RCS - Schroder AsiaPacific - Results analysis from Kepler Trust Intelligence

Schroder Asiapacific FundAnnouncement

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RNS Number : 6644K  Schroder AsiaPacific Fund PLC  29 May 2025

Schroder AsiaPacific (SDP)

29/05/2025

Results analysis from Kepler Trust Intelligence

Schroder AsiaPacific (SDP) has released its half-year results for the period
ending 31/03/2025, in which the trust saw a NAV total return of -3.3%, versus
a total return of -2.2% for the MSCI AC Asia ex Japan Index and a weighted
average peer group return of -4.5%.

Despite the near-term challenges, SDP remains significantly ahead over the
longer term, with five-year NAV total returns of 51.4%, versus the benchmark
of 36.1% to 31/03/2025.

These results contain several positives, including stock selection in
Singapore-listed banks, which contributed positively to performance.

The other key market was China, which enjoyed some strong periods. Whilst
positive in absolute terms for SDP, the trust's underweight was a relative
headwind. This was, however, somewhat offset by an overweight to Hong Kong,
which benefitted from its proximity to China and also rallied.

The managers used the volatility to add very selectively to some high-quality
Chinese companies, although remain notably underweight, albeit overweight Hong
Kong to help offset these risks. They continue to have an overweight to
Singapore as one of the region's more developed economies.

The board reduced the rate of the first tier of charges in the period.

The discount remained wide throughout the period, averaging 11.9%. The board
was active with share buybacks which was NAV accretive.

Chairman James Williams took a long-term view, stating the region "continues
to offer compelling longer-term opportunities, underpinned by favourable
demographics, rising wealth levels and steady growth in domestic demand across
many markets."

Kepler View

Abbas and Richard have presided over impressive long-term returns, with
Schroder AsiaPacific (SDP) outperforming its index by c. 15 percentage points
in the five-year period up to the date of these results. This has been
supported by the underweight allocation to China, with the managers arguing
that the country faces structural issues. However, this can cause short-term
headwinds such as in these results, although performance is only marginally
behind the benchmark, which we believe is a reasonable outcome.

The overweight to Hong Kong has helped mitigate this, providing exposure to
China with fewer governance concerns. We believe this is a good demonstration
of the managers' pragmatism. Furthermore, the managers reduced their China
underweight in the period which we believe demonstrates flexibility whilst
maintaining quality and valuation discipline. This could support the trust
going forward in our view, especially in a potentially volatile period.

This volatility has arguably been a driving factor behind the trust's discount
which has remained wide. Asia has been hurt by recent negative sentiment,
although we believe this could make for an attractive entry point for
long-term investors willing to look through the short-term noise.

The cut in charges has improved the trust's appeal, in our view. SDP was
already more competitive than the average of the peer group on fees, but this
most recent cut will improve this further.

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