Our portfolio companies generate more than 80% of their revenues from Asian clients.
What happened
On 2 April, the Trump administration announced it will impose 10% tariffs on all US imports effective from 5 April, alongside higher reciprocal tariffs targeting countries with the largest US trade deficits with effect from 9 April. Tariffs are bad news for everyone, given that someone has to pay for it (the US consumer will likely foot most of the bill) and therefore it will impact global growth as people consume less and things become more inefficient. Not surprisingly, we have witnessed global financial markets suffer sharp sell-offs, including equity markets across Asia.
Asia is among the hardest hit, based on the headline tariffs, with eight of the ten largest additions in reciprocal tariffs from Asia. Between now and their implementation, we would expect a lot of noise around negotiations and retaliatory moves related to the reciprocal tariffs. Aside from China, ASEAN countries are also among those with the highest tariffs given their trade imbalances with the US. Vietnam and Thailand drew the highest punitive tariffs at 46% and 36% respectively.
Portfolio impact
We see limited direct impact on the companies that we invest in.
The majority of revenues we receive are driven by domestic growth in Asia, with our portfolio companies generating more than 80% of revenues from Asian clients. Our companies tend to be local or global leaders with unique products or services that are incredibly hard to replace, meaning that these businesses are resilient and the fundamental outlook for growth remains robust.
For instance, we own an affordable housing company with a strong foothold in south India, which has ample growth opportunity within the domestic market, supported by superior metrics relative to its peers in terms of asset quality, loan yields and return ratios. Elsewhere in China, we are invested in one of the leading music-streaming apps in China which is popular with the younger demographic, given its growing user subscriber base and reasonable valuations. This online music business is thriving, with anticipated double-digit revenue growth and margin improvement. The company is profitable, generates positive cash flow, and boasts a strong net cash position.
What next
We would see two key risks arising from the tariffs: a potential US recession that could broaden into a global slowdown and supply chain disruptions caused by the global tariffs. Re-allocation of supply chains will occur over time but these global networks have been built over many decades so manufacturing cannot shift to the US overnight, if at all. Some humility is warranted on our part given the dramatic changes being thrown at the global economy so we must be careful in thinking through the second-order effects on our portfolio companies and the impact on equity valuations for individual stocks, but our focus since abrdn Asia Focus’ inception 30 years ago has squarely been on the highest-quality companies in the region that can thrive under extreme circumstances.
Tough times often entrench competitive positions, and we remain highly confident in the future growth prospects of our holdings and in the diversified nature of the Asia Focus portfolio.
Impact on Asia
| Countries | US reciprocal tariffs on Asia | Tariffs charged to the US |
|---|---|---|
| Vietnam | 46% | 90% |
| Thailand | 36% | 72% |
| China | 34% | 67% |
| Taiwan | 32% | 64% |
| Indonesia | 32% | 64% |
| India | 26% | 52% |
| South Korea | 25% | 50% |
| Japan | 24% | 46% |
| Malaysia | 24% | 47% |
| Philippines | 17% | 34% |
| Singapore | 10% | 10% |
| Australia | 10% | 10% |
Source: Aberdeen, Reuters, X, April 2025
Important information
Risk factors you should consider prior to investing:
- The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested.
- Past performance is not a guide to future results.
- Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
- The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.
- The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.
- The Company may charge expenses to capital which may erode the capital value of the investment.
- The Company invests in smaller companies which are likely to carry a higher degree of risk than larger companies.
- Movements in exchange rates will impact on both the level of income received and the capital value of your investment.
- There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
- As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.
- The Company invests in emerging markets which tend to be more volatile than mature markets and the value of your investment could move sharply up or down.
- Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.
Other important information:
Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG, authorised and regulated by the Financial Conduct Authority in the UK.
Find out more at aberdeeninvestments.com/aas or by registering for updates. You can also follow us on X, Facebook and LinkedIn.