Get growth at a discount with Invesco Asia Trust

The trust's net asset value (NAV) has done even better, meaning it trades at a discount to NAV of 12.5 per cent. This is wider than the trust's 12-month average discount of 10.9 per cent, so this looks like an opportunity to buy into outperformance at a good price.

The discount may not widen much further from here, and possibly tighten, because the trust has a discount control policy. If its shares trade at an average discount of 10 per cent or more to NAV over the year to 30 April 2017, its board will propose a tender offer for 15 per cent of the issued shares at a 2 per cent discount to NAV after costs.

This looks highly likely, according to analysts at broker Stifel, who calculate that the shares would need to trade at a discount of close to 1 per cent for the next few weeks to avoid the tender offer.

The trust's board also conducts share buybacks.

Invesco Asia aims for long-term capital growth via a diversified portfolio of Asian and Australasian companies. It is managed by Ian Hargreaves who began his investment career with Invesco Asia Pacific in Hong Kong in 1994 as an analyst covering Indonesia, Korea and the Indian sub-continent. In 2005, he returned to the UK to join Invesco Perpetual's Asian equities team, and in 2011 became co-manager of Invesco Asia Trust. He has been sole manager since 2015 and is supported by the company's wider Asian equities team.

Mr Hargreaves and his team invest via a top-down macroeconomic approach. This differentiates Invesco Asia from other Asian trusts, which tend to pick stocks according to their individual merits. Mr Hargreaves believes a top-down perspective is important as countries in Asia vary in their development, valuation, and economic and credit cycles.

But he also conducts fundamental analysis when considering companies, tending to favour those whose share prices are substantially below his estimate of fair value, especially if they have competitive advantages and balance sheet strength.

Asia remains one of the fastest-growing regions in the world and Mr Hargreaves is particularly upbeat about the economic prospects of India and South Korea. India is the market the trust is most overweight in compared with its benchmark index, as Mr Hargreaves believes it has high growth potential and will benefit from ongoing government reforms. He particularly likes Indian financials and used the recent market turmoil that followed government demonetisation in November to add to his exposure in this area. The trust's top 10 holdings include HDFC Bank (HDFCBANK:NSI).

The trust's largest geographic exposure is to China, where the manager favours stocks that tap into the domestic consumption boom. Mr Hargreaves believes China's economy can probably manage high debt levels for some years to come, as long as it is funded by domestic savings.

And Invesco Asia has a high weighting to Chinese internet companies because he feels that the market has been too sceptical of their ability to maintain strong growth. So he has recently added to JD.com (JD:NSQ), an online retailer with robust cash flow and a strong competitive position.

However, Asian economies could suffer if there is a rise in protectionism driven by policies pursued by the US government, and this could be detrimental to markets and the trust's performance. And the trust is relatively concentrated, with its top five holdings accounting for nearly a quarter of its assets.

However, Invesco Asia's long-term record of consistent returns suggests it is able to perform well in different market conditions, and that its manager makes the right calls on major holdings. The trust's discount control policy should also help prevent this widening too far.

So if you want to tap in to fast-growing Asian companies, Invesco Asia's consistent performance, experienced manager and attractive discount suggest it could be a good call. Buy. EA.

Source: Winterflood Securities as at 21/03/17, *Invesco Perpetual as at 31/12/16

Performance

Source: Winterflood Securities as at 21/03/17

Top 10 holdings as at 28 February 2017 (%)

Source: Invesco Perpetual

Geographic breakdown (%)

Source: Invesco Perpetual

IC Tip rating