Interactive Investor

Five Asian trusts in bargain territory as markets plunge

8th January 2016 09:50

by Rebecca Jones from interactive investor

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Many prominent Asia specialist investment trusts are trading toward the bottom of their six-month share price discount to net asset value (NAV) ranges, reflecting weak performance last year and a poor start for Asian markets in 2016.

According to broker Stifel, some of the "cheapest" trusts include Aberdeen Asian Smaller Companies, one of our sister magazine Money Observer's Rated Funds, which is currently trading on a 15% discount to NAV - the widest point of its six-month 15% to 7% discount range.

Fellow Money Observer Rated Fund Pacific Assets is trading on a 5% discount, which is also at the lower end of its six-month range of 7% discount to 7% premium.

Stifel notes that Pacific Assets' performance has also been relatively good compared with its peer group, with its one-year NAV total return down 1% against a 6% decline for the Association of Investment Companies' (AIC's) Asia ex Japan sector.

The broker says that Schroder Asia Pacific also "offers value" on a 12% discount, which compares favourably with its six-month range of 12% to 6% discount.

Scottish Oriental Smaller Companies - another Money Observer Rated Fund - which has recently seen some management change, is on a 13% discount compared with a one-year range of 14% to 1%.

Outside of Asia, Stifel says that Polar Capital Global Healthcare "appears cheap" on an 8% discount. This is its widest level for six months, during which the discount has ranged from 8% down to 1%.

Over one year Polar Capital Global Healthcare's NAV has risen 5%, while shares have returned 2.5%; this compares to respective averages of 12.2% and 18% from the biotechnology sector, potentially explaining the trust's widening discount.

Europe and UK Smaller Companies expensive

In contrast, Europe and UK smaller companies vehicles dominate Stifel's list of expensive trusts, reflecting strong performance throughout 2015 as well as a relatively benign economic outlook for both regions this year.

Topping the list is Money Observer Rated Fund Henderson European Focus, which is trading at a premium of 7%. This is at the top of its six-month range of a 7% premium to par value, and is well ahead of its six-month average premium of 3%.

Over one year the trust's performance has been in line with the AIC Europe sector, with shares returning 13% compared to an average of 11.3% from the latter. Stifel points out that the trust is issuing new shares, which may impact its premium.

The broker says fellow Money Observer Rated Fund JPMorgan European Income also looks expensive at a 1% premium against its six-month range of 2% premium to 5% discount.

Over the last year, UK smaller companies trusts have significantly outperformed larger company trusts, partly due to lower exposure to mining and oil and gas companies, while returns have been boosted by narrowing discounts.

Standard Life UK Smaller Companies, managed by star manager Harry Nimmo, is currently trading at a premium of 1%, which is expensive compared to its six-month average discount of 5%.

The trust's performance recovered in 2015 after a relatively weak 2014, with shares returning 40.4% compared to an average 25% from the UK smaller companies sector.

BlackRock Throgmorton has also seen a significant re-rating, trading on a 6% discount compared to a six-month range of 5% to 16%.

Mercantile, which has significant exposure to medium-sized FTSE 250 companies, is trading at close to its narrowest discount for a year at 7%, compared with a 12-month range of 6% to 13%.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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