Asia Pacific Fund: A Conservative And Extremely Undervalued Option
Summary The Asia Pacific Fund currently has extremely low valuation and is trading at a discount of 12.28%. The fund’s investment approach is extremely diversified, making it a conservative means to profit from economic growth in the Asia Pacific Region. The fund’s valuation is more attractive than other exchange traded funds that invest into high growth Asian countries. The Asia Pacific Fund (NYS APB ) is current a very attractive buy, and perhaps one of the best opportunities for investors seeking to take advantage of opportunities offered from discounted closed end funds. The fund invest in listed equity in the Asia Pacific region and is managed by Value Partners Hong Kong Limited. Historical performance of the fund has been positive, and the liquidity risk is negligent; the fund has an average trading volume of 18,562. One current unique opportunity that this fund presents is that it is currently trading at a discount of 12.28% , providing opportunity for those willing to take a long term investment approach. For a fund that invests into Asia, the valuation is extremely low at the moment; the fund currently has a P/E of 7.5. This is exceptionally lower than other exchange traded funds that invest in high growth countries in Asia, such as the Philippines , Vietnam , and Indonesia . The fund takes a very diversified approach to Asia, as the top 10 holdings for the fund only make up 34.1% of the fund. Moreover, geographical diversification within the Asia Pacific region is very strong; the fund invests in China, Hong Kong, South Korea, Taiwan, Singapore, Thailand, Indonesia, The Philippines, and Malaysia. High geographical diversification in a region that is on track to prosper in the future, further attributes to the logic of investing in this fund. These facts, coupled with the fund having low valuation and trading at a discount, provides a conservative and ideal investment opportunity. Fund Performance The fund seeks to track the performance of the MSCI All Countries Asia Ex. Japan Index, and was able to outperform the MSCI Europe and the S&P 500 Composite this year. Performance this year has been substantial, and is on track to continue based on growth projections for the Asia Pacific region. Investors who are willing to take a long term bullish view of Asia can benefit from investment in this fund. 1 Year % 3 Year % 5 Year % 10 Year % Asia Pacific Fund 12.4% 9.9% 16.37% 131.1% MSCI AC Asia Ex Japan 11% 22.9% 37.2% 161.2% S&P 500 Composite 10.4% 46.8% 76.8% 75.2% MSCI Europe -4.4% 33.2% 40.4% 70.1% Source: The Asia Pacific Fund March 31, 2015 Industry Approach The fund invests its assets into a variety of industries, and the majority of its assets are invested in the following industries: Real Estate: 17.6% Banking: 16.8% Consumer Discretionary: 16.1% Industrials 10.1% Consumer Staples: 7.4% Telecommunication Services: 6.2% The industry approach is very diversified, provide a conservative means to access growth in the Asia Pacific region. Holistically, growth in the Asia Pacific region is set to outperform the rest of the world, with 5.5% Per Annum GDP Growth projected for 2015-2016. Specific opportunities can be found in the consumer products industry, as consumption will inevitably increased with the increased economic growth in this region. Moreover, increased economic activity will also be a major catalyst for the real estate industry, particularly in the increased demand for office rentals. Conclusion This fund provides a unique and simplistic opportunity for investors to leverage off of growth in the Asia Pacific Region. The following factors make this fund relatively favorable to other investment approaches in Asia. The fund is trading at a 12.28% discount and has a P/E of 7.54, which is much more attractive than other alternatives in Asia. The only area of concern is the timeframe required to reconcile the fund’s trading price. The fund’s investment approach is extremely diversified, based on the variety of holdings and industries it invests into, as well as its high geographical diversification. Based on my observation of closed end funds and exchange traded funds that invest in Asia, closed end funds often provide more opportunity for investors. A similar case can be found in a previous article mentioning the benefits of the Aberdeen Indonesia Fund (NYSEMKT: IF ), which is trading at a discount of 10.05% . While both funds present ample opportunity, a diversified investment approach may be more suitable, as Indonesia’s growth is also met with inflation and exchange rate movement risks. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.