Outstanding H1 results from Aberdeen Asian Income Fund (LON:AAIF) showed an impressive net asset value (NAV) total return of 28%. The share price total return was even better at 30.9% as the high-yielder’s NAV discount narrowed from 7.6% to 5.7%.
The £450 million cap’s blowout performance was mainly driven by technology holdings linked to artificial intelligence (AI) and semiconductor demand. And this latest period of strong performance means the fund has outperformed the index over one, three and five years.
Alongside this outperformance, Aberdeen Asian Income Fund rewarded shareholders with a juicy dividend yield of 6.3%.
Stellar results
Managed by Singapore-based Isaac Thong and Eric Chan, Aberdeen Asian Income Fund seeks to capture Asia’s growth through a total return approach. This combines yield and earnings growth.
The managers focus on quality income, dividend sustainability and exposure to long-term structural growth themes.
During the six months to June, the fund’s semiconductor and hardware holdings across Taiwan and South Korea delivered spectacular gains. Key contributors included South Korean memory manufacturer Samsung Electronics (KRX:005930) and AI and connectivity chip designer MediaTek (TPE:2454).
| 1-year return (%) | 3-year return (%) | 5-year (%) return | |
| Share price | 60.1 | 102.4 | 93.6 |
| Net asset value | 53.1 | 84.5 | 77.8 |
| MSCI AC Asia Pacific ex Japan Index | 45.9 | 78.7 | 51 |
Source: Aberdeen Asian Income Fund
Companies providing critical enabling technologies for AI adoption also performed well. These included businesses involved in advanced packaging, testing and materials such as ASE Technology (NYSE:ASX).
These gains were partly offset by weaker consumer and financial holdings in China, reflecting soft domestic demand.
Timely repositioning
During H1, Thong and Chan began increasing the fund’s exposure to sectors beyond technology. This repositioning was implemented ahead of recent weakness in AI and semiconductor stocks.
The managers added to financial, industrial and consumer companies with strong cash generation and long-term dividend potential.
New positions included Australian gaming company Aristocrat Leisure (ASX:ALL) and Vietnamese electronics retailer Dien May Xanh.
Other purchases were Australian energy firm Santos (ASX:STO), electronics manufacturer Hon Hai Precision Industry (OTCMKTS:HNHPF) and batteries-to-energy storage company CATL (OTCMKTS:CYATY).
Fertile ground for stock selection
Jane Routledge, chair, insisted: ‘Valuations remain supportive in many parts of Asia, particularly when compared with the long-term earnings and cash generation potential of many high-quality businesses. This continues to provide fertile ground for active stock selection by the investment manager.’
Routledge added: ‘While periods of market volatility are inevitable, the board remains confident in the quality of the portfolio.’
She also expressed confidence in the manager’s ability to identify ‘attractively valued companies capable of delivering a combination of income growth and capital appreciation.’
We are big fans of Aberdeen Asian Income Fund. The quarterly dividend payer is focused on quality businesses with strong earnings and robust balance sheets. And we think this approach lends the portfolio resilience during periods of market turbulence.
Managed by experienced teams based across the region, the trust provides investors with exposure to the underappreciated dividend growth on offer across Asia. Furthermore, an enhanced dividend policy has boosted demand for the strategy and helped bring the discount in.
Admittedly, the H1 performance was largely driven by the AI trade. And market volatility in AI, semiconductor and related tech stocks has increased since period end. Yet this high-quality portfolio remains reassuringly diversified by geography, sector and market cap.
Income-seekers should also note Aberdeen Asian Income Fund is now just three years away from the 20 years of unbroken dividend growth required for full AIC Dividend Hero status.
Disclaimer: James Crux has a personal interest in Aberdeen Asian Income Fund.
