Fund Spotlight: A smoother ride through Asia ex-Japan markets

• We hold a constructive view on Asia ex-Japan, supported by strong conviction and reinforced rather than undermined by the Middle East energy shock.
• Asia has shown relative resilience year-to-date, with valuation support remaining compelling versus the US, where US equities trade above 21x forward earnings compared to 10–16x in Asia.
• The case for Asia ex-Japan is underpinned by both valuation upside and improving relative macro and energy resilience across key markets.
• The Fidelity Asia Pacific Dividend A-USD fund provides a simple way to access this opportunity, with a dividend-focused mandate that tilts the portfolio toward lower volatility, defensive income, and quality cash flows.
• The fund has generated competitive long-term returns (5-year annualised return of 4.9% vs 3.2% for the index and 0.9% from other peer funds), making it suitable for investors seeking stability with capital growth.

In our Investment Outlook, we have shone the spotlight on many Asian markets such as Singapore, Malaysia, Hong Kong, China, South Korea and Taiwan. On the broader level, we now hold a constructive view on the region – Asia ex-Japan.

In this article, we highlight one of our recommended funds, the Fidelity Asia Pacific Dividend A-USD, for investors seeking stability in the region.

Related article: iFAST Investment Outlook 2Q 2026: Why the Middle East shock has strengthened the case for Asia

Related article: Middle East war rocks Asian markets, but don’t let fear drive your trades

The case for Asia ex-Japan: a pivot backed by conviction

The oil shock has done something unusual: it has simultaneously pressured growth expectations in the US and Europe while leaving much of Asia structurally intact. China carries strategic reserves and diversified energy mixes that reduce its dependency on the Straits of Hormuz. Singapore and Malaysia are direct beneficiaries of safe-haven capital flows. The shock has not hit Asia uniformly, and where it has not struck, it has exposed the relative cheapness of Asian assets even more clearly.

Asia ex-Japan has emerged as one of the standout equity markets in 2026 year-to-date, delivering resilience in the face of Middle East-driven energy shock.

As of 28 April 2026, the MSCI AC Asia Pacific ex-Japan Index has delivered a strong year-to-date return of 15.5%, significantly outperforming other markets like the US (+4.7%) and Europe (+3.6%).

The valuation case is the headline. US equities remain expensive at over 21x forward earnings; most Asian markets trade at 10–16x, often with superior earnings growth profiles. In an environment where US valuation compression is a genuine risk, the relative case for Asia strengthens by comparison.

Portfolio construction: built for income and resilience

The Fidelity Asia Pacific Dividend A-USD holds a concentrated portfolio of 47 positions (relative to its benchmark, MSCI AC Asia Pacific ex Japan Index, 1072 constituents) (as of 31 Mar 2026). The strategy invests at least 70% in income-producing equities of Asia Pacific (excluding Japan) companies.

The fund has an active share of 81.5%, meaning a significant portion of the portfolio differs from benchmark weights. This reflects strong conviction in stock selection and a clear intent to outperform rather than to mirror the index.

Geographic exposure

China and Taiwan are the two largest absolute exposures at 19.4% and 15.5% respectively, but both are underweight relative to the index, reflecting the manager's selectivity within high-index-weight markets where not all constituents meet the dividend-quality screen. The overweight in Hong Kong (+10.9 percentage points) reflects exposure to high-yielding, cash-generative companies at attractive valuations. The underweight in India (-6.9pp), where valuations are higher and dividend yields lower, reinforces the fund’s focus on income quality over momentum.

Figure 1: Geographic exposure vs. benchmark (as of 31 March 2026)

Sector allocation

The sector allocation is where the fund's defensive, income-oriented character is most clearly expressed. Information Technology is the largest sector at 19.4%; however, this is a significant underweight versus the index at 31.7%, reflecting the manager's avoidance of high-multiple, low-yield technology names. In their place, the fund is overweight in Industrials (17.1% vs. 7.9% index), Consumer Staples (9.0% vs. 2.8%), Real Estate (8.1% vs. 2.1%), and Materials (8.4% vs. 6.3%). Generally, these sectors are characterised by tangible asset backing, recurring cash flows, and dividend yields.

Figure 2: Sectoral exposure vs. benchmark (as of 31 March 2026)

Top holdings: quality income across the capital stack

The fund's top ten holdings account for approximately 41% of the portfolio and reflect a defensive, income-focused approach.

Samsung Electronics (7.5%) is slightly overweight, while TSMC (7.1%) is significantly underweight, indicating that positioning in tech is actively managed rather than driven purely by index weights or dividend yield.

The portfolio’s differentiation comes from income-generating names such as HKT and AIA Group, alongside holdings not found in its benchmark like Dyno Nobel (an explosives/mining chemicals company), BOC Aviation, Embassy Office Parks REIT and BGF Retail (South Korean convenience store chain), which provide asset-backed, resilient cash flows.

Overall, the fund combines selective exposure to large tech names with a deliberate tilt toward defensive, income-generating businesses not typically found in passive Asia ex-Japan funds.

Table 1: Top ten holdings (as of 31 March 2026)

Company	Sector	Fund	Index
Samsung Electronics	Information Technology	7.5%	5.6%
Taiwan Semiconductor MFG Co Ltd	Information Technology	7.1%	13.2%
HKT Trust and HKT Ltd	Communication Services	3.9%	0.1%
AIA Group Ltd	Financials	3.8%	1.1%
Dyno Nobel Ltd	Materials	3.5%	0.0%
Evolution Mining Ltd	Materials	3.3%	0.2%
BOC Aviation Ltd	Industrials	3.1%	0.0%
Embassy Office Parks REIT	Real Estate	3.1%	0.0%
Techtronic Industries Co Ltd	Industrials	3.0%	0.2%
BGF Retail Co Ltd	Consumer Staples	2.6%	0.0%
Source: Fidelity Factsheet, 31 March 2026.

Performance: competitive returns with a genuine defensive edge

The Fidelity Asia Pacific Dividend fund's performance record should be read through the lens of its mandate: not to maximise return at all costs, but to generate income and capital growth with lower volatility than the broader market. Evaluated on those terms, the record is compelling.

As of 31 March 2026, the YTD return of 3.6%, against an index that was down 0.5% and a peer average of -0.6%.

Over the past year to 31 March 2026, the fund returned 24.3% in SGD terms, outperforming both the MSCI AC Asia Pacific ex Japan Index (22.8%) and the peer average (20.5%). The outperformance extends further back: over five years, the fund delivered an annualised return of 4.9% against the index's 3.2% and a peer average of just 0.9% — a margin that compounds over a full investment cycle. The 3-year annualised return of 11.6% trails the index's 13.0%, but remains well ahead of the 9.5% peer average, confirming that the fund consistently sits in the upper tier of its category even in periods where it does not lead the benchmark.

Figure 3: Performance Comparison (as of 31 March 2026)

The calendar year data tells a more instructive story.

In 2022, the fund fell 11.2% against the index's 17.5% decline and a peer average loss of 18.8%, a gap of more than 7 percentage points that represents substantial real wealth preservation. In 2021, when the index returned a negligible -0.5%, and other peer funds delivered an average of 0.5%, the fund delivered +9.7%, which is around a 10 percentage-point swing generated entirely by the dividend-quality screen. In 2023, the fund returned +5.0%, lagging the index's 6.3% but meaningfully ahead of the 2.1% peer average.

The pattern across years is consistent: the fund gives up some return relative to the index in strong momentum periods, most visibly in 2024, where it returned 6.5% against the index's 14.9%, but the protection delivered in down markets more than compensates over the full cycle.

This asymmetry is the defining characteristic of a dividend-tilt strategy. By screening for quality income payers, the portfolio naturally gravitates toward companies with strong cash flows, pricing power, and balance sheet resilience. Investors entering Asia at this juncture, after a period of elevated global macro volatility, may find that trade-off particularly valuable.

Figure 4: Calendar Year Performance Comparison

Table 2: Risk measures — fund vs. index (3-year, A-USD)

Metric	Fidelity Asia Pacific Dividend A-USD	MSCI AC Asia Pacific ex Japan
Annualised Volatility (3yr)	13.3%	15.7%
Beta (3yr)	0.79	1.00 (by definition)
Sharpe Ratio (3yr)	0.59	0.57
Price/Earnings Ratio (x)	17.7x	18.1x
Price / Book Ratio (x)	1.8x	2.2x
Source: Fidelity Factsheet, 31 March 2026.

The risk metrics reinforce the pattern seen in returns. A beta of 0.79 suggests the fund is less sensitive to market movements and is expected to fall less than the index in down markets, which has generally been the case.

Annualised volatility of 13.3% versus 15.7% for the index indicates consistently lower market swings. At the same time, a Sharpe ratio of 0.59, slightly above the index’s 0.57, shows that this lower risk has been achieved without sacrificing return efficiency.

Conclusion

For long-term investors seeking stability in Asia Pacific ex-Japan, the Fidelity Asia Pacific Dividend A-USD stands out as a compelling actively managed option. Its income-focused mandate results in a more defensive profile than typical growth-oriented Asia funds. This is illustrated in its lower beta, lower volatility, and stronger downside protection in years such as 2021 and 2022, while still delivering a 5-year annualised return higher than the index and peers.

Declaration:

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.