Asia Pacific Leaders Sustainability


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Strategy overview

The strategy was launched in December 2003. In July 2016 the strategy transitioned to the Sustainable Funds Group. The strategy invests in large and mid-sized companies which generally have a total stock market value of at least US$1 billion in the Asia Pacific region (excluding Japan, including Australia and New Zealand) and that are positioned to benefit from and contribute to sustainable development.

 

Strategy update

1 April - 30 June 2021

Markets often react differently to what might be expected in the short term.

Despite negative headlines about the new strain of the COVID-19 virus and the associated human suffering, equities in India have been notably strong in the first half of the year.1 In contrast, headline news from China has been more positive and yet equities have given back all of the large gains they recorded prior to Chinese New Year.1 Such top-down vagaries can be encapsulating but rather than ponder on their cause we find it more rewarding to focus on the quality and ability of stewards to contribute to, and benefit from, the many sustainable development challenges facing the societies in which they operate.

It is estimated there were over 4.5m new cases of cancer in China last year, contributing close to 25% of global cases.2 Late diagnosis, and treatment dominated by chemotherapy, sadly means that mortality rates are far higher in China than in Western countries. Similar to what we see in the US and Europe, precision oncology and early cancer detection are two avenues that present significant opportunity for better patient outcomes and more efficient use of valuable healthcare resources. We hold a number of diagnostic businesses across our portfolios as leading franchises tend to hold durable competitive advantages and generate attractive levels of cash flows while playing an increasingly important role in the development of healthcare systems. This quarter we were fortunate to be given an opportunity to initiate a position in China’s leading molecular testing franchise. This business is owned, and run, by private entrepreneurs and enjoys a robust position in this fast emerging market thanks to years of significant investment in research and development and close relationships with global multinational pharmaceutical companies. We also initiated a holding in a high-quality, privately founded, industrial automation business in China. This vertically-integrated company is benefitting from the ongoing substitution of capital for labour on production lines, and investing heavily in product quality improvements to capture market share from higher-priced foreign competitors. In addition to these two new holdings, we invested in a company listed in Australia which boasts a 20% market share in printed circuit board design software, which is an essential component for electronic goods.

We also had the opportunity to increase the position size of four of the newer and smaller holdings in the strategy: Tata Communications (India), Tata Consumer Products (India), Infosys (India) and Fisher & Paykel Healthcare (New Zealand). Over the period we met with each of these companies and our conviction in the quality of their franchises increased. On the other side, we reduced our holdings in semiconductor related businesses TSMC (Taiwan) and Tokyo Electron Limited (Japan) because of mounting concerns over sustainability, cyclicality and valuation. We also trimmed holdings in Tech Mahindra (India) and Xero (Australia) for reasons of valuation. These were small subtractions and there were no complete disposals over the period.

1 Source: FactSet

2 Source: World Health Organization. Global Cancer Observatory. 2020 data.


 

Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Portfolio data shown is from representative strategy accounts of each strategy shown above. Named new investments disclosed relate to holdings with a portfolio weight over 1%. It is not a recommendation or solicitation to purchase or invest in any fund. Differences between the representative account-specific constraints, currency or fees and those of a similarly managed fund or mandate would affect results. 

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Proxy voting

1 April - 30 June 2021

Asia Pacific Leaders Sustainability

During the quarter there were 247 resolutions from 21 companies to vote on. On behalf of clients, we voted against five resolutions.

We voted against Bank of the Philippine Islands’ request for management to approve all other business matters before the annual general meeting (AGM) of shareholders. We consider ourselves active shareholders and prefer to vote on such matters at the AGM. (one resolution)

We voted against Shenzhen Inovance Tech’s request to adopt a long-term stock ownership incentive plan as there was a lack of disclosure and transparency on the plan. We also voted against their request to elect an individual to their Supervisory Council as we do not believe they are truly independent. (four resolutions)

Source for company information: Stewart Investors investment team and company data. This stock information does not constitute any offer or inducement to enter into any investment activity. Proxy voting chart numbers may not add to 100 due to rounding. 

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Investment terms 

View our list of investment terms to help you understand the terminology within this document.

Important information

This information has been prepared and issued by First Sentier Investors (Australia) IM Limited (ABN 89 114 194 311 AFSL 289017) (FSI AIM).

Stewart Investors is a trading name of FSI AIM. FSI AIM forms part of First Sentier Investors, which is ultimately owned by Mitsubishi UFJ Financial Group, Inc (MUFG), a global financial group.

It is directed at persons who are professional, sophisticated or wholesale clients and has not been prepared for and is not intended for persons who are retail clients. A copy of the Financial Services Guide for FSI AIM is available from First Sentier Investors on its website. This material contains general information only. It is not intended to provide you with financial product advice and does not take into account your objectives, financial situation or needs. Before making an investment decision, you should consider, with a financial adviser, whether this information is appropriate in light of your investment needs, objectives and financial situation.

MUFG and its subsidiaries do not guarantee the performance of any financial products mentioned or the repayment of capital in relation to any financial products mentioned. Investments in any investment-type financial products mentioned are not deposits or other liabilities of MUFG or its subsidiaries, and investment-type products are subject to investment risk including loss of income and capital invested.

To the extent permitted by law, no liability is accepted by FSI AIM, MUFG or any affiliates thereof for any loss or damage as a result of any reliance on this information. This information is, or is based upon, information that we believe to be accurate and reliable, however neither FSI AIM, MUFG nor any affiliates thereof offer any warranty that it contains no factual errors. No part of this material may be reproduced or transmitted in any form or by any means without the prior written consent of FSI AIM.

Some of the information has been compiled using data from representative accounts. This information relates to existing Stewart Investors strategies and has been provided to illustrate Stewart Investors’ expertise in the strategies. Some of these strategies are not available for distribution in the Adviser market and this material is provided for information purposes only and does not constitute a recommendation, a solicitation, an offer, an advice or an invitation to purchase or sell any fund and should in no case be interpreted as such.

Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell. Reference to the names of any company is merely to explain the investment strategy and should not be construed as investment advice or a recommendation to invest in any of those companies.