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Fidelity Asian Values Plc

Fidelity Asian Values Plc share price, company news, analysis and interviews

Fidelity Asian Values Plc (LON:FAS) provides shareholders with a differentiated equity exposure to Asian Markets.

Asia is the world’s fastest-growing economic region and the trust looks to capitalise on this by finding good businesses, run by good people and buying them at a good price.

Fidelity Asian Values plc

Investment objective

The investment objective of the Company is to achieve long-term capital growth principally from the stock markets of the Asian region excluding Japan. 

The Company’s performance will be measured against the return of the MSCI AC Asia ex Japan Small Cap Index (net) total return (in Sterling terms).

Approach and style

Nitin Bajaj aims to generate outperformance mainly through stock selection within the Asia Pacific ex Japan universe. 

He prefers investing in smaller companies because they tend to be less well researched, which leads to greater valuation anomalies. His fundamental analysis involves the evaluation of various factors including, but not limited to, stock valuation, financial strength, cash flows, company’s competitive advantages, business prospects and earnings potential. His style is tilted towards value and he has a two to three year investment horizon.

Nitin utilises Fidelity’s unrivalled locally based research resources in Asia to find these mispriced companies before his competitors.

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Fidelity Asian Values Plc share price

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News

Fidelity Asian Values picks up undervalued China stocks (LON:FAS)

Fidelity Asian Values plc (LON:FAS) has announced its monthly summary for February 2024.

Portfolio Manager Commentary 

The Trust’s NAV rose 6.5% during the 12-month period ended 29 February 2024, underperforming its reference index which rose by 12.5%. The Trust’s share price rose 2.4% over the same period.   

Stock selection was the key contributor to the Trust’s relative performance. Our investment process leads us to take contrarian positions in undervalued businesses. We have been finding a lot of such opportunities in China, where heighted perception of risks has led to a sharp decline in stock prices. But despite attractive valuations China continues to underperform and drag down the Trust’s relative returns versus the index. On the other hand, an underweight in Taiwan and India also held back relative returns, as small caps in these countries continued to perform well. From a sector perspective, selections within financials and utilities added value. The Trust is managed with an absolute return focus, agnostic of the index, with a bias towards high quality and value stocks.   

Given this approach, stock selection was the key contributor to the Trust’s relative performance. Of late, investors seem to be rotating out of growth stocks and into value names in the Asian small cap space, which also aided performance. This trend should continue as small cap value stocks remain at a significant discount to small cap growth stocks in Asia.   

Overall, the Trust was manly overweight consumer discretionary & financials and at a country level, it was mainly overweight China & Indonesia. 

Fidelity Asian Values Plc (LON:FAS) provides shareholders with a differentiated equity exposure to Asian Markets. Asia is the world’s fastest-growing economic region and the trust looks to capitalise on this by finding good businesses, run by good people and buying them at a good price.

Read More »

Heavily discounted Asian small cap value stocks see rising demand (LON:FAS)

Fidelity Asian Values plc (LON:FAS) has announced its monthly summary for November 2023.

Portfolio Manager Commentary

The Trust’s NAV rose 4.3% during the 12-month period ended 30 November 2023, outperforming its reference index which rose by 9.5%. The Trust’s share price rose 6.8% over the same period.

Stock selection was the key contributor to the Trust’s relative performance, particularly in China. We have been finding a lot of such opportunities in China, where heightened perception of risks has led to a sharp decline in stock prices. But despite attractive valuations China continues to underperform and drag down the Trust’s relative returns versus the index. On the other hand, an underweight in Taiwan also held back relative returns. From a sector perspective, selections within energy and utilities added value. The Trust is managed with an absolute return focus, completely agnostic of the index, with a bias towards high quality
and value stocks.

Given this approach, stock selection was the key contributor to the Trust’s relative performance. Of late, investors seem to be rotating out of growth stocks and into value names in the Asian small cap space, which also aided performance. This trend should continue as small cap value stocks remain at a significant discount to small cap growth stocks in Asia.

Overall, the Trust was overweight consumer discretionary, financials, consumer staples and utilities among others. At a country level, it was overweight China, Indonesia, and Hong Kong among others.

Fidelity Asian Values Plc (LON:FAS) provides shareholders with a differentiated equity exposure to Asian Markets. Asia is the world’s fastest-growing economic region and the trust looks to capitalise on this by finding good businesses, run by good people and buying them at a good price.

Read More »
Fidelity

Fidelity Asian Values and Special Values win Investment Company awards for 2023

Investment Week was pleased to honour the winners of the 25th Investment Company of the Year Awards, in association with the AIC, at a special ceremony in London.

The awards recognise managers in this important part of the market, who have delivered consistently for investors across a variety of sectors.

Investment Week’s host for the awards ceremony on 16 November was financial journalist and presenter Declan Curry, while our charity for the evening was Place2Be.

Methodology

The shortlists for the awards were constructed using scores provided by the AIC, using Morningstar data. Investment companies needed a three-year track record to 30 June 2023 to be shortlisted and a market cap of £50m or above.

Within each sector, companies had their cumulative fair NAV returns calculated over three discrete periods in sterling terms. Returns over the 12 months to 30 June 2023 were given a 40% weighting, the 12 months to 30 June 2022 were given a 30% weighting, while the 12 months to 30 June 2021 accounted for 20% of the overall score. The final 10% weight was given to the full cumulative NAV return over the three years to 30 June 2023.

These scores were added to give a single score out of 100, the highest of which were considered for the shortlists, with oversight from our judging panel.

Winners were then chosen by our judging panel after heated debate during our judging sessions, where qualitative factors were also considered.

The judging panel for the awards included some of the UK’s leading researchers and investors in investment companies.

Against a challenging backdrop, our judges this year were keen to highlight consistent performers who have managed to navigate turbulent market conditions. Discount management was a major focus this year, as well as effective communications with investors and use of the investment company structure.

UK All Companies: Winner: Fidelity Special Values PLC

Overseas Smaller Companies: Winner: Fidelity Asian Values PLC

Fidelity Special Values PLC (LON:FSV) aims to seek out underappreciated companies primarily listed in the UK and is an actively managed contrarian Investment Trust that thrives on volatility and uncertainty.

Fidelity Asian Values Plc (LON:FAS) provides shareholders with a differentiated equity exposure to Asian Markets. Asia is the world’s fastest-growing economic region and the trust looks to capitalise on this by finding good businesses, run by good people and buying them at a good price.

Read More »

Fidelity Asian Values Plc: China, India and Energy selections aide performance

Fidelity Asian Values plc (LON:FAS) has announced its monthly summary for October 2023.

Portfolio Manager Commentary

The Trust’s NAV rose 13.7% during the 12-month period ended 31 October 2023, outperforming its reference index which rose by 13.1%. The Trust’s share price rose 13.7% over the same period. Stock selection was the key contributor to the Trust’s relative performance, particularly in China and India. Furthermore, underweight in Thailand also contributed to the relative performance. Meanwhile, an overweight in Indonesia held back relative returns. From a sector perspective, selections within energy
and utilities added value. The Trust is managed with an absolute return focus, completely agnostic of the index, with a bias towards high quality and value stocks.

Given this approach, stock selection was the key contributor to the fund’s relative performance. Of late, investors seem to be rotating out of growth stocks and into value names in the Asian small cap space, which also aided performance. This trend should continue as small cap value stocks remain at a significant discount to small cap growth stocks in Asia. The manager continues to believe that owning good businesses, run by competent managements at attractive prices is the most time-tested way to make money in the stock market.

Overall, the Trust was overweight consumer discretionary, financials, consumer staples and energy among others. At a country level, it was overweight China, Indonesia, and Hong Kong among others.

Fidelity Asian Values Plc (LON:FAS) provides shareholders with a differentiated equity exposure to Asian Markets. Asia is the world’s fastest-growing economic region and the trust looks to capitalise on this by finding good businesses, run by good people and buying them at a good price.

Read More »
funds news

UK Investment Trusts for Capital Growth investing

DirectorsTalk funds publishes the latest market insights, news and exclusive research and interviews for a wide variety of listed investment companies on the London Stock Exchange. 

Below is a selection of UK investment trusts that provide investing opportunities for capital growth.

Fidelity European Trust is top capital growth investment over 5 and 10 years

https://www.directorstalkinterviews.com/fidelity-european-trust-is-top-capital-growth-investment-over-5-and-10-years/4121124458

Miton UK MicroCap well positioned to capture a shift in investor sentiment

https://www.directorstalkinterviews.com/miton-uk-microcap-well-positioned-to-capture-a-shift-in-investor-sentiment/4121126480

How BlackRock Greater Europe Investment Trust outperformed over the last one, three, five and 10 years

https://www.directorstalkinterviews.com/how-blackrock-greater-europe-investment-trust-outperformed-over-the-last-one-three-five-and-10-years/4121124670

Fidelity Asian Values 12.8% NAV annual growth outperforms index

https://www.directorstalkinterviews.com/fidelity-asian-values-12.8-nav-annual-growth-outperforms-index/4121130428

BlackRock Frontiers Investment Trust: Are smaller markets worth the extra effort?

https://www.directorstalkinterviews.com/blackrock-frontiers-investment-trust-are-smaller-markets-worth-the-extra-effort/4121130698

Fidelity Emerging Markets Limited: Low valuations meet big opportunities

https://www.directorstalkinterviews.com/fidelity-emerging-markets-limited-low-valuations-meet-big-opportunities/4121129161

Read More »
Fidelity

Fidelity Asian Values 12.8% NAV annual growth outperforms index

Fidelity Asian Values plc (LON:FAS) has announced its monthly summary for September 2023.

Portfolio Manager Commentary

The Trust’s NAV rose 12.8% during the 12-month period ended 30 September 2023, outperforming its reference index which rose by 11.2%. The Trust’s share price rose 16.5% over the same period.

Stock selection was the key contributor to the Trust’s relative performance, particularly in China, Indonesia and India. Meanwhile, being underweight in South Korea held back the relative performance. This country selection has been a headwind to performance given South Korean equities were supported by the strong performance of several stocks in the technology sector. From a sector perspective, selections within financials and energy added value. The Trust is managed with an absolute return focus, completely agnostic of the index, with a bias towards high quality and value stocks.

Given this approach, stock selection was the key contributor to the Trust’s relative performance. Of late, investors seem to be rotating out of growth stocks and into value names in the Asian small cap space, which also aided performance. This trend should continue as small cap value stocks remain at a significant discount to small cap growth stocks in Asia. The manager continues to believe that owning good businesses, run by competent managements at attractive prices is the most time-tested way to make money in the stock market.

Overall, the Trust was mainly overweight consumer discretionary, financials and consumer staples. At a country level, it was mostly overweight China, Indonesia, and Hong Kong.

Fidelity Asian Values Plc (LON:FAS) provides shareholders with a differentiated equity exposure to Asian Markets. Asia is the world’s fastest-growing economic region and the trust looks to capitalise on this by finding good businesses, run by good people and buying them at a good price.

Read More »

Interviews

Fidelity Asian Values Opportunities from India (VIDEO)

Fidelity Asian Values (LON:FAV) is the topic of conversation when Hardman & Co Analyst Mark Thomas joins DirectorsTalk Interviews.

https://vimeo.com/803147793

Mark talks us through his latest report entitled ‘India: adding spice to the mix’, explains why Fidelity invest in India, what he learned from a couple of case studies, the near-term factors and the risks involved.

Fidelity Asian Values PLC provides shareholders with a differentiated equity exposure to Asian Markets.

Read More »

Fidelity Asian Values things to ask at AGM on 23 November (VIDEO)

Fidelity Asian Values (LON:FAS) is the topic of conversation when Mark Thomas, Analyst at Hardman & Co joins DirectorsTalk Interviews.

Mark talks us through his report entitled ‘questions for the 2022 AGM on 23 November’, explains what drives FAV’s long-term outperformance, the short-term prospects, the management of the trust and the risks.

https://vimeo.com/769326433

Fidelity Asian Values Plc (LON: FAS) provides shareholders with a differentiated equity exposure to Asian Markets.

Read More »

Asia market dynamics gives favourable tailwinds to Fidelity Asian Values investment trust (LON: FAS) (VIDEO)

Fidelity Asian Values Plc (LON:FAS) is the topic of conversation when Mark Thomas, Analyst at Hardman & Co joins DirectorsTalk Interviews.

Having published a report on the company entitled ‘Asia: more appealing than ever‘ Mark talks us through his findings, talks us through some numbers showing how Asia is accelerating into 2023 while Western economies are slowing, the new trade agreements and de-regulation, the long term demographics and urbanisation and what all this means for the trust.

https://vimeo.com/732354220

Fidelity Asian Values Plc (LON: FAS) provides shareholders with a differentiated equity exposure to Asian Markets.

Read More »

Nitin Bajaj analyses opportunities in Asia investment fund and markets (LON: FAS)

Asia investment trust Fidelity Asian Values Plc (LON:FAS) Fund Manager Nitin Bajaj, joins DirectorsTalk Interviews to give us a better understanding of his investment approach, opportunities and the thought processes taken before adding a company to the porfolio.

Nitin talks about areas of the market within different parts of Asia where he is finding more investment opportunities, opportunities in stocks typically considered as growth stocks, increased exposure to the financials sector, a reduction in exposure to the technology sector and thoughts on the medium term demand impact in the region from high oil and commodity prices. Nitin also provides us with some examples of high conviction holdings to help our viewers understand how he assess companies, what he looks for and the thought process that he goes through before adding it to the portfolio.

https://vimeo.com/715527022

Fidelity Asian Values Plc (LON FAS) provides shareholders with a differentiated equity exposure to Asian Markets.

Read More »

Question & Answers

Hardman & Co

Fidelity targets favourable India investment opportunities (LON:FAS)

Fidelity Asian Values plc (LON:FAS) is the topic of conversation when Hardman and Co’s Analyst Mark Thomas caught up with DirectorsTalk for an exclusive interview.

Q1: You called your recent report on Fidelity Asian Values ‘India: adding spice to the mix’. What can you tell us about it?

A1: India accounts for 23% of FAV’s portfolio and the top two overweight positions, both of which are Financials.

In this note, we examine some of the key macro attractions of that market, which help generate favourable tailwinds for investment. These include economic growth, socio-demographic changes, digitalisation and deregulation. We also use the two overweight, very different Indian case studies, to illustrate FAV’s investment approach and how it adds value in the process. In six months, the Trust’s NAV has risen to our previous July 2023 year-end estimate.

We have now increased our forecast by 8%, reflecting performance to date, stock selection and the regional outlook.

Q2: So, why invest in India?

A2: Before I go into that, just a reminder that FAS is driven by stock selection, but favourable headwinds help investment and sentiment.

The IMF’s January World Economic Outlook update once again highlighted the superior economic prospects (and lower downside revisions) of India over both advanced economies and critically ca.1.5x most emerging markets. This superior growth is a long-term feature driven by the expectation for the middle-class proportion of spending to double in the next 25 years, and, combined with accelerating rate of urbanisation, this will see significant domestic demand changes and opportunities.

Additionally, there is a rapid smartphone and digital transaction adoption with India now third globally for unicorns. To put unicorns into perspective, India’s performance is around twice the number of the UK and four times the number of Germany or France. On top of this, there is major reform of the business environment with government support, including government’s production-linked incentive or PLI schemes, lower taxes and focus on helping infrastructure. India moved from 132 in 2013 to 63 in 2020 in the World Bank’s ease of doing business index and recently, has seen more appetite for free trade agreements.

Q3: You included a couple of major investments as case studies, what did you learn from that?

A3: We looked at their two largest holdings: Shriram Finance Ltd – formerly holding in Shriram City Union Finance Ltd a niche lender requiring specific skills built over many decades; and Axis bank the third-largest private-sector bank in India.

The key issues are that they have high returns, good growth, good ESG credentials. As a reminder, Fidelity Asian invests in companies not stocks.

Q4: You have touched on some long-term factors there , what can you tell us about the near term?

A4: Half of NAV is in companies with market caps of under £1bn,  so market appetite for small caps can be important. This was a headwind for much of 2016-21, as market appetite was for large-cap, growth companies – but Fidelity Asian Values still outperformed.

One short-term theme we have identified is that, more recently, appetite has turned in their favour, and this could now be a following wind. The manager sees it as the start of a trend, given the relative valuation, while we see significant opportunities in that space.

A second theme is that, whilst Chinese growth may be slower than in the past, it is still expected by the IMF to be many multiples of advanced economies in 2023, and that’s before any further stimulus packages. The manager comments that, even in the property sector, detailed analysis can identify mis-priced opportunities. The volatility, both up and down, around regulation and state intervention, has been very evident in recent weeks.

It is worth remembering that FAS is all about stock selection, not sector allocation. The past six months have seen a material rise in their benchmark and additionally, significant outperformance against this by the Trust driven by stock selection. As a consequence, it achieved our previous July 2023 year-end forecast.

Reflecting this performance and the recent economic upgrades, we increased our 2023E NAV by 8%, with a carry-forward effect into 2024. Given the higher capital growth we now expect, we also now assume a stable dividend.

Q5: What about the risks?

A5: Sentiment risk is always an issue, and the manager highlights the “unknown unknowns”. The fund’s performance is driven by stock selection, and that should never be overlooked.

It is not a complicated story. It invests in good businesses – not stocks, but businesses. It backs people in whose competency and honesty it trusts, and buys at prices with a margin of safety. It does this again and again, and it doesn’t get carried away and doesn’t go to extremes, it just repeats the same behaviour, again and again. It sounds quite boring, but, by maintaining this discipline, with the Fidelity analyst team generating great investment ideas, and with the through-cycle support of the board, they have delivered long-term outperformance.

What we’ve done in this note is highlight that this approach is being undertaken in very appealing markets that give favourable tailwinds, a potential double whammy, if you like.

Read More »
Hardman & Co

Performance, prospects and risks analysed for Fidelity Asia investment trust (LON:FAS)

Fidelity Asian Values (LON:FAS) is the topic of conversation when Hardman and Co’s Analyst Mark Thomas caught up with DirectorsTalk for an exclusive interview.

Q1: You called your recent report on Fidelity Asian Values ‘FAV: questions for the 2022 AGM on 23 November’. What can you tell us about it?

A1: In this note, we asked the questions we would ask the FAV board at the forthcoming AGM, on 23 November 2022. To offer a perspective, we also gave the answers that we would give if we were asked the same questions.

We believe they fall into three key areas, and we asked i) why has the trust outperformed over the long term, ii) what are the short-term prospects, especially bearing in mind the market’s appetite for small-cap, value companies in Asia, the trust’s exposure to Chinese and financial businesses, and sentiment risks, and iii) how the trust is managed in terms of its discount/buyback, the large dividend increase, and its conservative approach to gearing.

Q2: So, taking the first question first, what drives their long-term outperformance?

A2: There has been outperformance against both UK and local benchmarks, and it really has two elements. First, it is because Asia is an attractive market to be in, and, secondly, because of the value added by the trust and the manager.

We explored the macro appeal of Asia in great detail in a recent note, Asia: more appealing than ever, published on 5 July 2022, and the region’s superior economic growth prospects were reconfirmed in the October IMF World Economic Outlook. This is combined with regulatory, socio-demographic and valuation support. Fidelity Asia leverages regional opportunities with stock selection – all about using detailed research to pick good companies at fair prices, and, when we wrote the report, the trust’s companies’ RoE was 35% above the market, but its P/E was 25% lower.

Q3: Your second theme, the short-term prospects, what can you tell us about them?

A3: Half of NAV is in companies with market caps of under £1bn – so market appetite for small caps can be important. This was a headwind for much of 2016-21, as market appetite was for large-cap, growth companies – but Fidelity Asia Values still outperformed.

One short-term theme we have identified is that, more recently, appetite has turned in FAV’s favour, and this could now be a following wind. The manager sees it as the start of a trend, given the relative valuation, while we see significant opportunities in that space.

A second theme is that, while Chinese growth may be slower than in the past, it is still expected by the IMF to be ca.4x that of advanced economies in 2023, and that’s before any further stimulus packages. The manager comments that, even in the property sector, detailed analysis can identify mis-priced opportunities. The volatility, both up and down, around regulation and state intervention, has been very evident in recent weeks.

A third theme we look at is some sector exposures; we note, in particular, that three of the biggest holdings were banks, and financials were the biggest sector overweight in uncertain times. It is worth remembering that Fidelity Asia is all about stock selection, not sector allocation – so sector exposures drop out from stock-picking. Financial investments have strong balance sheets, structural growth opportunities and good managements, and the key ones are in India, where GDP growth is expected to be more than 6% in both 2022 and 2023.

Q4: And the management of the trust?

A4: We noted the active returns to shareholders with a buyback programme that has seen nearly 2% of shares bought back in the past 15 months. The dividend was increased 59% in 2022, reflecting a sharp increase in investment income, and the current yield on the portfolio should generate a similar level of investment income as last year. Gearing has remained modest through the life of the current manager.

Q5: What does about the risks?

Sentiment risk is always an issue, and the manager highlights the “unknown unknowns”.

Fidelity Asian Values’ performance is driven by stock selection, and that should never be overlooked. It is not a complicated story. It invests in good businesses, not stocks, but businesses. It backs people in whose competency and honesty it trusts and buys at prices with a margin of safety. It does this again and again, and it doesn’t get carried away and doesn’t go to extremes, it just repeats the same behaviour, again and again.

It sounds quite boring, but by maintaining this discipline, with the Fidelity analyst team generating great investment ideas, and with the through-cycle support of the board, they have delivered long-term outperformance. What we have done in this note is highlight that this approach is being undertaken in very appealing markets that give favourable tailwinds, a potential double whammy, if you like.

Read More »
Hardman & Co

Looking to capitalise on accelerated Asian growth with an Asia investment trust? (LON:FAS)

Fidelity Asian Values plc (LON:FAS) is the topic of conversation when Hardman and Co’s Analyst Mark Thomas caught up with DirectorsTalk for an exclusive interview.

Q1: You called your recent report on Fidelity Asian Values ‘Asia: more appealing than ever’. What can you tell us about it?

A1: FAV’s performance is driven by stock selection, and that should never be overlooked. However, being in appealing markets gives favourable tailwinds, and, in this note, we highlight that Asia is now more appealing than ever, with i) growth accelerating into 2023 while developed economies slow, ii) lower inflation, iii) liberalisation of economies, iv) the full benefits of major new free trade agreements, and v) continued long-term positive demographic and urbanisation trends unaffected by short-term noise.

FAV may further benefit from sentiment increasingly favouring its small-/mid-sized value focus, a trend that, arguably, has already started.

Q2: You say Asia is accelerating into 2023 while Western economies are slowing. Can you put some numbers on that for us?

A2: The IMF’s World Economic Outlook April 2022 update highlighted the continued superior growth of the Asian economy over the rest of the world.

In 2022, emerging and developing Asia is forecast to have real GDP growth of 5.5%, against advanced economies’ estimated growth of 3.3%, while, in 2023, the gap is expected to widen to more than double, as Asian growth accelerates, while advanced economies are forecast to slow.

In 2023, the ASEAN 5 economies are expected to show real growth at just under 6% (India at just under 7%), while the US and the Euro areas are struggling at around 2%. Expected inflation in the G7 is around 6%, nearly double the Asian rate of 3.5%, with the associated interest rate risk being much higher in Western economies. The macroeconomic picture is much, much brighter in Asia.

Q3: And you touched on some new trade agreements and de-regulation. What can you tell us about them?

A3: The Asian Economic Integration Report 2022, produced by the Asia Regional Integration Centre (ARIC), has gone into some detail on the new trade agreements that are now effective across the region.

The Regional Comprehensive Economic Partnership (RCEP) became effective on 1 January 2022 and follows the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP), which was effective at the end of 2018. The report notes that the RCEP will add $245bn to regional income and 2.8m jobs. In addition to free trade, we note that there is a general trend towards fewer regulations.

In India, under the tag line of “Reform, Perform and Transform”, there has been a broad range of changes, including sales tax systems, bank accounts and bankruptcy laws, and these have helped attract the highest-ever foreign direct investment.

Q4: And the long term demographics and urbanisation?

A4: The UN Habitat World Cities Report 2020 noted that 49%, nearly 1bn, more people in Asia will live in cities in 2030 than in 2010 (2.8bn vs. 1.9bn).

In our report, we included a chart that showed the proportion of the population who are urban dwellers. The starting position is very low relative to more developed economies. India has less than half its population in urban centres than is the case for the developed world, and China is around three quarters of that level. 

The Kearney Consumer Wealth and Spending Study concurs with our view that, as consumers’ income and wealth rise, their spending habits change, with a much greater proportion of income spent on discretionary items, rather than basic necessities. It may be expected that this growth in spending will be focused in sectors such as financial services, consumer discretionary and leisure.

In addition, China will see a huge increase in the number of older people requiring more healthcare.

Q5: And what does this mean for the trust?

A5: Fidelity Asian Values’ performance is driven by stock selection, and that should never be overlooked. It is not a complicated story.

It invests in good businesses – not stocks, but businesses. It backs people in whose competency and honesty it trusts and buys at prices with a margin of safety. It does this again and again, and it doesn’t get carried away and doesn’t go to extremes – it just repeats the same behaviour, again and again.

It sounds quite boring, but by maintaining this discipline, with the Fidelity analyst team generating great investment ideas, and with the through-cycle support of the board, FAV has delivered long-term outperformance. Now, what we have done in this note is highlight that this approach is being undertaken in very appealing markets that give favourable tailwinds – a potential double whammy, if you like.

Read More »
Fidelity

Investing in Asia – Fidelity Asian Values fund manager approach (LON:FAS)

Fidelity Asian Values plc (LON:FAS) Fund Manager Nitin Bajaj caught up with DirectorsTalk for an exclusive interview to discuss investment philosophy & approach, investment opportunities in different parts of Asia and in growth stocks, increased exposure to the financial sector & decreased exposure to the technology sector, the medium term demand impact from high oil and commodity prices and the process he goes through before adding high conviction holdings to the portfolio.

Q1: Just as a way of introduction, could you give us a brief overview of Fidelity Asian Values, its investment philosophy, your investment approach and what you believe makes it different?

A1: I don’t think I can tell you what makes it different, I can only tell you what I do. My investment philosophy actually isn’t very complicated, it’s very similar to what you would do in your personal life.

So, if you’re in the UK and you’re trying to buy a business for yourself, what do you want to do? First and foremost, you want to buy a good business, and by a good business I mean a business which makes a product which is in demand by the customer and the business can make a decent return on capital while doing their business.

So, first and foremost you want to buy a good business, second you want to hire the right people to run it for you and third you want to buy it at a price that leaves enough margin of safety for bad judgement, mistakes etc.

I just try to do that in the stock market, buy good businesses run by people that are competent and honest and buy them at a price that leaves enough margin of safety.

Q2: Although you’re not a thematic or top down investor, are there areas of the market within different parts of Asia where you are finding more investment opportunities? If that is the case, can you give us some examples?

A2: It’s always the case that the market goes in cycles and sometimes investors are focussed on certain parts of the market and at other times focussed on other parts of the market.

So, at the moment the places that I find the most ignored are first and foremost Chinese companies listed in Hong Kong and I see some incredible opportunities in Chinese companies listed in Hong Kong. You can buy really long duration businesses that have been around for 30/40/50 years with no risk of disruption, with net cash balance sheets on 4/5 times earnings with dividend yields of 7-10%, this is, to me, quite incredible value.

There are obvious reasons why this is happening, there are geopolitical tensions between China and the West, the Chinese government has taken some quite harsh measures against some of the education companies and maybe some, in my opinion, good decisions related to some of the internet companies and investors have been put off by that. Secondly, there’s been a slowdown in the housing market, which is central to the Chinese economy and finally, the COVID situation in China.

So, I think all of these things have come together for investor apathy towards China and I think that’s fantastic because it’s giving us an opportunity to own these businesses.

The second place that I find quite interesting at the moment is some of the financials in India and with rising rates and fear of emerging market sell-off, Indian financials – which have quite a spectacular record of creating shareholder value – have been sold off, you get this every few years with the Indian banks. That’s given us an opportunity to take up positions there.

Q3: Your process lends itself to a value tilt in the portfolio. Now, with growth stocks having underperformed value stocks in the last few months, are you finding more investment opportunities in stocks typically considered as growth stocks?

A3: The difference between a growth stock and a value stock is basically the valuation. Everyone wants to own a company which is growing 50% a year, I just want to own it at a multiple where I’m not pricing in the next 15 years already.

So, the market sell off obviously does start to create some opportunities, much more in the large cap space than in the small cap space at the moment. You do also understand that we’re starting this cycle at such egregious valuations for this growth stocks, that a lot of them after having collected 50% in my opinion still don’t offer much value, some do but most of them still, in my opinion, are overpriced after having collected 50%.

Q4: Year to date, the fund has seen an increased exposure to the financial sector. What are the drivers for this change, such as rise in interest rates, or is it just driven by valuations?

A4: It’s stock picking, I’m not a macro guy. Like I said, India is quite attractive at the moment because financials have been sold off and these are businesses that I’ve known for a long time and they’re run by very competent and honest management teams and now, they’re available on good prices.

I’ve also started a new position in Indonesia in Bank Mandiri and that’s been a turnaround situation where the new management came, they’ve cleaned up the book and now the bank is executing really well and is still on 10 times earnings.

So, it’s really stock-specific and stock-specific in Indonesia and Korea and sector-specific in India where the whole sector has been sold off.

Q5: Similarly, there’s been a reduction in the fund’s exposure to the technology sector. Is this driven by the global demand slowdown or other factors?

A5: Most of my decrees in technology would have come from me selling out of my holdings in Indian IT service companies so these are the guys that write code etc. and I had quite substantial positions in them and now I own nothing basically. The reason was that the stocks had a great couple of years in terms of business momentum.

So, for example, Infosys which is amongst the largest, used to add $1 billion of revenue a year and the last couple of years it’s been adding $3 billion a year and the reason that’s happened is clear to everyone that with COVID there was a pull forward of a lot of IT spend by companies as people realised the importance of remote working, the importance of always being ready for any kind of emergencies so the whole world went on spend on these things. So, not only are you now at quite strong revenue numbers, but the multiples have also expanded as well because the market generally chases good fundamentals.

I don’t really see margin of safety in these companies so I have taken money off these businesses and that’s the primary driver of the decrease in technology exposure.

Q6: Given that a large part of your portfolio is domestic driven, what are your thoughts on the medium term demand impact in the region from high oil and commodity prices?

A6: I can tell you it won’t be positive, it’ll definitely be negative, how much is impossible for me to say but it’s not going to be good, for sure. It’s a tax on the consumers.

Q7: Finally, can you give us some examples of your high conviction holdings to help our viewers understand how you assess companies, what you look for and the best process you go through before adding it to the Fidelity Asian Values portfolio?

A7: Let’s take the example of HDFC Bank, it’s a very well-known bank, it’s the largest private sector bank in India by profitability and the second largest by net worth. If you look at the Indian banking market, it’s split two ways, roughly 60/65% if government-owned banks which are the legacy banks and a third of the market is private sector banks which are the new-age banks, which have come about only in the last 20/25 years.

The customer segment, the underwriting profile, the quality of the people, everything is better in private sector banks, primarily because they have better incentive structures. This bank has 20 years of incredible value creation history and I think it has another 20 years in front of it in terms of it being able to grow in excess of nominal GDP. Nominal GDP in India should be growing at about 10/11% so let’s say this bank has another 10 years of double-digit growth in front of it and you’re paying 13/14 times earnings for it now. To me, that’s quite good value because in 5 years, this bank has doubled, you’re paying 13/14 times earnings, 5 years out at 7/8 times earnings, it won’t be there in 5 years’ time.  So, it’s very low-risk high return position for me and, at the moment, it is the largest position in the portfolio.

Another example let’s take ICBP, it’s the largest noodle maker globally, I think they do somewhere close to 35 billion packs of noodles a year. Their dominant market position in Indonesia, Saudi, North Africa, more or less any market they operate in, they are anywhere between 60-80% market share. Again, incredible history of consistent pricing power above inflation as well as consistent volume growth and market share gains over the last 15 years.

This stock, at the moment is trading on 13/14 times earnings, primarily because people are very worried with the soft commodity prices and the margin pressure that may come in the short term because of wheat and palm oil which are the two key ingredients in making noodles. I think the market is right to worry, margin s probably are going to come down.

To me, if I’m taking a 3-5 year view on a business like this, to pay 13 times earnings for a global market leader which dominates absolutely each of the markets it operates in, I think is again a low-risk high return position.

So, that gives you a flavour of the kind of businesses that I like to buy.

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Analyst Notes & Comments

Fidelity

Fidelity Asian Values: Kepler trust research June 2023 (LON:FAS)

Fidelity Asian Values plc (LON:FAS) has today announced that new research by Kepler Trust Intelligence has now been published.

Overview

Fidelity Asian Values (FAS) is a diverse portfolio of quality companies, predominantly from the smaller end of the market cap spectrum, selected by manager Nitin Bajaj with a strong focus on valuations. Nitin is highly experienced with this investment style which, when combined with the extensive on-the-ground analyst team, could provide a strong informational edge for an under researched part of the market.

Nitin believes that smaller companies offer superior earnings growth over the long term, which he aims to capture through his value-tilted approach. FAS has outperformed its benchmark over five years after a very strong past year, which has benefitted Nitin’s value style. Whilst this has been a positive tailwind, Nitin is expecting an alpha driven rally to come next, especially in the Chinese equities market. This means that stock selection is key and if the right stocks are owned, it could be beneficial for Performance going forward. He believes that small-cap value stocks remain significantly undervalued.

Nitin has found very strong value opportunities in China and, therefore, the trust has a large overweight position. He believes that the Chinese economy is set to grow faster than developed markets next year, in part because of the lifting of the zero-Covid policy, and this should provide a boost to Asian markets. Nitin has increased the net market exposure of the trust to a near five-year high to capitalise on this, given the current risk/reward he sees in various opportunities.

The trust is trading at a Discount in line with its five-year average. However, FAS consistently traded at a premium at the beginning of this period, with two periods when the discount was exceptionally wide in 2020 and 2022, thus affecting the average. The discount is notably narrower than the sector average.

Analyst’s View

We believe that FAS offers investors highly differentiated exposure to the Asian region. Smaller companies are likely to have different drivers to the larger companies in the region, including direct exposure to the domestic growth stories across the region. The industry-leading resources of Fidelity further support the identification of the best ideas from the vast universe, as well as helping to build a strong understanding of the companies through interactions with management. When combined with Nitin’s strong valuation focus, we believe this makes for a unique offering, likely to exhibit a very distinctive portfolio against both peers and the wider index.

Nitin can also take short positions and can invest up to 20% in larger companies, which offers strong diversification benefits, as well as helping the trust to stand out against the peer group and index. All these factors have contributed to strong long-term Performance. This has been supported by an excellent period recently, but we believe the ability to outperform in a variety of market backdrops has demonstrated the stock selection prowess of the manager.

Despite this strong performance, Nitin has evidenced a portfolio that is cheaper than the market average, and significantly cheaper than equivalent growth companies. Yet it still offers quality characteristics in line with the market. We believe that if the market should continue to focus on fundamentals, Nitin is well-placed to capture the alpha opportunities with his approach.

Fidelity Asian Values is an Asia investment trust that provides shareholders with a differentiated equity exposure to Asian Markets.

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Hardman & Co

Fidelity Asian Values: India – adding spice to the mix

India accounts for 23% of Fidelity Asian Values plc (LONFAS) portfolio and the top two overweight positions, both of which are Financials. In this note, we examine some of the key macro attractions of the that market, which help generate favourable tailwinds for investment. These include economic growth, socio-demographic changes, digitalisation and deregulation. We also use the two overweight, very different Indian case studies, to illustrate FAV’s investment approach and how it adds value in the process. In six months, the Trust’s NAV has risen to our previous July 2023 year-end estimate. We have now increased our forecast by 8%, reflecting performance to date, stock selection and the regional outlook.

  • Asia’s appeal: The IMF’s January World Economic Outlook update once again highlighted the superior economic prospects (and lower downside revisions) seen in FAV’s investment mandate. We also see opportunities being created by new trade agreements, reduced regulation, long-term socio-demographic trends and urbanisation.
  • Trust-specific appeal: Fidelity Asian Values uses in-depth research to identify good businesses at fair prices, rather than making macro calls. Despite headwinds for many years, when market appetite was for large-cap, growth companies, FAV outperformed. More recently, market appetite has turned sharply in FAV’s favour.
  • Valuation: FAV is trading at a 6% discount to NAV – broadly in line with its peers in the AIC Asia Pacific Smaller Companies Index (average discount 10%) and the broader Asia Pacific sector (average 7%), even though its one-year performance has been ca.18% better than that of the latter. Most assets are listed, making the NAV “real”.
  • Risks: Geopolitical and economic tensions may affect investments, and also sentiment. If growth/momentum stocks are in favour (as they have been for much of the period since 2016), FAV faces a relative headwind, which it has usually, but not always, overcome. Volatility of returns is likely to be high.
  • Investment summary: Fidelity Asian Values has delivered superior long-term returns by being in attractive growth markets and adding incremental value using structured, in-depth analysis to identify mis-priced investments. Its “value” investments have actually delivered higher earnings growth than an average Asian “growth” company, as well as being lower-rated and providing a higher RoE. FAV is actively managed, and divergence from the benchmark performance, often for sustained periods, is to be expected.

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Hardman & Co

Performance, prospects and risks analysed for Fidelity Asia investment trust (LON:FAS)

Fidelity Asian Values (LON:FAS) is the topic of conversation when Hardman and Co’s Analyst Mark Thomas caught up with DirectorsTalk for an exclusive interview.

Q1: You called your recent report on Fidelity Asian Values ‘FAV: questions for the 2022 AGM on 23 November’. What can you tell us about it?

A1: In this note, we asked the questions we would ask the FAV board at the forthcoming AGM, on 23 November 2022. To offer a perspective, we also gave the answers that we would give if we were asked the same questions.

We believe they fall into three key areas, and we asked i) why has the trust outperformed over the long term, ii) what are the short-term prospects, especially bearing in mind the market’s appetite for small-cap, value companies in Asia, the trust’s exposure to Chinese and financial businesses, and sentiment risks, and iii) how the trust is managed in terms of its discount/buyback, the large dividend increase, and its conservative approach to gearing.

Q2: So, taking the first question first, what drives their long-term outperformance?

A2: There has been outperformance against both UK and local benchmarks, and it really has two elements. First, it is because Asia is an attractive market to be in, and, secondly, because of the value added by the trust and the manager.

We explored the macro appeal of Asia in great detail in a recent note, Asia: more appealing than ever, published on 5 July 2022, and the region’s superior economic growth prospects were reconfirmed in the October IMF World Economic Outlook. This is combined with regulatory, socio-demographic and valuation support. Fidelity Asia leverages regional opportunities with stock selection – all about using detailed research to pick good companies at fair prices, and, when we wrote the report, the trust’s companies’ RoE was 35% above the market, but its P/E was 25% lower.

Q3: Your second theme, the short-term prospects, what can you tell us about them?

A3: Half of NAV is in companies with market caps of under £1bn – so market appetite for small caps can be important. This was a headwind for much of 2016-21, as market appetite was for large-cap, growth companies – but Fidelity Asia Values still outperformed.

One short-term theme we have identified is that, more recently, appetite has turned in FAV’s favour, and this could now be a following wind. The manager sees it as the start of a trend, given the relative valuation, while we see significant opportunities in that space.

A second theme is that, while Chinese growth may be slower than in the past, it is still expected by the IMF to be ca.4x that of advanced economies in 2023, and that’s before any further stimulus packages. The manager comments that, even in the property sector, detailed analysis can identify mis-priced opportunities. The volatility, both up and down, around regulation and state intervention, has been very evident in recent weeks.

A third theme we look at is some sector exposures; we note, in particular, that three of the biggest holdings were banks, and financials were the biggest sector overweight in uncertain times. It is worth remembering that Fidelity Asia is all about stock selection, not sector allocation – so sector exposures drop out from stock-picking. Financial investments have strong balance sheets, structural growth opportunities and good managements, and the key ones are in India, where GDP growth is expected to be more than 6% in both 2022 and 2023.

Q4: And the management of the trust?

A4: We noted the active returns to shareholders with a buyback programme that has seen nearly 2% of shares bought back in the past 15 months. The dividend was increased 59% in 2022, reflecting a sharp increase in investment income, and the current yield on the portfolio should generate a similar level of investment income as last year. Gearing has remained modest through the life of the current manager.

Q5: What does about the risks?

Sentiment risk is always an issue, and the manager highlights the “unknown unknowns”.

Fidelity Asian Values’ performance is driven by stock selection, and that should never be overlooked. It is not a complicated story. It invests in good businesses, not stocks, but businesses. It backs people in whose competency and honesty it trusts and buys at prices with a margin of safety. It does this again and again, and it doesn’t get carried away and doesn’t go to extremes, it just repeats the same behaviour, again and again.

It sounds quite boring, but by maintaining this discipline, with the Fidelity analyst team generating great investment ideas, and with the through-cycle support of the board, they have delivered long-term outperformance. What we have done in this note is highlight that this approach is being undertaken in very appealing markets that give favourable tailwinds, a potential double whammy, if you like.

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Hardman & Co

Fidelity Asian Values: Asia – more appealing than ever

Fidelity Asian Values plc (LON:FAS) performance is driven by stock selection, and that should never be overlooked. However, being in appealing markets gives favourable tailwinds, and, in this note, we highlight that Asia is now more appealing than ever, with i) growth accelerating into 2023 while developed economies slow, ii) lower inflation, iii) liberalisation of economies, iv) the full benefits of major new free trade agreements, and v) continued long-term positive demographic and urbanisation trends unaffected by short-term noise. FAV may further benefit from sentiment increasingly favouring its small-/mid-sized value focus, a trend that, arguably, has already started.

  • Economic outlook: Growth in Asia in 2023 is expected to accelerate to more than double that of developed economies. As the latter slow, Asia is accelerating. Asia is not facing the same inflationary expectations, nor, as a consequence, the same pressures to raise interest rates. New trade agreements will also help growth.
  • Market trends: Market sentiment has increasingly favoured FAV’s investment focus, with a move away from large-cap names, and an increasingly positive view on China. There remains a huge valuation gap between small-cap value and growth, which remains anomalous with underlying business performance.
  • Valuation: Fidelity Asian Values is trading at a 9% discount to NAV – only a little better than its peers in the AIC Asia Pacific Smaller Companies Index (average discount 11%) and the broader Asia Pacific sector (average 9%), even though its one-year performance has been ca.11% better than the latter. Most assets are listed, making the NAV “real”.
  • Risks: Geopolitical and economic tensions may affect investments, and also sentiment. If growth/momentum stocks are in favour (as they have been for much of the period since 2016), FAV faces a relative headwind, which it has usually, but not always, overcome. Volatility of returns is likely to be high.
  • Investment summary: Fidelity Asian Values has delivered superior long-term returns by being in attractive growth markets and adding incremental value using structured, in-depth analysis to identify mis-priced investments. Its “value” investments have actually delivered higher earnings growth than the average Asian “growth” company, as well as being lower-rated and providing a higher return on equity. FAV is actively managed, and divergence from the benchmark performance, often for sustained periods, is to be expected.

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Data policy – All information should be used for indicative purposes only. You should independently check data before making any investment decision and or seek professional advice. DirectorsTalk cannot guarantee that the data is accurate or complete, and accepts no responsibility for how it may be used.