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Investment Trust's Purchase Of Unloved China Equities Pays Off
Tom Burroughes
18 September 2025
There is a saying that timing the market is a fruitless exercise but there are occasions when a decision to get in or out of a position pays off. And this might just be the case for a London-listed investment trust which focuses on Asia-ex Japan equities. The trust aims to provide long-term capital growth and income by investing in a mix of Asian and Australasian companies to beat the MSCI AC Asia ex Japan Index (total return, net of withholding tax, in sterling terms). A reason for the relatively neglected status of Asia ex-Japan is that the US market has been so strong for so long, in particular the Big Tech stocks. However, forces such as a devaluing dollar and an US Federal Reserve rate cut have changed the narrative, she said. And a move towards Asian equities would have happened even without the dollar factor as growth in Asian equities is compelling, she said.
About two years ago, China’s equity market was languishing, paying the price for Beijing’s crackdown on certain sectors, trade tensions with the West and domestic woes such as indebted real estate firms. And yet the manager of the Invesco Asia Trust, Fiona Yang (pictured), (now Asia Dragon Trust – formed out of a recent trusts merger in February), judged this as a propitious time to buy into Chinese equities.
“We used this opportunity to increase weighting in China. The market was extremely cheap and the market was on the floor. It enjoyed a 60 per cent rally in the last 12 months and a lot of the companies we have bought have done extremely well,” Yang told this publication in an interview.
At Invesco for five years, Yang and colleagues have tried to take a contrarian approach, seeking opportunities that might not be readily apparent. And underlying all this is that Asia, for all its challenges, is “the world’s growth engine” – it accounts for about 60 per cent of the world’s GDP growth, she said.
Performance data suggests that, over the past 10 years, it has met that objective by a comfortable margin. The share price has risen almost 187 per cent over 10 years; the net asset value has risen 172 per cent, while the MSCI AC Asia ex Japan Index is up almost 119 per cent. Yang joined Ian Hargreaves on the Invesco Asia Trust in January 2022.
Under-loved
Much of the Asia equity sector is “under-owned” – overall, the region trades on a forward price-earnings ratio of 14.6 times earnings.
Beyond looking at macro factors, the portfolio is composed of companies that fulfill certain tests, such as healthy balance sheets providing resilience through interest rate changes, a strong shareholder return policy and, most importantly, these companies are attractively valued, she said.
“We want firms to pay out more to shareholders via share buybacks and dividends,” Yang said. This means that the trust has low leverage within its overall portfolio, she continued.
Holdings
Within its top 10 holdings, as a percentage of the total portfolio, are Taiwan Semiconductor Manufacturing (11.5 per cent); Tencent ( 7.6 per cent); Samsung Electronics (7.2 pe cent); HDFC Bank (5.2 per cent); AIA (3.6 per cent); NetEase (3.0 per cent); Alibaba (2.9 per cent); Kasikornbank (2.8 per cent); United Overseas Bank (2.6 per cent); and Shriram Finance (2.2 per cent).
The trust has a share price discount to NAV of -8.8 per cent, as at the end of July. According to its 31 July factsheet, the trust has a net gearing of 3.2 per cent. It intends to maintain an aggregate annual dividend equal to 4 per cent of its NAV.
(Note: The Asia Dragon Trust was formed this year through the merger of two investment trusts: the original Asia Dragon Trust and the Invesco Asia Trust.)