Henderson poised to gear trust for first time in four years

Fund Strategy - 20 Feb 2012 | By Henry Brennan

A facility of 10% is under consideration based on reductions in the cost of borrowing and favourable market valuations.

“My outlook has always been: if the markets are cheap enough and there are enough opportunities then we would gear the portfolio to make the most of that. (article continues below)

“We haven’t done that for the last four years because the cost of debt has been very high”, says Kerley, the manager of the fund.

“Although this could take a year or two to play out, if we look back in three or five years’ time, we will think ’that was a terrific time to buy’,” he says.

Kerley reports China presents among the cheapest opportunities on offer in South-East Asia as valuations have only been matched once in the past 11 years.

“This has been as good a start to a year for as long as I can remember,” he says.

“We have suffered over the past year and a half, especially relative to the other Asia income trusts because we had China which hasn’t performed very well and we have had less [invested in] Australia. We still think China is the best combination of value and performance in the region and we have been adding to it.”

The trust recently reopened a 2.5% position in China Mobile, the world’s largest telecomms provider, for the first time in several years, taking overall exposure to China up to 21%.

“China Mobile has had very specific competition issues and, although it will continue to for the next six-to-12 months, we’re getting to the point where 4G could have a significant impact on their revenues, so we are willing to take a longer-term view on that,” says Kerley.

The manager has decided to reduce the trust’s technology weighting based on the sector’s unpredictability and better opportunities coming from Asia’s domestic markets.

“We [reduced our technology weighting] too early as there has been a bit of bounce in that sector but it is incredibly hard to forecast the end demand in America and Europe. That naturally has reduced our weighting in Taiwan.”

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