Stocks in Asia ex-Japan rose in the final quarter of 2013 thanks to gains in China and India and a rally in October amid optimism that the Federal Reserve would maintain the pace of its monetary stimulus. Indian stocks added more than 10% after a new central bank chief implemented confidence-building measures. Additionally, India's domestic benchmarks reached record highs in December after state election results lifted hopes that the main opposition party will replace the current coalition government in national elections in 2014. Stocks in China advanced more modestly amid signs that its economy stabilized after a surprisingly weak first half, though the restricted A-share market for domestic investors fell. Stocks in Indonesia, the Philippines, and Thailand slumped as investors fretted about slowing growth and lofty valuations. A record current account deficit in Indonesia, a devastating typhoon in the Philippines, and a governance crisis in Thailand also hurt investor sentiment.
The New Asia Fund returned 2.95% in the quarter compared with 3.42% for the MSCI All Country Asia ex Japan Index and 3.35% for the Lipper Pacific Ex Japan Funds Average. For the 12 months ended December 31, 2013, the fund returned −0.54% versus 3.33% for the MSCI All Country Asia ex Japan Index and 2.11% for the Lipper Pacific Ex Japan Funds Average. The fund's average annual total returns were −0.54%, 21.41%, and 13.33% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2013. The fund's expense ratio was 0.95% as of its fiscal year ended October 31, 2012.
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Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
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The New Asia Fund charges a 2%
redemption fee on shares held 90 days or less.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
China, Hong Kong, and South Korea accounted for the largest absolute positions at the end of December. Our largest overweight countries were Hong Kong and India. We maintained longstanding underweights to Taiwan and South Korea. In recent months, we have reduced our exposure to India, which is suffering from chronic economic problems and a lack of reform, and to Southeast Asia, where valuations appear stretched and we see slower growth in the near term. We added to positions in China following signs of reform progress and a pickup in economic growth. Our China investments are focused on domestic consumption, infrastructure, and renewable energy. Sector allocations continue to reflect our preference for areas driven by domestic consumption. However, we have added to select industrial and technology companies that should benefit from rising export demand.
Developing Asian economies slowed over the past year due to domestic slowdowns and external forces arising from a shift in U.S. monetary policy. While emerging Asian markets are still growing faster than developed markets, we believe they will decelerate further in 2014 as part of an ongoing cyclical slowdown. Our outlook for the region's more developed economies is more positive. Lately, we have seen improved earnings prospects for export-oriented businesses in South Korea, Taiwan, Hong Kong, and Singapore. We believe that activity in these more mature markets will pick up along with the recoveries in the U.S. and Europe. Over the long term, we continue to believe that increased urbanization, consumption, and upward mobility are trends that should drive strong and sustainable growth in Asia.