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Aberdeen Asia-Pacific Income Fu Message Board

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  • axzl axzl Jan 16, 2000 7:18 AM Flag

    IS THERE ANYTHING ENCOURAGING

    again that I agree that FAX has disappointed me
    to and I bought it at 5 7/16, watched it go to 6 7/8
    and back down again. But it is my understanding that
    FAX has not paid their dividend from operational
    earnings since the last rights offering was completed; In
    fact they stated as much that the .72 through March
    was based partly on capital gains. Well, with rising
    interest rates, FAX has seen the underlying market value
    of their bonds decrease and have had no opportunity
    to generate additional capital gains through
    portfolio turnover. Thus, income from investments remains
    static and their capital gains are about spent; And
    guess what, we can probably expect a dividend
    cut.

    There is chance that the dividend cut could be
    temporary if interest rates fall which could put FAX in a
    position to once again start generating capital gains
    through portfolio turnover; but I wouldn't hold my
    breath. It's more likely that FAX will have another
    rights offering to generate more cash to invest which
    would dilute our share NAV just like before. Just
    another cycle like we have just experienced. If interest
    rates would have fallen even more, which some were
    predicting, the capital gains flow would have continued and
    the dividend would have been safe. I can remember
    predictions that the long bond would go to 3.5% about the
    same time that FAX was completing the rights offering.
    We all know now that didn't happen. However, there
    are those that predict that long bond rates will be
    under 6% by year end.

    Also, don't forget there
    is one other wild card, and that is the Aust.$.

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    • that you see no hope for any stability or gain.
      Is that corect? If so, IYHO, should we just take our
      licks and get out? Just read a neat article by Paul
      Sturm in the Feb. issue of Smart Money. He advocates CE
      municipal bond funds because of their deep discount. One, a
      high quality, insured...is paying a taxable equivalent
      of 9%. Thanks for your thoughtful replies. I have
      just started using the net and have discovered the
      Dividend History feature in Yahoo. If I had had that at
      the time I bought FAX, and seen the declining
      dividends, I would not have bought.

 
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