Schroders  

Schroder Oriental Income hit by sluggish Asian markets

Schroder Oriental Income hit by sluggish Asian markets

The Schroder Oriental Income fund saw its share price fall by 0.6 per cent in the year to 31 August owing to a weaker pound and turmoil in Asian equity markets.

The £578m investment company saw the total return on its net asset value rise by 1.5 per cent over the year, a stark contrast to the 20 per cent rise it saw the previous year.

Robert Sinclair, chairman of the trust, said: "Two factors account for this lower return. Firstly, the weakness of sterling against Asian currencies following the Brexit referendum result was staunched and, indeed, so far in 2018 sterling has strengthened.

"Secondly, Asian equity markets have been less buoyant, mostly reflecting fears over the mounting trade rhetoric between the US and China, the imposition of tariffs and the impact of rising US interest rates."

Mr Sinclair said despite the sluggish performance, the trust’s dividend growth was still in a healthy position.

He said: "Dividend growth from our underlying investments has remained robust and this has allowed the company to grow its own dividend once again. During the financial year, the company paid total dividends of 9.40 pence per share representing a yield of 3.8 per cent."

Mr Sinclair said the trust’s total return on Nav was 333 per cent in the 13 years since launch, amounting to an annualised return of 13 per cent.

Fund manager Matthew Dodds said the fund’s weak performance was due to geopolitical conditions affecting the region.

He said: "Foremost was the rapid deterioration in Sino-US relations, with initial assumptions that this represented a mere trade dispute giving way to realisation of much more fundamental differences.

"Rising US interest rates, a stronger dollar and tightening credit conditions also contributed to downbeat sentiment across the whole region, allied to signs of economic slowdown in developed markets outside the US, emerging market volatility (Turkey, Argentina), and fading momentum in global trade."

He added: "In country terms, stock selection was strong in China, Taiwan and Thailand, offset by weakness in Hong Kong, Korea and New Zealand.

"Country positioning was helpful thanks to the underweight in China and Indonesia and overweights in Thailand and Singapore. In sector terms, selection was strong in information technology, telecoms, real estate and consumer discretionary, partly offset by selection in materials and a nil weight in health care."