Stocks in Asia ex-Japan declined in the fourth quarter as losses in India and several Southeast Asian countries outweighed a rally in China's markets. Slowing economic growth in China led its government to unexpectedly cut interest rates in November for the first time since 2012 and raised expectations of more stimulus measures in the near term. Indian stocks declined as investors grew more guarded about the new government's ability to implement reforms after it won a landslide victory in May. Thai stocks fell as the country's military government tried to stabilize the economy after months of popular unrest. Malaysian stocks sank as falling oil prices weighed on the oil-exporting country's outlook. Stocks in Indonesia and the Philippines advanced.
The New Asia Fund returned −0.80% in the quarter compared with 0.17% for the MSCI All Country Asia ex Japan Index and −2.11% for the Lipper Pacific Ex Japan Funds Average. For the 12 months ended December 31, 2014, the fund returned 6.95% versus 5.11% for the MSCI All Country Asia ex Japan Index and 3.65% for the Lipper Pacific Ex Japan Funds Average. The fund's average annual total returns were 6.95%, 6.83%, and 12.16% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2014. The fund's expense ratio was 0.93% as of its fiscal year ended October 31, 2013.
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if it did, the performance would be lower.
China, Hong Kong, and South Korea represented the fund's largest absolute positions at quarter-end. Hong Kong and India accounted for the largest overweight markets. In China, we avoid holding banks due to the risk of rising nonperforming loans in the financial system and have focused on select Internet and consumer staples companies. We maintained longstanding underweights to the more developed markets of Taiwan, Singapore, and South Korea due to a lack of attractive growth opportunities. Sector allocations continue to reflect our preference for areas driven by domestic consumption. Information technology and consumer discretionary represented the largest overweight sectors as of December 31, while financials was the biggest underweight.
Asia ex-Japan stock markets have lagged developed markets in recent years, but the magnitude of underperformance diminished in 2014, making us optimistic that the region is on the cusp of a better performance cycle. Several factors underpin our outlook: valuations across Asia are well below previous peak levels; earnings growth is picking up; and economic imbalances such as current account deficits have improved in many countries that were in dire shape as recently as last year. We are excited about the reform potential in countries that have elected reform-minded leaders. One near-term headwind facing Asian and other emerging markets may be heightened market volatility once the Federal Reserve starts raising interest rates, which is expected to occur in mid-2015. Over the longer term, we expect that cyclical and secular trends in Asia will drive strong economic and corporate earnings growth.