Summary

• The actions by governments to reduce the humanitarian impact of the very rapid spread of Coronavirus is leading to a huge, though likely temporary, reduction in economic activity. During March this led to a major risk-off environment and very substantial falls in equity markets. The Ashburton Chindia Fund fell 16% during March broadly in-line with the fall of the emerging market index and in-line with a 50-50 blend of the China and India indices
• The China portion of the strategy performed in line with the Chinese Index falling 6.6%. JD.com and Tencent both performed well given the rise in internet usage and on-line shopping. The Indian portion of the strategy fell 26%, a little worse than the Indian Index decline of 24.6%. Indian banks performed particularly poorly reflective on an increasing risk of defaults due to a sharp economic contraction
• A new position was taken in the Pacific Assets Trust, reducing the cash position. The closed ended vehicle trades at a 15% discount to net asset value and is run by an able team with a focus on sustainability.

Market update

The very rapid spread of the Coronavirus declared a pandemic on 11 March by the World Health Organisation, is resulting in human tragedy across the world. Our thoughts are with all those impacted by the loss of family and friends. The team has relatives in some of the highest risk categories and naturally this causes our families much concern. We do, however, take some comfort in the relatively low risk the virus poses to most of the world’s population in comparison to other major diseases.

The China portion of the strategy performed in line with the Chinese Index falling 6.6%. JD.com and Tencent both performed well likely given the rise in internet usage and on-line shopping. The Indian portion of the strategy fell 26%, a little worse than the Indian Index decline of 24.6%. Indian banks performed particularly poorly reflective on an increasing risk of defaults due to a sharp economic contraction.

A new position was taken in the Pacific Assets Trust. The closed ended vehicle currently trades at a 15% discount to net asset value which is much wider than is usual. It is run by an able team with a focus on business sustainability and corporate governance.

We believe that global investors will look to China to see how economies can recover from the Coronavirus. As the first affected, the country is likely to be among the first to return to normality. The virus may possibly herald a new era of increased domestic demand and a reduction in exports.