Henderson TR Pacific Investment Trust has been selling down its bond weighting and is now fully inve...
Henderson TR Pacific Investment Trust has been selling down its bond weighting and is now fully invested in equities.
At the same time the trust's discount has come in significantly. Last November it was trading at a discount to NAV of 23%. The £178.8m trust has benefited from the recovery in the Asian market. In the six months to the end of June the NAV per share rose by 53.9% to 93.7p. At the same time the discount narrowed into a single figure, as at the 6 August the discount was 9.
One of the reasons for the trust's turnaround is the manager sold its fixed interest exposure. At the bottom of the market the trust had some 39% of its portfolio invested in bonds, it is now fully exposed to equities.
Michael Watt, manager of the trust, said: "When we started to sell off our bond exposure at the end of the year we went heavily into South Korea. There has been a huge change in the country's mind set. Even though interest rates have fallen loan growth has not been excessive, something which had caused the economy problems in the past. The recovery is driven by industrial growth and exports. In addition consumers are starting to spend money.
Some 84% of the trust is exposed to four countries including South Korea with a 25% portfolio weighting. The remaining countries are Hong Kong, Singapore and Taiwan.
Watt said: "It is a risk having over four-fifths of the portfolio invested in only four countries but I am particularly bullish about those markets. The investment mandate prevents us from investing in Japan and Australasia. I do not have any exposure to Malaysia which I know is a strong view but I think the country will have problems with capital controls and corporate structures.
Since the recovery he has been buying blue chip stocks but expects to see the trust's exposure to mid and small cap stocks increase. He said: "When a region recovers it is usually the blue chip stocks that feel the benefit first but now these stocks are stretching the portfolio.
"Recently, I took some profit from JIT, a contract manufacturing company, because it went over my 3% barrier. I invested the money in GES International which is a computer manufacturer but it has now set up an e-business arm selling computer components from the US over the internet.
"I am particular bullish about the technology sector as the stocks are providing good growth and are good value relative to similar companies in the US.
In April the board gained approval to buy back shares. This followed the board's concern at the historically high levels of discount at which the shares had traded.
Watt said: "The widening of the discount occurred only during the past few years.
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