Aberdeen, the UK-headquartered investment manager, sets out why Asia is becoming a driver of global dividends and offers opportunities at a time of worry about US-China trade, tariffs and other challenges.

Despite concerns over what will happen in the US-China trade talks this week and on semiconductor export tariffs to the US, Isaac Thong, portfolio manager of the Aberdeen Asian Income Fund (AAIF), said that Asia is becoming a driver of global dividends, with many firms remaining undervalued.

The AAIF, which has outperformed the index over the past 3 and 5 years, aims to provide investors with a total return primarily through investing in Asia Pacific securities, aiming to grow its dividends over time. Thong is overweight in Taiwan, a big dividend payer. Taiwan Semiconductor Manufacturing Company (TSMC) is his largest holding, reporting resilient demand across the artificial intelligence supply chain, with little sign of consumer weakness.

Despite concerns over potential hikes on semiconductor export tariffs to the US, which are currently exempt, Thong told this news service in an interview that TSMC is a diversified company, with a plant already established in the US and another two being built.

Dividend reform is also gaining momentum in Korea, India and China, with more companies formalising regular payouts. Thong has recently reduced his underweight position in Korea, and invests significantly in Samsung Electronics, the largest global producer of DRAM chips which has benefited from the price increase of DRAM and NAND flash memory chips, driven by demand for generative AI. “Samsung is also building capacity in the US,” he said.  

Thong, who is heavily invested in tech, financials and real estate in Asia, stressed the importance of investing in domestically-focused companies, in view of the tariff uncertainty. Despite concerns over what will happen in the US-China trade talks this week, he has reduced his underweight position in China, saying that he can find quality dividend franchises there. “Dividend payout ratios have been ratcheted up in China recently. Before, China was unwilling to pay out dividends but this mindset has changed which investors appreciate,” Thong told this new service.  "It is also the second round of tariffs for China so they are well prepared this time," he added. "It's worse for others like Canada and Brazil who are unprepared," he said. Thong recently invested in the Alibaba Group, a global e-commerce company with many businesses, including the Taobao and Tmall online platforms in the mainland. It also has interests in logistics, media, as well as cloud computing platforms and payments. Shares were purchased in Netease, an online and mobile gaming company with a market share of around 20 per cent, which is a good dividend payer. Thong also invests in the Chinese internet firm Tencent.

Thong is not alone in his views. After the market correction, Richard Tang, China strategist and head of research Hong Kong at Swiss private bank Julius Baer, is maintaining an overweight stance on China’s market, whose bottom-up narrative has improved despite top-down macro challenges. See here.

Despite the higher-than-expected 25 per cent tariffs imposed by the US on Indian goods, Thong emphasised that India is very domestically focused, with only 2 per cent of its exports going to the US. He is convinced of the promising long-term opportunities across the market and has reduced his underweight position there, even though the average dividend yield remains quite low. He recently invested in HDFC Bank, which is known to have the best retail banking franchise in India, with a high-quality wholesale portfolio, solid underwriting standards, and a progressive digital stance strengthening its competitive edge.

Magdalene Teo, fixed income analyst Asia at Julius Baer, also thinks the tariff impact on India’s GDP growth should be limited. See here.

In Thailand, Thong bought SCB X, an attractive dividend stock among Thai banks, given its commitment to sustaining its high dividend payout ratio. Management has acknowledged Thailand’s slower growth environment and is shifting towards returning capital rather than the pursuit of M&A and other non-core growth businesses.  

Thong is also overweight in Indonesia, notably banks, with high dividend yields. He recently introduced Bank Rakyat Indonesia (BRI), which focuses on the high-margin micro-lending segment and has a good track record. He thinks there is potential for re-rating BRI as the bank emerges from the current challenges associated with asset quality. Meanwhile, he has reduced his overweight position in Singapore.  He exited Singapore's Oversea-Chinese Banking Corporation (OCBC)  and remains invested in the Development Bank of Singapore (DBS).