Stocks in Asia ex-Japan rose in the first quarter of 2016, as a rally in March erased earlier declines. Asian markets rallied after the Federal Reserve left short-term interest rates unchanged at its March policy meeting and signaled a slower-than-expected pace of rate increases this year. Despite the quarterly gain, performance was mixed across countries. Chinese shares retreated as the yuan came under renewed pressure and continued signs of economic weakness raised fears that growth was slipping faster than China's government was letting on. Indian stocks declined amid mixed signals in its economy, which recently surpassed China as the world's fastest-growing major economy. Southeast Asian stocks rose as currencies in the region stabilized and economic growth picked up in some countries.
The New Asia Fund returned −0.59% in the quarter compared with 1.80% for the MSCI All Country Asia ex Japan Index and 1.07% for the Lipper Pacific Ex Japan Funds Average. For the 12 months ended March 31, 2016, the fund returned −10.33% versus −11.59% for the MSCI All Country Asia ex Japan Index and −9.51% for the Lipper Pacific Ex Japan Funds Average. The fund's average annual total returns were −10.33%, 1.92%, and 7.66% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2016. The fund's expense ratio was 0.94% as of its fiscal year ended October 31, 2015.
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if it did, the performance would be lower.
China, Hong Kong, and India represented the fund's largest absolute country positions at quarter-end. Our holdings in China are concentrated in businesses exposed to domestic consumption, particularly select Internet and consumer staples names. Hong Kong and India accounted for the largest overweight markets relative to the benchmark. On the other hand, South Korea and Taiwan remained significant underweight markets due to a lack of attractive growth opportunities. We had no exposure to Malaysia. Sector allocations reflect our preference for areas driven by domestic consumption. Information technology and consumer discretionary were the largest overweight sectors at the end of the quarter, while telecommunication services was the largest underweight.
Our outlook for emerging Asia is optimistic in the medium to longer term, despite the bearish headlines about China's slowdown and its impact on the global economy. While it is hard to say whether Asian stock markets and economies have bottomed after last year's disappointing performance, we believe that the positive structural drivers behind the region's long-term growth story remain intact. Moreover, with current valuations close to historic lows based on various metrics, stocks have plenty of room to exceed market expectations. China's deceleration will continue to weigh on the region. However, we are still finding attractively valued businesses that are adjusting to lower topline growth, taking market share, showing innovation, and generating value. Uncertainty about China's exchange-rate policy has pressured the yuan, spurring wider currency volatility and reviving concerns about the stability of its economy. Any resolution lending more clarity to China's currency policy would improve our outlook.