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Aberdeen Asia-Pacific Income Fu Message Board

  • jogger9 jogger9 Feb 9, 2000 9:57 AM Flag

    Dividend cut?

    It looks like those on this board that post so
    well think the cut is inevitable. Any chance that they
    will not cut dividend? What would be the scenario for
    that to happen? Fax is up a little today. Is the cut
    already priced in?
    j9

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    • depends on currency, in my opionion. If Aus
      remains at $0.65- 0.66 level in next few months
      ($0.63-0.64 now), the FAX asset will be higher than $6.1/s.
      In addition, FAX gets some currency appreciation
      from its Korean investiment. Also, paying high div to
      shareholder is an another way of tender shares from
      shareholder, but has reversal affects on the share price. For
      this reason, I would rather to see FAX using retired
      seculities for tendered shares at NAV, just like South
      Africa Fund did.

      • 1 Reply to wp5151
      • Yes, the AUD is the most important single factor
        in FAX's NAV and a major factor in its dividend. The
        great great majority of FAX's Korean debt securities
        are dollar denominated so it can't get any currency
        appreciation. It is possible to get credit appreciation from
        the Korean and other Asian debt which is something
        not likely with the higher credit rating Australian
        debt.
        I can never remember seeing a stock rise on
        announcement of a dividend cut, in fact a significant drop is
        almost universally the norm. The degree of the FAX cut
        could effect market reaction. Dividend concerns most
        certainly could be priced into FAX, so a small cut might
        have little effect. If the monthly dividend drops a
        penny or more, I expect a distinct and noticable drop
        in FAX's share price.
        I wouldn't focus too much
        on any recent rise in FAX's share price. It seems
        most other closed-end bond funds (at least those that
        I follow CGF, DSF, & MSY) have been strong as of
        late.

    • It is good to discuss something meaningful
      together. Thanks, AXZL!

      I am not a date trader. But,
      in such a computer-age enviroment, I found out that
      trading is mostly affected by market condition and
      momentum. Dissolution of CEF and rebuilding a sequel fund
      in a limited period (every 5-10 yrs) shall help
      stock price in this sense.

      I also found SOA
      approach by tendering shares quite practical. It should
      not affect the NAV too much, but increase CEF market
      value by expectation.

      I understood the NAV of
      FAX is determined by the safety (rating), div,
      currency, and interest rate. However, the stock prices were
      controlled by trading. Since the trading pattern of this age
      is different from 2-3 years ago. I do think CEF
      managers should pay their most attention to maintain the
      market value as close to its NAV. In addition, the rule
      of management fee should be changed.

    • Fund manager should announce a projected
      "dissolution date or period" (5-10 yrs) for the fund and then
      built a similar one for tax-free transfer for
      shareholders. I call it "Close-end Fund Merger/Buyout (CEFMB)"
      to enhance share value.

    • Thanks for the info on DSF. I will wait for the new web site. So you are going to cost average down on DSF. Does that mean what I think it means?

    • Yes I was a bit hasty. I still think of the difference of the reduced cost basis and when you sell it as taxable, but technically your absolutely correct, thx.

    • I would expect FAX to drop below $5 the day after
      the dividend reduction is announced. You might also
      notice some weakness in the days immediately prior to
      the announcement. Bottom might be in as few as two
      days after the announcement.
      As one recent
      example, LTC announced a dividend reduction last week -
      $39 to $.29. They also held a conference call which
      went well in my opinion. This CC and the fact that the
      LTC share price had fallen about 30%already probably
      helped the stock as its price fell only 5% after the
      announcement.

    • I paid aproximately 6 1/2 for my shares and I've
      got about 10,000 shares so going down translates to
      $10,000 a point but as long as I don't sell I don't lose
      anything. Eventually it;s bound to rise again and in the
      meantime I get a pretty good dividend.
      As far as
      timing your buy (if you buy) that's a tough call. Lord
      knows I'm no expert.

    • about Closed End Funds(CEF) that you may want to
      consider.

      First, Equitilink manages FAX for
      management a fee.

      Second, the management fee is a
      percentage of the NAV, not the market value. Therefore
      management's first concern is with keeping the NAV as high as
      possible which IMO strongly indicates that they won't pay
      a dividend that results in the return of capital to
      shareholders for very long because it tends to lower the NAV
      which is the basis for their fees. I am not saying that
      they are not concerned with the market value, but
      market value concern is secondary to NAV
      value.

      Third, don't look for Equitilink or most other CEF
      managers to desolve a CEF because the market value is at a
      discount to NAV and it would be good for the shareholders.
      They are in business to make money for themselves
      first and foremost. No FAX, no jobs for
      them.

      Fourth, as long as interest rates are going up and
      depressing the NAV of the fund and as long as the Aust. $ is
      weak, I have a real problem seeing how FAX can increase
      net income from operations to earn what they are
      paying in dividends or how they will generate any
      capital gains to make up the difference
      either.

      Perhaps you or someone else can point out something that
      I am missing. Also, understand that I am long FAX
      at about $5 9/16 and would like FAX to perform well
      to!

    • BUY/SELL/HOLD ?????

      Why are you still
      holding on to FAX?

      Would you make an initial
      purchase at this time?

      Why does Prudential still
      consider FAX a BUY?

      Lets get a crossection of
      opinions.

    • I do not necessarily think that the dollar will
      weaken against the Euro any time soon. I am leaning
      towards closed-end equity funds invested in European
      stocks. The weak currency could help their corporate
      revenues and perhaps longer term the Euro might strengthen
      given European productivity increases sufficiently. It
      is improving, but slowly. I am no economist, but I
      could write a book on unproductivity in Germany having
      lived there for 4 years and had 250 German workers in
      my organization.

      Whatever you find out on
      the credit of the DSF portfolio, I would be
      interested in so a post here would be appreciated.

 
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