The hugely popular Scottish Mortgage has been hit by a recent slump in China’s top tech companies but said Covid jab-maker Moderna can be a long-lasting booster investment.
The UK’s biggest investment trust said China’s recent crackdown on big tech ‘negatively impacted’ the share prices of some of its holdings, which include Tencent and Alibaba.
However, the company said its performance improved in its first half to the end of September thanks to bigger stakes in healthcare and biotech companies like Moderna, the US firm behind one of the Covid vaccines.
And it said Moderna’s mRNA technology will have many uses beyond just Covid jabs.
US vaccine maker Moderna is now now Scottish Mortgage’s top holding
‘Our largest holding, Moderna has been the greatest contributor to this change, writing what is effectively code in the form of RNA to program human cells,’ said Scottish Mortgage’s managers James Anderson and Tom Slater.
‘Moderna has helped the world to start escaping the tragedies and confinement of the last 18 months.
‘However, it is the breadth and scalability of its mRNA technology platform rather than its Covid vaccine that holds the greatest promise. Its pipeline of programs is both large and growing, targeting diseases such as flu, Zika, HIV, cancer and many more.’
Moderna is now now Scottish Mortgage’s top holding, having replaced Tencent, representing 9.2 per cent of the total portfolio.
It is followed by another biotech company, Illumina, which makes up 5.8 per cent of total investments by the trust.
Overall, investments in biotech and healthcare have grown from 11.6 per cent a year ago to 21.4 per cent of the portfolio today.
Moderna contributed 7.2 per cent to Scottish Mortgage’s performance in the first half, after the fair value of the shareholding rose to £1.94billion on 30 September from £646million at the end of March.
Chinese giant Tencent, while still being one of the trust’s top holdings after Tesla representing 4.1 per cent of the total portfolio, has not boosted returns.
In fact, its contribution was -1.4 per cent in the period, compared to 3.5 per cent in the previous six months.
Other Chinese companies Meituan, NIO and Alibaba, which are the trust’s seventh, eighth and eleventh largest holdings respectively, all also had a negative impact on returns in the half year.
However, the investment trust expressed confidence in the trajectory of its investments in China, saying their performance remained ‘surprisingly strong’.
Alibaba, the trust’s eleventh largest holding, has had a negative impact on its performance
‘Alibaba and Tencent both continue to grow revenue in excess of 20 per cent whilst Meituan and Pinduoduo are both growing considerably faster,’ it added.
‘We will continue to assess the long-term implications of the new regulatory approach as they apply to each of our holdings.’
Despite the poor performance of its Chinese holdings, net asset value, or NAV, for the FTSE 100-listed fund rose 16 per cent to 1,381.1p per share from 1,195.1p at the end of March.
That compares with growth of 9 per cent in the FTSE All-World index.
Given its recent positive performance, Scottish Mortgage hiked its interim dividend by 5 per cent to 1.52p.
Scottish Mortgage shares fell 1 per cent to £15.12 in afternoon trading on Monday.
