Quarterly Trust update

Significant Trust changes

Shortly after the quarter began, President Trump announced his ‘Liberation Day’ tariffs. With China responding in kind, the prospect of a sharp contraction in global trade saw markets worldwide – including Asia – falling sharply. Within a matter of days, however, a fall in the US dollar and the threat of a rout in the US government bond market encouraged the president to impose a 90-day pause on imposing most of his tariffs. As the world pulled back from an outright trade war, Asian markets rallied, with the gains being led by markets in the export-dominated economies of South Korea and Taiwan. Given our enthusiasm for a number of India’s high-quality, entrepreneurial companies, we were pleased to see share prices in that country starting to rally off the lows seen earlier in the year. The rally was aided by a cut in interest rates but also, we would argue, by valuations that appear attractive in view of those companies’ long-term growth potential.

Although share prices in some parts of Asia have recovered from the falls seen at the start of the quarter, the on/off discussions on tariffs have undoubtedly created lingering uncertainty. Some of the companies we have met are looking ahead to a potential resumption of talks on trade through the summer. Although we won’t try to predict their outcome, we would note that business leaders are often preparing for the worst while hoping for the best. While the market waits for greater clarity on trade, we continue as usual: seeking high-quality companies to invest in for the long term.

During the quarter we added four new positions to the Trust’s portfolio. Trip.com (China: Consumer Discretionary), a leading online travel agency, is set to benefit from the growth in the number of Chinese tourists travelling both domestically and overseas. Comparable companies in the US and Europe show how attractive the economics of online travel platforms can be. There is a tendency for market leaders in this sector to come to dominate their smaller rivals over time. Sea (Singapore: Communication Services) is the parent company of the pan-Southeast Asian e-commerce retailer Shoppee. It has built a strong presence across the region by offering attractive prices, a wide selection and reliable delivery. We expect it to benefit from the growth of e-commerce within the region, from its expansion into the Brazilian market and by offering credit to Shoppee’s users and merchants.

Motilal Oswal Financial Services (India: Financials) has businesses spanning stockbroking, asset management, wealth management, investment banking, and housing finance. It should benefit from meeting the savings and investment needs of India’s growing middle class. The final purchase of the quarter was SM Investments (Philippines: Industrials), a conglomerate whose businesses span banking, property and retail.

In addition, we continued to add to the Trust’s existing positions in Alibaba (China: Consumer Discretionary) and DFI Retail (Hong Kong: Consumer Staples), reflecting our growing confidence in both companies.

We sold the entirety of the Trust’s holding in Tata Consultancy Services (India: Information Technology) and Dr. Lal PathLabs (India: Health Care) due to their valuations. We sold the holding in Hangzhou Robam (China: Consumer Discretionary) in recognition of the difficulties it faces in selling its kitchen appliances into China’s depressed property market. Our sales of Unicharm (Japan: Consumer Staples) and of its subsidiary Uni-Charm Indonesia (Indonesia: Consumer Staples) reflected the increasing competition the group faces from local brands across Asia. Finally we disposed of small positions in ESAB India (India: Industrials) after struggling to build confidence and in Bajaj Housing Finance (India: Financials) where we struggled to buy enough shares to build a meaningfully sized position.

In recognition of the trade uncertainties and difficult geopolitical situation facing Taiwan, we trimmed the Trust’s holdings there. As part of this, we reduced its holdings in TSMC (Taiwan: Information Technology), MediaTek (Taiwan: Information Technology), Advantech (Taiwan: Information Technology) and Delta Electronics (Taiwan: Information Technology). Our confidence in the underlying quality of these businesses is undimmed but we believe it is prudent to manage the Trust’s overall exposure to the country. Elsewhere, to fund the additions mentioned above, we trimmed Samsung Biologics (South Korea: Health Care), Samsung Electronics (South Korea: Information Technology) and CG Power (India: Industrials).

Predicting how any of today's economic and political challenges will play out lies beyond our remit and our skillset. Fortunately, many of the Asian companies held in the Trust have long memories; they still have the scar tissue formed during previous crises. These businesses have been forced to learn, to adapt and to become resilient. As a result, we believe they are set up not only to perform when conditions are fair but to navigate through whatever political and economic turbulence lies ahead.

Download the Q2 Trust datasheet

Significant Trust changes

Broad market indices in the Asia Pacific region moved slightly lower in sterling terms over the first quarter of 2025. Perhaps of greater significance was that political turbulence resulted in a wide divergence of returns on a country level. Market indices in China, South Korea and Singapore moved higher but fell across the rest of the region, with some markets suffering double-digit falls.

Most notable was the extent of the divergence in returns between markets in India (down) and China (up). Investors’ enthusiasm for Chinese equities came in response to DeepSeek’s impressive demonstration of the progress the country is making in AI, some market-friendly rhetoric from the government in Beijing and hopes that the United States’ trade tariffs might not prove too onerous. In contrast, while there was relatively little news from India, share prices there fell back from elevated levels, as they did in many other parts of the world; returns from the Indian market over the quarter were broadly in-line with those from markets in the United States.

During the quarter, and on behalf of the Trust, we added new positions in S.F. Holding (China: Industrials), Mindray (China: Health Care) and Alibaba (China: Consumer Discretionary). S.F. Holding is China’s number one provider of logistics and is well placed to benefit from the growth in time-sensitive logistics across Asia. Mindray is a global leader in affordable medical devices and is steadily climbing up the value chain. Alibaba, meanwhile, has an important part to play amid China’s new emphasis on increasing national self-reliance, particularly in the realms of AI and cloud computing. In recent years, the stewards of Chinese companies have, often for the first time, been tested by genuine economic and political adversity. They have applied the lessons learned, strengthening their franchises and balance sheets. This, in combination with valuations that appear modest by global standards, means we have been identifying a greater number of new investment ideas in China.

Elsewhere, we established new positions in Bank of the Philippine Islands (Philippines: Financials) and BDO Unibank (Philippines: Financials). Both are family owned and professionally managed. In India, we took advantage of recent weakness to add a new holding in Bajaj Auto (India: Consumer Discretionary), a leading manufacturer of motorcycles, scooters and auto rickshaws backed by a high-quality steward.

Lower valuations also prompted us to build the Trust’s positions in two companies which we first purchased last year. Bajaj Holdings & Investment (India: Financials) is a holding company with auto and finance businesses and Sundaram Finance (India: Financials) provides vehicle finance, home loans and general insurance.

We sold the entirety of the Trust’s holding in Tata Consumer Products (India: Consumer Staples) on valuation grounds. We also sold out of Syngene (India: Health Care), Dr. Reddy’s Laboratories (India: Health Care) and Cyient (India: Information Technology) because of their vulnerability to policy changes from the White House. Finally, we sold ICICI Lombard (India: Financials), IndiaMART (India: Industrials) and Koh Young Technology (South Korea: Information Technology). These were small positions and we had better ideas elsewhere.

We continued to reduce the holding in TSMC (Taiwan: Information Technology) as evidence continued to mount that it is losing control of capital expenditure. To control position sizes, we reduced Mahindra & Mahindra (India: Consumer Discretionary), and CG Power (India: Industrials).

As the long period of US exceptionalism draws to an end, we hope investors will begin to pay attention to the abundance of attractively valued companies to be found in the Asia Pacific region. Clearly, if the US economy falters and global demand falls, then economies across Asia will be impacted, albeit to differing degrees. We are also conscious that political risks appear to be rising in many Asian countries. Those risks, however, are far from uniform. The region’s technology complex, centred around Taiwan, South Korea and China, would appear to be particularly vulnerable to a global slowdown. India, by contrast, remains a domestically driven growth story and, as such, is somewhat isolated from the tumult in the global economy. The Philippines, meanwhile, could receive a significant economic boost if a global slowdown results in a meaningful fall in oil prices.

Predicting how any of today’s economic and geopolitical challenges will play out lies beyond our remit and our skillset. Fortunately, many of the Asian companies held in the Trust have long memories; they still have the scar tissue formed during previous crises. These businesses have been forced to learn, to adapt and to become resilient. As a result, we believe they are set up not only to perform when conditions are fair but to navigate through whatever political and economic turbulence lies ahead.

Download the Q1 Trust datasheet

Significant Trust changes

Over most three-month periods, there should be relatively little change to the investments in the Trust portfolio. We aim to build resilient portfolios of high-quality companies with various ways of earning money that have the ability to grow in value over the long term.

Many Chinese stocks lost some of the performance gains that they saw in the third quarter of 2024 when the government announced positive economic events. The performance of the Indian market index struggled after some of the largest companies in India faced governance issues that became subject to enquiry by the regulator in the United States. The re-election of Mr Trump in the United States election in November also seemed to distract global investors from Asian equities. At Stewart Investors we continue to concentrate on companies rather than unpredictable economic and political news.

On behalf of the Trust, we bought DFI Retail Group (Hong Kong: Consumer Staples), a pan-Asian retailer led and stewarded by the Keswick family and MANI (Japan: Health Care), a Japanese medical device company. We also bought Naver (South Korea: Communication Services), South Korea’s dominant internet search engine which has significantly improved how it allocates and spends its financial resources in recent years.

During the quarter we also took advantage of attractive valuations to increase the size of the Trust’s positions in AirTAC International (Taiwan: Industrials) and Yiheda Automation (China: Industrials).

Due to less confidence, high valuations, or finding better ideas elsewhere, we sold Pentamaster (Malaysia: Information Technology), Advanced Energy Solution (Taiwan: Industrials) and Samsung C&T (South Korea: Industrials).

To control position sizes, we trimmed the Trust’s holdings in Mahindra & Mahindra (India: Consumer Discretionary), CG Power (India: Industrials), Marico (India: Consumer Staples), TSMC (Taiwan: Information Technology), Unicharm (Japan: Consumer Staples), Dr. Lal PathLabs (India: Health Care) and Chroma ATE (Taiwan: Information Technology).

Views on investment opportunities in Asia have not changed; we continue to look to invest in high-quality companies that are aligned with sustainable development. We look for company leaders who are low profile, competent, long-term decision makers, franchises free from political agendas and financials that are resilient, not frail. Our focus is on quality, and we remain indifferent to many of the large, well-known companies, regardless of lower valuations.

Download the Q4 Trust datasheet