Schroder Oriental Income (SOI)
Results analysis from Kepler Trust Intelligence
Schroder Oriental Income (SOI) has released its financial results for the year ending 31/08/2023.The trust saw its NAV decrease by 3.5% on a total return basis, which compares to a decrease of 8.1% for the trust's formal benchmark, marking another year of outperformance.
Performance was materially impacted by currency movements. A number of countries' returns have delivered a positive return in local currency terms, but when the impact of currency translation back to sterling was taken into account, these returns were negative.
SOI has paid four quarterly dividends totalling 11.80p per share over the course of the year. This marks an increase of c. 3.5% on the previous year and the 17th year of consecutive dividend growth.
The shares of the trust have remained at a discount throughout the year, ending the period at a discount of 4.5%.
The trust's chairman, Paul Meader, has taken the opportunity "to commend our investment manager for achieving such consistent and considerable outperformance over recent years" and has said of the future, "I look forward with modest optimism… the fundamentals of the region, its companies and their strong dividend growth will once again attract international capital. The company is well placed to benefit from that trend when it arrives."
In our opinion, managers Richard Sennitt and Abbas Barkhordar have navigated Schroder Oriental Income (SOI) admirably through the challenging 12-month period to August 2023. The region has been affected by changes in sentiment due to a series of troubling factors, ranging from sky-high inflation and poor US-China relations to sharply rising interest rates.
These factors have led to fluctuating returns across the region best demonstrated by the volatile performance of Hong Kong and China. They declined as zero-covid policies hampered the economy, and then recovered as these policies were lifted, before waning again as the recovery failed to materialise as expected. The managers have been underweight China which has helped and been supported by good company selection. We believe this is testimony to the stock selection capabilities which has repeatably driven outperformance. Furthermore, positions in Korea and Taiwan, particularly in tech have been strong performers over the course of the year. We believe this is another example of the managers' quality approach benefitting the trust.
Absolute performance has been affected by a strengthening of sterling which led to every country delivering negative returns when translated back. However, the relative performance versus the index is impressive in our opinion. Richard and Abbas have outperformed by 4.6% largely as a result of stock selection. The trust delivered a 17th consecutive year of dividend growth. This, in our opinion, shows the strength of identifying firms with sustainable dividends and supports our view of the trust being a very good way of accessing the growing dividend culture in Asia.
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