Mark Dampier: Asia is coming of age - expect less rapid growth and more dividends

 

Asia has been a disappointment for investors over the past 18 months. Some have been left wondering whether an area traditionally associated with rapid growth has lost its mojo. I think the reality is somewhat different.

Asian markets have had a strong run over the past 10 years. A significant development over this period has been the emergence of dividends. Dividends are sometimes seen as a sign of weakness – that the company has a lack of opportunities and pays dividends instead of reinvesting cash to grow the business.

Nothing could be further from the truth. Dividends are a sign of a company's cash discipline. Paying dividends year after year with the potential to increase them too requires a good business model.

As companies in Asia mature, more and more are able to pay attractive dividends. With many Asian companies being family led, the attraction of dividends is becoming more obvious as the older generations retire and require an income.

Newton capitalised on this early with the launch of the Newton Asian Income fund, under the stewardship of Jason Pidcock. The fund is now £4bn in size, showing how many UK investors like the opportunity to invest in Asia, but take a dividend too.

Over the life of the fund so far it has had three disappointing periods of performance worthy of note. Each lasted between five and seven months, the most recent being between May and November 2013. Mr Pidcock attributes this to a kneejerk reaction by the markets following a speech by Ben Bernanke, the chairman of the US Federal Reserve, on the "tapering" of quantitative easing (QE).

High-yielding companies, which had been in favour with investors in a low interest rate environment, saw a wave of profit-taking as "hot money" was withdrawn from that area of the market. The fund usually holds up relatively well in a falling market, but as it was high-yielding companies bearing the brunt of the selling there was no shelter on this occasion.

Mr Pidcock notes that each period of poor performance tends to be followed by a longer period of stronger performance which he is now anticipating. Valuations look attractive, as does dividend growth. In 2013 income payments were hurt somewhat by strengthening sterling, but I suspect this will eventually reverse itself. With a current yield of 5 per cent it could be said investors are being rewarded for their patience – they are getting an attractive income now while they wait for the prospect of long-term capital growth.

Like many at Newton, Mr Pidcock starts with a "big picture" view. Using Newton's trademark thematic process he aims to identify the themes set to drive long-term growth, and then looks for the companies set to benefit most.

Sands China, the resort and casino developer, was last year's best performer. The company also paid a special dividend and overall increased its dividend by 29 per cent. Some profits have since been taken, as while he remains positive on the company, he doesn't want too much risk to rest with one stock.

There were a couple of stock-specific issues last year, including New Zealand telecoms company Chorus, which fell more than 40 per cent last November and has since been sold. To be fair to Mr Pidcock, this was down to political interference rather than a problem with the company.

A new theme recently introduced to the fund is "havens", by which Mr Pidcock means companies with a genuine competitive advantage and sustainable business model with the potential to offer protection in an inflationary environment. He cites Dexus Property Group, a leading Australian player which invests in high-quality office, industrial and retail space.

Thirty years ago, investors who wanted growth and income really had only the UK market to choose from. Today investors can search globally and Asian markets yield some of the best prospects for income growth. Since launch this fund has performed exceptionally. I have a holding in my own ISA which I am likely to add to following this period of weakness.

Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial advisor and stockbroker. For more details about the funds included in this column, visit hl.co.uk/independent

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
Arts and Entertainment
From Mean Girls to Mamet: Lindsay Lohan
theatre
Sport
Jordan Rossiter celebrates with team mates after scoring the opening goal during the match between Liverpool and Middlesbrough at Anfield
football

Liverpool progress to the last 16 of the Capital One Cup

News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
i100
Travel
travelGallery And yes, it is indoors
Sport
Nathaniel Clyne (No 2) drives home his side's second goal past Arsenal’s David Ospina at the Emirates
footballArsenal 1 Southampton 2: Arsène Wenger pays the price for picking reserve side in Capital One Cup
Life and Style
tech
Arts and Entertainment
The Tiger Who Came To Tea
books
News
i100
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    IT Project manager - Web E-commerce

    £65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

    Trainee / Experienced Recruitment Consultants

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

    Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Day In a Page

    Syria air strikes: ‘Peace President’ Obama had to take stronger action against Isis after beheadings

    Robert Fisk on Syria air strikes

    ‘Peace President’ Obama had to take stronger action against Isis after beheadings
    Will Lindsay Lohan's West End debut be a turnaround moment for her career?

    Lindsay Lohan's West End debut

    Will this be a turnaround moment for her career?
    'The Crocodile Under the Bed': Judith Kerr's follow-up to 'The Tiger Who Came to Tea'

    The follow-up to 'The Tiger Who Came to Tea'

    Judith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed' - which has taken 46 years to get into print
    BBC Television Centre: A nostalgic wander through the sets, studios and ghosts of programmes past

    BBC Television Centre

    A nostalgic wander through the sets, studios and ghosts of programmes past
    Lonesome George: Custody battle in Galapagos over tortoise remains

    My George!

    Custody battle in Galapagos over tortoise remains
    10 best rucksacks for backpackers

    Pack up your troubles: 10 best rucksacks for backpackers

    Off on an intrepid trip? Experts from student trip specialists Real Gap and Quest Overseas recommend luggage for travellers on the move
    Secret politics of the weekly shop

    The politics of the weekly shop

    New app reveals political leanings of food companies
    Beam me up, Scottie!

    Beam me up, Scottie!

    Celebrity Trekkies from Alex Salmond to Barack Obama
    Beware Wet Paint: The ICA's latest ambitious exhibition

    Beware Wet Paint

    The ICA's latest ambitious exhibition
    Pink Floyd have produced some of rock's greatest ever album covers

    Pink Floyd have produced some of rock's greatest ever album covers

    Can 'The Endless River' carry on the tradition?
    Sanctuary for the suicidal

    Sanctuary for the suicidal

    One mother's story of how London charity Maytree helped her son with his depression
    A roller-coaster tale from the 'voice of a generation'

    Not That Kind of Girl:

    A roller-coaster tale from 'voice of a generation' Lena Dunham
    London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

    London is not bedlam or a cradle of vice

    In fact it, as much as anywhere, deserves independence
    Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

    Vivienne Westwood 'didn’t want' relationship with McLaren

    Designer 'felt pressured' into going out with Sex Pistols manager
    Jourdan Dunn: Model mother

    Model mother

    Jordan Dunn became one of the best-paid models in the world