Subscription Shares - update
The opportunity to exercise subscription shares in 2018 in Fidelity Asian Values PLC has now passed. Those shareholders that opted to convert subscription shares will receive the ordinary shares over the next couple of weeks.
Shareholders will have a final opportunity to convert their subscription shares on 29 November 2019, when the exercise price will be 392.75p.
The decision on whether or not to exercise subscription shares should made on the basis of the information in the offer prospectus, which is available in the Subscription Shares area of the Company website. There is also available a guide to subscription shares and additionally a video ‘Understanding Subscription Shares’ to help.
How to deal with uncertainty in Asia
Nitin Bajaj - Portfolio Manager
5 November 2018
Over recent months it is fair to say that political risks have intensified and for Asian equity investors the dominant theme has been the escalation of trade tensions between the US and China. While it feels as though policy uncertainty is at the highest level it has been in the last 25 years, it is important to remember the complexity of these developments and that there are no certain answers.
The impact of political and economic policy has many forms and occurs at various stages. The direct impacts are transparent and easy to comprehend – for example, a tax on soya exports from the US to China will impact the price of soya beans.
This will have a knock-on impact on palm oil, as soya bean oil competes with palm oil. It will also impact animal feed, which uses soya beans as a raw material. Consequently, meat and poultry prices will be high, which will impact inflation and other macro variables. The point I am trying to make is that the world economy is an extremely complex system and we need to be careful about interpretations we draw from any single policy action.
That said, we need to remain alert to the implications of political crosswinds. When it comes to selecting stocks for Fidelity Asian Values PLC, my framework for considering the potential impact of changing policy focuses on two elements:
- Avoiding businesses where either the risk of policy impact is very high or where the stock market has failed to understand the unintended consequences of such a policy change.
- Not allowing myself to become frozen with fear, instead remaining vigilant for new opportunities. Markets sometimes punish stocks which are in the eye of the storm of a policy decision. I am especially interested in these scenarios as they can throw up wonderful businesses going through challenging circumstances which are likely to improve with time. These sorts of companies can be excellent investments for the patient investor.
In this regard, I remain as focused as ever on finding good businesses that are run by good management teams and aren’t overly reliant on a positive macro environment. Crucially, the valuation must also make sense as it is this that determines both the base for compounding capital returns as well as providing a margin of safety. For me investing is as much about protecting the downside as it is about participating in the upside.
With Asia home to over 18,000 listed stocks, these companies can be found across a wide range of areas. Every decision I make is based on the merits of an individual business - rather than the country or industry they operate in - although it is notable that bottom-up stock selection has recently resulted in a substantial positon in the Indian mortgage space.
This is spread across Housing Development Finance Corporation and Indiabulls Housing with these stocks exhibiting the traits I look for. Each has a significant competitive advantage based on low cost operations and low borrowing costs. They also have prudent and trusted management teams which have kept both operating costs as well as non-performing loans in check for long periods of time.
The growth dynamics of the Indian mortgage market is also attractive. India has less than 10% mortgage/GDP ratio - the comparable ratio in the UK is around 60% - these companies can continue to grow for the next decade and beyond. The key will be backing the right management teams who execute in this growing market without taking undue risks.
Crucially, they are also available at relatively attractive valuations. Like every position in the portfolio, they were bought with a view of offering 50% upside over three years with limited risks
Final Results Announced
Final Results for the year ending 31 July 2018 have been announced.
- The NAV returned 2.2% with the discount narrowing from 7% to 1.8% over the period as a result of the strong share price total return of 8.2%.
- The directors recommend that a dividend of 5.5p be paid on 17 December 2018 (as increase of 10% on the prior year)
- The Company added the Variable Management Fee structure with effect from 1 August 2018.
- The AGM will be held at 1.30pm on 13 December 2018 at Fidelity’s offices at 25 Cannon Street, London EC4M 5TA
Management Fees Update
The Board of Fidelity Asian Values PLC would like to inform Shareholders that, following Fidelity’s announcement in October last year to offer its clients a variable management fee, the Board has accepted a new fee proposal from the Manager.
The new model will replace the Company’s current tiered fee structure (0.90% of gross assets up to £200 million; 0.85% on gross assets over £200 million). The new fee will reduce the headline base management fee from 0.90% of gross assets to 0.70% of net assets per annum with a +/- 0.20% variation based on performance relative to the Comparative Index. The maximum fee that the Company will pay will be 0.90% of net assets, but if the Company underperforms against the Comparative Index, the overall fee could fall as low as 0.50% of net assets.
This new fee arrangement will be effective from 1 August 2018. There will be no change in the investment process as a result of the new fee arrangement.
You should remember that the price of ordinary shares can go down as well as up so you may get back less than you pay for them. As Fidelity Asian Values invests overseas, the value of your investment may also be affected by movements in exchange rates. In addition, you should bear in mind that Fidelity Asian Values focuses on smaller companies, whose share prices may be more volatile than those of larger companies.