Stocks in Asia ex-Japan rose in the first quarter driven by a rally in China, where domestic investors bet that the government would introduce stimulus measures to revive the slowing economy. The Shanghai Composite Index, China's main domestic benchmark, rose to a seven-year high in March. Indian stocks advanced as expected reforms and lower oil prices lifted the country's economic outlook, and its central bank twice cut interest rates as inflation fell faster than expected. Southeast Asian markets were mostly positive despite subdued economic growth across the region. Stocks in the Philippines, the region's fastest-growing economy, led advancers with a roughly 10% gain, while Malaysia was the sole decliner.
The New Asia Fund returned 5.22% in the quarter compared with 4.90% for the MSCI All Country Asia ex Japan Index and 4.75% for the Lipper Pacific Ex Japan Funds Average. For the 12 months ended March 31, 2015, the fund returned 11.21% versus 11.02% for the MSCI All Country Asia ex Japan Index and 5.99% for the Lipper Pacific Ex Japan Funds Average. The fund's average annual total returns were 11.21%, 7.33%, and 12.53% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2015. The fund's expense ratio was 0.94% as of its fiscal year ended October 31, 2014.
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Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.
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 represented the fund's largest absolute positions. Our holdings in China are concentrated in select Internet and consumer staples companies. Hong Kong and India accounted for the largest overweight markets relative to the benchmark. On the other hand, South Korea, Taiwan, and Singapore remained significant underweight markets due to a lack of attractive growth opportunities. Sector allocations reflect our preference for areas driven by domestic consumption. Consumer discretionary and information technology represented the largest overweight sectors as of March 31, 2015 while financials was the largest underweight. Our underweight in financials stems from our decision to avoid mainland Chinese banks because of nonperforming loans risk.
We are optimistic about the outlook for the Asia ex-Japan region. Valuations in most Asian markets are relatively reasonable, earnings growth has improved, and economic imbalances such as current account deficits have strengthened in many countries that were in dire shape as recently as 2013. We are excited about the reform potential in Indonesia and India, where voters elected leaders who have demonstrated a willingness to tackle structural economic reforms. Capital outflows and heightened volatility due to interest rate increases in the U.S. this year remain a headwind for Asian and other emerging markets. Over the longer term, however, we expect that cyclical and secular trends in Asia will drive strong economic and corporate earnings growth.