying to make the common language within their office corridors. Um, a global language such as English, uh, to try and attract, um, talent from elsewhere. Not necessarily Korean or or or or Japanese, for example. So I think that's been good to see as well. Um, and I think people are always interested to work for companies that have growth.

Speaker 1:
Um, that offer you new opportunities to live somewhere else, experience a different culture and gives you, um, opportunities for career development. Uh, so I don't think they're struggling to find international, uh, graduates and, um, candidates applying for the roles that are in, um, in these, uh, countries here in Asia. So I don't think that will be an issue in terms of trying to find a talent for the future.

Speaker 0:
Well, we've got three or four minutes left. So, Stephen, one, major market that we've touched on I haven't really dug down into Is is India. Now I know, I know. That's one that you've got quite a relatively high geographic exposure to at the moment. So what are some of the the positive trends you're you're seeing there again? I think that

Speaker 0:
with regards to the demographics we've talked about previously, and I think that the demographics in India certainly look a lot more positive, I think we sort of see India as China sort of 10 plus years ago and the opportunity set that you have. But I think that one of the great things that has been done is just even while you have those demographics there and and and a a broader, positive backdrop, how how is the government and how is the country really sort of harnessing that

Speaker 0:
opportunity set? And many of the things that the Indian government and the current administration have brought together have actually really helped to, um, I think bring forward the economy, especially the investments around digitalization and bio identification, which again, from a banking perspective, uh, for instance, uh, that's enabled, um, I think growth of that banking market and the

Speaker 0:
for banks and financial institutions to reach a broader audience That should, I think, accelerate the F financial organisation of the broader economy. And that, of course, will help to reap greater benefits just in terms of economic growth. That is a back story that we certainly are very excited, uh, to invest around, um, and one of the ways that we can do that obviously, is that exposure to the private banks within the Indian market.

Speaker 0:
Well, I mentioned that we are running out of time. Uh, there's a lot we've chatted about a lot more we we could talk about, but I just want to finish by getting a final thought from each of you out of everything we've talked about, there's one key point to leave us with. What would that be? Um, you John, Can I come to you on that first?

Speaker 1:
Yeah. So I think Asia is a very attractive region to find both capital growth and dividend growth. Um, I think you can see that in the performance of this fund and through the steady increase in dividend per share that you've seen, um, being paid out over the past 13 or so years.

Speaker 1:
I think one of our key strengths is that we have this, um, wide team on the ground and that we are able to make use of gearing as well as going down the, uh, market cap scale to find interesting opportunities that give us that growth and yield. I think one thing we didn't touch on is the ESG side of things, and that is something that is very much integrated

Speaker 1:
into our process. Um, we are rated, uh, in line with the benchmark in terms of ESG by MS C I and that's something that we monitor. Just to make sure, um, that our work here in Asia on improving EESG standards is getting reflected through the portfolio and benefiting both the companies here, uh, as well as the fund owners who invest in this fund.

Speaker 0:
Thank you, Stephen. A final thought? Yes, II, I think, uh, similarly, we share very similar thoughts with regard to the opportunity set that you have, uh, in Asia. Asia Pacific. In fact, um, at the company level, um, we have people on the ground, a large investment team to help us identify the best opportunities available. Um, I think that

Speaker 0:
the approach that we take, which is very unconstrained. Uh, one point that we would certainly make is that if you do look at the indices that cover Asia, uh, those indices, I don't think necessarily represent, um, the opportunity set. Very well, uh, or, uh, alternatively speaking, uh, it may give you a

Speaker 0:
exposures to companies and opportunities that you may not want investments in. So taking an unconstrained approach, uh, is one that we would certainly advise. Um, I think that this particular, um, structure that we offer, uh, which employs a little bit of downside protection, Uh, in terms of hedging,

Speaker 0:
um, then also provides a better performance experience for some of our investors, Uh, just to, uh, reduce some of the overall volatility, uh, within the market and so that we can provide. I think, uh, a better performance in terms of risk adjusted returns and and a better volatility experience. Um, equally, I think, with respect to opportunities around ESG, uh, we have ESG fully integrated throughout our process. And I think

Speaker 0:
Asia is probably the one region where there's the most opportunity, Uh, in terms of upside and and positive change that you can find, uh, across the world. And from that perspective, uh, I think having, uh, people on the ground, uh, investors on the ground who essentially are taking ESG into consideration. We have our own analysts that are doing that ESG analysis, uh, specifically on the individual companies to give us a better view on

Speaker 0:
how things are progressing. That's going to be critically important, I think, for how companies move forward and how successful their investments will be. Uh, from an Asia perspective, we have to leave it there. Do stay with us. We've got some information coming up in just a second

Speaker 0:
on how you can potentially use this as part of your structured learning. Just reminds me to thank our fantastic panellists Yong YO of Aberdeen, based in Singapore, and from Hong Kong, Stephen Camp of Schroeders from all of us here. Goodbye for now