Henderson trust looks to the Far East – and its banks in particular

Published on Friday 8 January 2010 19:54

INVESTING in the Far East used to be the preserve of those seeking high capital growth potential.

Now it is possible, and indeed sensible, for income investors to diversify their sources of income away from UK equity, where traditional portfolio cornerstones have suffered recently.

The Henderson Far East Income investment trust provides broad exposure to the region and aims to deliver a combination of long-term capital appreciation with high dividends. It currently has an attractive yield of 4.36 per cent.

Manager Mike Kerley can invest across the territory, including Japan, but has so far avoided that country. He says: "There may be a catalyst for Japan to do well, but I think the currency is against it. The yield from the market as a whole is only 1.5 per cent, albeit you can get higher yields from individual sectors, like property."

Kerley says investors should recognise that, although the Far East suffered during the global downturn, the fundamentals are significantly stronger there. He says: "China will post double-digit GDP growth next year and India probably 7 per cent. Yes, the western economies will show some GDP growth as well, but the Far East growth is more sustainable.

"Take the banking sector as an example. Most of the global banks have withdrawn from the region, leaving the local banks with plenty of scope as economies grow."

The main active positions within the trust are a strong overweight in China and an underweight in Australia.

Kerley says: "Although my largest holdings are in banks, I don't like the Australian banks. The economy there is more like the UK than the rest of Asia. It has high levels of debt, high property prices and has only been bailed out by high commodity prices."

The trust also provides exposure to property markets via individual stock holdings and a holding in the Henderson Land Development Company.

As further evidence of the region's popularity, the trust recently succeeded in raising a further 18.7 million from an institutional placing of shares at a 2 per cent premium to Net Asset Value.

&#149 For more information, call 020 7818 1818 or visit www.hendersonfareastincome.com. Barry O'Neill is a chartered financial planner with Thomson Shepherd Limited (incorporating Coggans Wood).