Stifel downgrades 'uninspiring' Asia Dragon trust rating to negative

investmentweek.co.uk:

In terms of positives, the analysts highlighted abrdn’s large Asian equities team, increased size and more flexible investment mandate post-merger with abrdn New Dawn.

Following its merger with abrdn New Dawn, the trust saw its total assets grow by £214.7m last month, putting its total assets at £736.4m and making it one of the largest trusts in the Asia sector despite a recent dip in net assets to just over £700m. 

In a research note, analysts William Crighton, Iain Scouller and Sachin Saggar noted the trust's performance has struggled over the past two years, as its quality focus has been out of favour.

Asia Dragon assets swell by over £200m following abrdn New Dawn merger

Five-year net asset value total return, which had previously looked much more favourable, is now 4%, which they said significantly lags the benchmark as well as peers. 

«While the fund would benefit from a market rotation back into quality, we see no obvious catalyst for a rerating in the near term and think the strategy remains vulnerable against a weak backdrop in China,» the analysts said. 

According to the Association of Investment Companies, Asia Dragon is trading at a 14% discount to NAV, which the Stifel analysts said is not «sufficiently attractive» compared to alternatives on only slightly narrower discounts. 

Asia Dragon shareholders greenlight abrdn New Dawn merger

In terms of positives, the analysts highlighted abrdn's large Asian equities team, increased size and more flexible investment mandate post-merger with abrdn New Dawn, and noted the trust could potentially benefit from rerating in China and quality stocks. 

However, they also highlighted DGN's poor performance over past two years, as it significantly underperformed the