Look to Asia for yield

Advisers are being encouraged to think of investments into Asia as being a useful income generating investment, rather than one for capital appreciation.

Wednesday, November 8th 2017, 6:38AM

Mike Kerley, Director, Pan-Asian Equities, Janus Henderson

Janus Henderson Investors managers were in New Zealand last week talking about three UK-listed investment trusts they manage. These include City of London, Bankers Investment Trust and the Henderson Far East Income, all of them are dual listed on the NZX.

Janus Henderson Director of Pan Asian Equities, Mike Kerley, said in the past the fund has struggled to sell itself as a viable income option in portfolios, but a numberof key trends change that position

Part of the problem in Asia is that there had been very little earnings growth for six years up to 2016. That has changed and consensus earnings forecasts show there is likely to be a significant pick up in this area.

"The reasons for owning Asia for growth are back," he says.

Also Asian companies have changed are now display lower growth but strong cash flow and dividends. He says they area generating huge amounts of cashflow and have very disciplined capex programmes.

Another trend is that China is moving up the value chain and investing large amounts of money into research and development which will eventually help companies increase earnings.

He says in the New Zealand market the income generating companies are largely in the unities sector, while in Asia the spread is more diverse across sectors.

The Far East Income Fund (NZX:HFL) has a current dividend yield of 5.3% and portfolio dividend income rose 16.7% over six months to February this year.

Tags: equities financial advisers investment Janus Henderson NZX yield

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