Major Asian investment trusts prepare for unexpected merger amid China recovery
Two leading Asian investment trusts plan to join forces in an £800m deal‚ creating a new market giant. The merger comes as Chinese markets show signs of recovery despite global uncertainties
A ground-breaking £800m merger plan between two major Asian investment trusts is taking shape in late-2024‚ with some non-standard features that catch investors attention
The larger fund - Asia Dragon (worth £673m) plans to merge with its smaller rival Invesco Asia Trust (valued at £223m); an unusual move since bigger trusts dont typically join smaller ones. Asia Dragons performance hasnt been great - showing just 79pc returns in last decade while the market index went up 98pc
The deal has some interesting twists: both trusts shares trade below their real value (which is pretty rare for mergers)‚ and Asia Dragon holders can sell 1/4 of their shares at just 2pc below asset value. The new combined trust - to be called Invesco Asia Dragon - will likely join FTSE-250 index
Fund managers Fiona Yang and Ian Hargreaves keep about 40.5pc of investments in China-Hong Kong area: more than any other Asia trust. While this was not helpful lately‚ Chinas market jumped 21pc in Sept-2024 after three down years. Neil Rogan‚ who leads Invesco Asia‚ thinks its a turning point saying: “when the market realises‚ it will be off to the races“
The trusts value approach looks good - they buy profitable companies at low prices (like Food Truck Alliance: the digital freight platform with 60pc market share). Asian stocks now cost half of global markets despite 25pc earnings growth this year‚ making them look cheap
The deal needs voting in Jan-2025; already 55pc of Asia Dragon and 38pc of Invesco Asia investors support it. The new trust will cut fees below 0.7pc yearly and pay dividends every three months instead of six
