Interim Management Statement

RNS Number : 0176T

Pacific Assets Trust PLC

29 May 2009

 



Pacific Assets Trust plc

Interim Management Statement

For the Three Month Period from 1 February 2009 to 30 April 2009

Investment Objective

Pacific Assets Trust plc aims to achieve long term capital growth through investment in selected companies in the Asia Pacific region and the Indian sub-continent, but excluding Japan and Australasia.

Performance Summary

Capital Return	As at  30 April 2009	As at  31 January 2009	Movement
Net asset value (000s)	£105,543	£87,760	20.3%
Net asset value per share	89.18p	74.15p	20.3%
MSCI All Country Far East ex Japan Index	214.70	177.87	20.7%
Share price (mid market)	82.75	68.25p	21.2%
Discount	7.2%	8.0%
Gearing‡	(2.5)%	(4.9)%
Total Return#			For the three month period to 30 April 2009
Net asset value			20.3%
MSCI All Country Far East ex Japan Index			21.3%
Share price			21.3%

Sources: F&C Investment Business Limited, Datastream.

‡ - Gearing: equity investments/shareholders' funds

# - All total returns are based on net dividends re-invested

Review for the Period

The Company's net asset value total return for the three month period ended 30 April 2009 was 20.3 per cent. For comparison purposes, the total return from the MSCI All Country Far East ex Japan Index was 21.3 per cent.

Fears of a deepening global recession led to weak stock markets across the Asia Pacific region in February. Macroeconomic data continued to deteriorate, corporate order visibility was non existent and investor sentiment remained extremely risk averse.  This reversed dramatically in March and April following the coordinated announcement of quantitative easing by the US and much of Europe.  The injection of liquidity freed up the previously frozen credit markets allowing trade finance to flow once more, triggering an immediate reversal of the de-stocking process that had been occurring since the third quarter of last year. Macroeconomic data indicated signs of reaching a floor, corporate monthly sales began to recover and investor risk appetite recovered.  

The best performing markets (in sterling terms) in the region during the quarter were Indonesia, Taiwan and South Korea. In Indonesia, the increasing probability that incumbent President SBY will win a second term led to a reduction in the perceived political risk.  This fact, coupled with the prospect of faster, sustainable growth led to significant appreciation in the Rupiah encouraging domestic as well as foreign investors to raise their exposure to the market. The Company had a positive stance towards Indonesia and this was increased further by adding to gas supplier PT Perusahaan Gas Negara. 

Taiwan was the greatest beneficiary of the rebound in international trade as the technology sector witnessed an immediate pick-up in order flows when re-stocking commenced. With global technology inventories near historical lows, the earnings impact on companies with high operational gearing was considerable. Having previously suffered from aggressive downgrades by analysts, Taiwan enjoyed a significant rally. The Company's technology exposure performed well with select additions being made in companies such as in Hon Hai Precision where the earnings outlook appeared defendable regardless of the shape of the economic recovery.

In Korea, improving trade balances in January and February highlighted that the weakness in the Won, due to concerns over short term debt financing, appeared overdone. The easing of global credit markets plus improving risk appetite encouraged investors to reduce their underweight positions. With a larger than peer group weighting in Korea, and Korean financials in particular, this helped the Company's relative performance.

China achieved a first quarter GDP growth rate of 6.1 per cent, comfortably ahead of many regional economists' expectations.  Subsequent upward revisions to full year forecasts helped to buoy investor sentiment. However, following the rapid expansion in loan growth in the first three months of the year, concerns have grown that tightening measures may be introduced acting as a cap on the local market.  Nonetheless, given that deflation remains prevalent, it is the Manager's opinion that the authorities would be unlikely to risk such a strategy, especially when GDP growth has yet to really establish sustainable momentum.

Helped by first quarter corporate earnings releases, which have been in-line to slightly ahead of generally depressed expectations, analyst earnings forecasts appear to be finding a floor. When combined with better than feared macroeconomic data, plus excess liquidity driving up investor cash positions, risk appetite has materially rebounded. The region's equity markets have staged a significant recovery taking valuations up to the 10 year average price to book level of 1.8x.  Given the speed and strength of the global equity market recovery, despite minimal evidence of sustainable final demand with continued job insecurity and on-going de-leveraging, the process of rebuilding confidence remains critical.  The markets are no longer cheap, expectations have increased, and corporates and households remain focussed on shoring up their balance sheets rather than expanding them. For sustainable economic growth to unfold the private sector needs to come to the fore. The danger is that this does not materialise as fast as the equity markets anticipate.  

Top Ten Holdings 

Company	Country	30/04/09 Percentage of total assets
China Mobile	China	3.9
CNOOC	Hong Kong	3.7
Perusahaan Gas	Indonesia	3.6
Shinhan Financial	South Korea	3.2
Kasikornbank	Thailand	3.2
Wistron	Taiwan	2.9
China Medical Technology	China	2.8
NHN Corporation	South Korea	2.8
HTC	Taiwan	2.7
China Petroleum & Chemical	China	2.7
Total		31.5

Geographical Analysis 

Country	30/04/09 Percentage of total assets		31/01/09 Percentage of total assets
China	23.0		20.9
South Korea	20.8		19.9
Hong Kong	18.6		19.5
Taiwan	12.9		11.0
Indonesia	6.7		4.8
India	5.7		5.9
Thailand	4.3		4.9
Singapore	3.7		3.8
Malaysia	1.8		2.9
Philippines	0.0		1.5
Liquidity	2.5		4.9
Total	100.0		100.0

The Board is not aware of any significant events or transactions which have occurred since 30 April 2009 and the date of publication of this statement which would have a material impact on the financial position of the Company.

Daily and Key Information

Further information regarding the Company, including daily net asset values published since the end of the period and monthly factsheets, can be found at the Company's website www.pacific-assets.co.uk, or at www.fandc.co.uk.

For further information please contact:

Peter Dalgliesh/Gordon Hay Smith

F&C Investment Business Limited

Tel: [phone]

 

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