Stocks in Asia ex-Japan retreated in the third quarter due to declines in economic heavyweights Taiwan and South Korea. Most of the region's less developed markets, however, rose as gains early in the quarter offset a September sell-off. Chinese stocks rose despite data showing that its economy was losing steam even after the government implemented targeted stimulus measures earlier this year. Indian stocks advanced as the domestic Sensex index repeatedly hit records after the Bharatiya Janata Party's (BJP) landslide victory in May. Southeast Asian stock markets advanced. Thai stocks rose as investors welcomed the political stability ushered in by the new army-led government; Philippine stocks gained on strong economic growth; and Indonesian stocks rose on reform optimism after Joko Widodo won a tightly contested presidential election in July.
The New Asia Fund returned −0.98% in the quarter compared with −1.54% for the MSCI All Country Asia ex Japan Index and −1.73% for the Lipper Pacific Ex Japan Funds Average. For the 12 months ended September 30, 2014, the fund returned 10.99% versus 8.52% for the MSCI All Country Asia ex Japan Index and 8.39% for the Lipper Pacific Ex Japan Funds Average. The fund's average annual total returns were 10.99%, 9.22%, and 13.97% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2014. The fund's expense ratio was 0.93% as of its fiscal year ended October 31, 2013.
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China, Hong Kong, and South Korea represented the largest absolute positions at quarter-end. We maintained longstanding underweights to the more developed markets of Taiwan, Singapore, and South Korea, where we see fewer growth opportunities. Conversely, Hong Kong and India accounted for the largest overweight markets. We increased our Hong Kong exposure over the quarter. Sector allocations continue to reflect our preference for areas driven by domestic consumption. Consumer discretionary and information technology were the largest overweight sectors at the end of September, while financials was the biggest underweight. We avoid holding mainland Chinese banks due to the risk of rising nonperforming loans in China's financial system.
Our outlook for the Asia ex-Japan region is mixed. For more developed Asian economies, we expect somewhat stronger economic performance over last year, aided by the strengthening U.S. economy. For the less developed parts of Asia, growth prospects vary according to country. Thailand appears to have stabilized since the military seized power in May, while the pace of reform in Indonesia appears murky as the new president faces stiff political opposition. We are encouraged by India's election results but caution that the BJP faces many obstacles as it tries to reform India's vast economy. We believe China's government will manage the slowing economy in the near term, but occasional missteps will trigger bouts of volatility in global financial markets. We believe that urbanization, rising consumption, and a growing middle class should drive strong and sustainable growth in Asia for many years.