The Pacific Horizon Investment Trust saw its performance make “significant” improvements in the year to July 2017, as its managers look to Chinese growth.
The trust’s share price appreciated 42.5 per cent and the net asset value increased by 38.5 per cent.
This compares to the trust’s index, the MSCI AC Asia ex Japan, which rose by 28.6 per cent.
During the previous year the trust’s share price fell by 3.4 per cent.
The managers attributed this turnaround to the increased penetration and disruption brought by technology and the fall in the dollar.
On the latter, the trust's managers said: “In the first half of the year, markets worried over Brexit, Trump and a potential reduction in world trade.
“This supported the US dollar and hid the nascent recovery in Chinese economic growth which, having slowed sequentially since 2011, reached its nadir in 2015; since then, it has been recovering.
“It is likely that 2016 will prove to be the second year of a Chinese cyclical economic expansion; we are seeing this in the rising Chinese Producer Price index, increasing imports, rising commodity prices and a stabilisation in the exchange rate.
“Free cash flow, the money left after costs and capital expenditure, is, on average, increasing for Chinese companies, and we would therefore expect growth and probably earnings to continue to surprise on the upside.”
The trust’s weighting towards China increased from 28 per cent to 35.1 per cent over the course of the year, mainly driven by outperformance in its holdings.
This means China is now the largest country weighting in the portfolio while its exposure to South Korea fell because of a reduction in the trust’s biotech holdings.
Technology companies now account for 48.9 per cent of the portfolio, down from 50.9 per cent a year ago.
The managers reduced the trust’s holding in Tencent, reflecting their enthusiasm for other holdings while they bought Samsung SDI and it is now among the portfolio’s top 10 holdings.
damian.fantato@ft.com
