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(Alliance News) - Pacific Horizon Investment Trust PLC on Friday reported a negative performance in its financial year, explaining that the market was in a period that would not bear fruit for growth investors.
The FTSE 250-constituent is an investment trust aiming to achieve capital growth via investment in the Asia-Pacific region, excluding Japan, and the Indian Sub-continent.
"In the last year these markets have been influenced by weaker than expected post-Covid consumption recovery in China, ongoing geopolitical tension between the US and China and rising US interest rates and the consequent US dollar strength," the fund said.
In the financial year that ended July 31, the fund reported a negative net asset value return per share of 3.6%. This was behind the positive MSCI All Country Asia ex Japan Index return of 0.8%.
"It is to be expected that there will be periods during which growth investment will not be rewarded. We are in such a phase now," said the fund's chair, Angus Macpherson.
Macpherson announced he would be stepping down from the board and his role as chair. He will leave once a suitable replacement has been found, which is expected to be around the end of the first quarter next year. On Friday, Templeton Emerging Markets Investment Trust PLC announced Macpherson joined as a non-executive director, with the intention to become its chair on January 1.
NAV per share fell to 637.18 pence each at the end of the period, from 664.65p a year before. The discount of its share price to NAV widened to 8.0% from 2.7%.
The firm proposed a final dividend of 3.25p, rising from 3.00p a year before.
Shares in Pacific Horizon were up 0.5% at 543.62p each in London on Friday morning.
Its outperforming investments were in Korea's Samsung Electronics Co, as strong orders continued, Indian steel forging firm Ramakrishna Forgings Ltd, amid rapid sales growth and new order wins, and Korean laser-based equipment maker EO Technics Co Ltd, as orders accelerated.
Its notable detractors were Singapore's Jadestone Energy, which saw significant operational issues at its main cash-producing asset, Montara in Australia, with production stopped for several months.
Indian logistics firm Delhivery also underperformed, after quarterly results at the end of 2022 disappointed, sending its shares down 52%.
Chinese e-commerce firm JD.com was also a source of weakness in the portfolio, despite a "reasonable" operational performance. Its revenue growth slowed and margins suffered from increased competition from the likes of TikTok-owner Bytedance.
Looking ahead, Chair Macpherson warned of the potential threat to Chinese asset prices posed by any extension of US and Western sanctions on China. The domestic situation in China also factors into the equation, he noted, and predicted a "greater complexity and risk" in securing investment exposure to China.
"On the basis of the information currently available, the manager and your board believe that the risks of investment in China and the broader Asian region are justified by the potential rewards. China is a critical trading partner of the West and only the most extreme geopolitical confrontation would justify the economic disruption of severing economic ties entirely," Macpherson said.
"More broadly, the economies of Asia including the Indian Sub-continent are...unencumbered by some of the issues affecting more developed markets, such as high levels of debt and elevated levels of inflation. The region is fostering competitive companies that are well placed to benefit from key drivers of long- term growth such as the rising wealth of the Asian consumer, the transition to renewable energy and an AI-led digital age of innovation."
By Elizabeth Winter, Alliance News senior markets reporter
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