Asia Pacific All Cap

While the list of portfolio-management responsibilities within our team looks different now than it did when the quarter began, on a deeper level, nothing has changed: the philosophy and approach that has defined Stewart Investors since 1988 is deeply engrained and continues to define what we do. Our structure is flat. Every member of the investment team is first and foremost an analyst and our collective focus is on identifying high-quality companies, with resilient financials, guided by ambitious stewards. This is the bedrock on which the returns of all our strategies, including Asia Pacific All Cap, have been built.

Before being appointed as the lead manager of the Asia Pacific All Cap strategy, Doug Ledingham was already the manager of a number of Stewart Investors’ other Asia Pacific strategies, including the UK-listed Pacific Assets Trust. Those strategies invest in many of the same companies as Asia Pacific All Cap. Doug, meanwhile, continues to apply the same principles to managing this strategy that have guided it since its launch, working as part of the same tight-knit group of investment analysts and drawing on a common pool of investment ideas. He recently wrote a piece explaining why we consciously resist the growing pressure to focus on the short term:

“At Stewart Investors, we have always sought to occupy a space that protects our clients’ capital. One of the threats we are striving to protect it from is short-termism: from the incessant distraction provided by 24-hour news, from the temptation to digest every morsel of noise, from the danger of trying to react to every macro data point or tweet, and from the pressure to fixate on quarterly earnings. That’s increasingly important in a world where long-term thinking is in increasingly short supply.”

You can read the rest of the piece here: Slow has all the power: why we invest alongside long-term owners. 

Investing in the ‘picks and shovels’ of the AI boom while focusing on the long term 

Our clients have understandably been keen to discuss the changes that have taken place within our business. Set against that, however, we have been careful to ensure that the majority of our time and attention remains on companies. As part of this, we have been discussing the broader forces being felt by companies across the Asia Pacific region, particularly the extraordinary surge of investment in the build out of AI infrastructure. Although AI is often viewed as a US-focused phenomenon, many of the leaders in this space are actually found in Asia rather than America. They include the manufacturers of the advanced semiconductors that supply computing power to AI data centres, the companies whose technology tests those semiconductors for reliability, and the suppliers of essential components to data centres, such as uninterruptible power supplies. 

Many of the immediate financial beneficiaries of the AI infrastructure boom have, therefore, been suppliers of its ‘picks and shovels’. We are cognizant of the intense geopolitical pressures that surround some of these companies, such as the desire of the US to ‘nearshore’ production of semiconductors or to keep the most advanced chips out of the hands of its perceived strategic enemies. These carry the potential to influence corporate behaviour in a way that may not necessarily be to the advantage of long-term shareholders. This is something we are debating and watching closely. 

To deepen their understanding of this subject, two members of our team recently visited South Korea, which, along with Taiwan, is at the heart of the global semiconductor industry. Korea is also enacting corporate governance reforms designed to improve shareholder returns. Recent trip reports from Indonesia, India and the Philippines are available on our Insights page, and a report from South Korea should be available next quarter.

A final illustration of continuity over the past quarter: turnover within the portfolio remained typically low. As we describe below, we added three new holdings while selling five. Our longstanding clients have grown accustomed to seeing modest levels of turnover within the portfolio and, while there may be periods when turnover waxes and wanes, they should not expect that to change. 

Looking ahead

Today, our companies generally enjoy lower leverage (less debt) and generate higher free cashflows than the benchmark index. This gives them a buffer against any renewed macroeconomic volatility or geopolitical instability. We believe they can use their financial strength to take advantage of any renewed short-term uncertainty and to extend their advantage relative to their peers. Those companies also have multi-year opportunities for growth in front of them. 

At a time of change in markets, trade and geopolitics, our underlying approach remains consistent: we continue to focus on generating attractive returns over the long term rather than attempting to outperform through every short-term period. We look forward to demonstrating the fruits of that approach over the years and decades to come.

Activity

New holding: AIA (Hong Kong: Financials)

Over the course of more than a century, AIA has steadily developed a distinct culture combining a conservative approach to investment with an entrepreneurial structure. Its business is built around a high-quality salesforce who foster long-term relationships with its customers. AIA demands higher levels of professionalisation from its agents than many of its peers, who often rely on armies of part-time agents. Although this means there have been times when AIA has grown more slowly than its peers, putting the needs of its customers above drive for short-term expansion has enabled it to build a premium brand. It now has an opportunity to grow by fulfilling unmet insurance needs across China, India and Southeast Asia. While those countries are getting richer, they lack social safety nets, making insurance products a necessity. This is especially true in China, where the regulator has recently allowed AIA to expand into new regions beyond its historical areas of strength in Beijing, Shanghai, and the Pearl River Delta.

New holding: Jardine Matheson (Hong Kong: Industrials)

Jardine Matheson is a complicated company whose journey towards greater simplicity and professionalisation has the potential to reward patient investors. The current chairman, Ben Keswick, took over from his uncle in 2019. He inherited a sprawling Asian conglomerate whose interests span retail, property, financial services, healthcare, autos, construction equipment, hotels and mining. He has steadily divested non-core assets in a way that would have previously been unthinkable. One result is that debt, excluding financial services operations, fell by more than a fifth over the first half of 2025.¹ His vision is to appoint high-quality professionals to run the company’s business units, give them well-defined targets and then grant them autonomy to hit those targets. He keeps a deliberately low profile and acknowledges the missteps the business made over the past decade. Both are valuable signals of humility and an openness to change. 

A new chief executive, Lincoln Pan, is due to join later this year. His initial focus seems likely to be on Astra, the listed Indonesian conglomerate, in which Jardine own a majority stake and which is a major contributor to group cashflows. Political uncertainties are an overhang in Indonesia. But as we discussed in a recent report– Is Indonesia still ‘at a crossroads’? – investing in companies who have been able to grow and refine their franchises, and to generate returns for their shareholders irrespective of the wider flux in Indonesia’s economy and politics, is an exciting prospect. Astra currently trades on price-to-book and price-to-earnings multiples not seen since the global financial crisis; one of Mr Pan’s goals will be to change that. Jardine Matheson is some distance from being the highest quality company in our portfolio, but we believe that will start to change over time.

New holding: Singtel (Singapore: Communication Services)

Adding up the market value of Singapore Telecommunications’ (‘Singtel’) various businesses produces an interesting result. The combined value of its shares in Globe Telecom of the Philippines, Indonesia’s Telkomsel, India’s Bharti Airtel, Thailand’s AIS and its parent Intouch along with its holdings in Singapore Post and fibre optic network Netlink gives a total implied valuation above Singtel’s current market value. That implies that its two core businesses, SingTel and Optus, an Australian telecoms network, have a negative value, despite having 4.5 million and 10.7 million mobile customers respectively.² This is suggestive of the extent to which Singtel remains out of favour among investors despite the fact that, under the leadership of Kuan Moon Yeun, we believe it is better-managed than it has been for some time. Since 2021, he has been refocusing on its core telecoms businesses by disposing of non-core assets acquired under the previous leadership, which made an ill-fated and costly attempt at diversification by venturing into unrelated areas such as digital marketing and online advertising. While the growth potential of its core units is undeniably limited, they deliver steady, predictable and diversified cashflows. Given that Temasek, Singapore’s state-owned investment arm, is its majority owner, it would appear to serve the interests of the government to ensure that Singtel keeps generating cashflows and healthy dividends.

Sold: Dabur (India: Consumer Staples)

Dabur directly contributes to improving the health and wellbeing of the Indian population by selling herbal and Ayurvedic products covering hair care, oral care, health care, skin care, home care, food and beverages. A net cash balance sheet and emerging franchises outside of India provide resilience and potential for further growth. But how much more growth can we reasonably expect? Our sale was a recognition that the valuation being awarded to its shares left no room for disappointment.

Sold: Mainfreight (New Zealand: Industrials)

Mainfreight is a logistics company in New Zealand. While it is well managed and has a first-rate culture, we now have stronger ideas elsewhere. 

Sold: Tata Communications (India: Communication Services)

Tata Communications is in the midst of a transformation, evolving from a utility company into a technology business partner, offering a range of digital services and solutions to its clients. While profitable, this is also a highly competitive area and the valuation of its shares left little room for disappointment. As a result, our conviction here has weakened. We can now find stronger ideas – and better homes for our clients’ capital – elsewhere.

Sold: Tokyo Electron (Japan: Information Technology)

Tokyo Electron sells manufacturing equipment to semiconductor foundries such as Samsung Electronics and TSMC. Having grown increasingly concerned about the valuation on which its shares trade, we believe we can find better homes for our clients’ capital elsewhere.

Sold: Zhejiang Supor (China: Consumer Discretionary)

Concerns that circumstantial headwinds would overpower satisfying, long-term returns motivated the sale of Zhejiang Supor, a cookware manufacturer with limited growth prospects. 

[1] Source: Jardine Matheson Analyst Presentation: 2025 Half-Year Results, pg 15.

[2] Source: Singtel: Annual Report 2025.