Asia Dragon Trust PLC on Monday said returns for the financial year ending August 31 were ‘mixed’, amid talks of a proposed merger with Invesco Asia Trust PLC to create a collective portfolio with net assets exceeding £800 million.
The investor in Asian equity markets said net asset value per share as at August 31 increased 7.5% to 452.93 pence from 421.26p a year prior.
NAV total return for the financial year to August 31 rebounded to 9.3%, recovering from a negative 16.7% the previous year. However, it underperformed its benchmark, the MSCI Asia ex Japan Index, which delivered a total return of 12% in financial 2024, up from a negative 8.4% in financial 2023.
The company declared a final dividend of 6.60p per share, the same as a year prior.
Asia Dragon’s discount to NAV narrowed to 10.8%, a significant improvement from 16.2% the previous year, as investor sentiment improved following portfolio adjustments and news of the proposed merger.
The trust credited its performance to a diversified investment strategy, including a portfolio ‘reset’ after its combination of assets with abrdn New Dawn Investment Trust PLC in late 2023, which allowed for exposure to ‘high-quality stocks in semiconductor’, technology, and real estate sectors.
However, the trust significantly reduced exposure to Chinese equities due to near-term headwinds, including a sluggish consumer recovery and weak property sector.
Looking ahead, the board remains positive about the outlook for Asian equities. The trust anticipates strong returns from its exposure to Indian and Taiwanese markets, supported by rising affluence and urbanisation trends.
In October, Asia Dragon announced a proposed merger with Invesco Asia to create a combined entity, Invesco Asia Dragon, with net assets exceeding £800 million. The merger aims to enhance secondary market liquidity, implement a discount management policy, and offer an increased dividend, with Asia Dragon’s board targeting a distribution of 4% of NAV annually.
The transaction, subject to shareholder approval in early 2025, is expected to result in the trust joining the FTSE 250 index.
Shares in Asia Dragon are up 1.0% at 425.00 pence on Monday morning in London, while Invesco Asia Trust shares rose 0.6% to 336.94p.
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