Page 6 - DIY Investor Magazine | Issue 32

CAPTURING THE OPPORTUNITY IN ASIA’S DYNAMIC SMALLER COMPANIES
• The Asian smaller companies sector has been a fertile place to invest as recovery has emerged across the region.
• Aberdeen Standard Asia Focus has made changes to ensure it captures emerging opportunities in the region’s key markets.
• The Trust has also broadened its appeal to retail investors with a changed dividend policy, 5-yearly tender offer and lower fee.
Since the start of the economic recovery in Asia, the region’s smaller companies sector has seen significant growth. It has benefited not only from economic recovery, but from the ability of dynamic companies to renew and regenerate in the face of some vast challenges.
It has also been the best place to capture some of the structural shifts accelerated by the pandemic – e-commerce, digitisation or agile working.
However, the sector is constantly shifting and at Aberdeen Standard Asia Focus, we need to be alert to those shifts to ensure we give ourselves the broadest opportunity set. With that in mind, the Trust has made a number of changes.
CHINA INNOVATION
The first consideration has been China. China was weak in 2021 and the Trust’s relatively light position in the region was a benefit. However, there can be no doubt that much of the region’s most exciting innovation is emerging from China.
To date, the Trust’s relatively low market capitalisation cut-
off has prevented wholesale investment in Chinese smaller companies, which tend to be large simply because everything in China is on a bigger scale.
We have removed the $1.5bn market capitalisation limit to accommodate more investment in China and, to some extent, in India as well as to be able to invest more in our ‘winners’. We have hired a native Mandarin speaker, Neil Sun, to help us analyse the opportunity-rich ‘A’ shares market in China.
At the same time, Flavia Cheong joins the Trust as a co-lead manager, alongside Gabriel Sacks and Hugh Young. As head of Asia-ex Japan equities at abrdn, Flavia brings a wealth of experience and breadth of perspective that should help dissect the range of small cap opportunities across Asia.
‘THE IPO MARKET HAS BEEN PARTICULARLY FERTILE IN INDIA, WHERE A NUMBER OF HIGH GROWTH TECHNOLOGY COMPANIES HAVE COME TO MARKET’
EARLY STAGE COMPANIES
Initial public offerings (IPOs) have provided a range of opportunities in recent years. The IPO market has been particularly fertile in India, where a number of high growth technology companies have come to market.
We were an anchor investor in Indian consumer intelligence platform Affle a few years ago and that is now amongst our top 10 holdings; we also participated in another four new issues in 2021.
The IPO market has proved a good route to invest in India’s growing mobile penetration and digitisation trends as the country establishes itself as a major technology hub.
We were also an early investor in momo, the Taiwanese equivalent of Amazon, which has risen 10x on our initial investment only a few years ago.
Hugh Young, Gabriel Sacks and Flavia Cheong, Investment Managers, Aberdeen Standard Asia Focus PLC
DIY Investor Magazine · Feb 2022 6