ISA fund ideas: investing in Asia for income

Important information - the value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

Share price growth is just one part of the story, however. Asia is also a rich source of dividends, meaning it holds plenty of appeal for investors seeking high income ISAs or pensions.

This is a little counterintuitive. Asia is typically viewed as a growth market, filled with emerging economies and young companies. However, it boasts a far bigger dividend yield than the US, and the number of businesses that generate income is high, with half yielding 3% or more.²

‘If you’re a UK investor, roughly half the income you’re getting from the index comes from just under 10 stocks,’ says Richard Sennitt, manager of the Schroder Oriental Income Fund.

 ‘For Asia Pacific ex Japan, it’s over 50. As an active stock picker, there’s a good opportunity set to pick from.’

Why now?

For many years, there has been a ‘big picture’ argument in favour of Asia. After all, it contains the world’s biggest emerging economies - China and India - meaning the economic growth outlook is strong.

It also has a large, youthful workforce. Asia is home to around 60% of the global population³ and has a median age of 32, compared to Europe’s average age of 42.5.⁴

Despite its structural advantages, however, Asia has lagged its international rivals until this year. What has changed?

Crucially, the US has stumbled. Investors are increasingly nervous about America’s erratic trade policies, its high level of debt, and the valuations attached to its biggest tech stocks. As such, they have started looking further afield for investment opportunities - and Asian equities are going cheap.

The depreciating US dollar has proved particularly important. This is because a weaker US dollar improves the spending power of Asian consumers; reduces the region’s imported inflation; lessens the burden of dollar-denominated debt; and boosts the price of commodities, a key export for many emerging markets.

It is not all about America, however. Portfolio managers argue that Asia, which boasts around 20,000 listed companies, is becoming more attractive in its own right - not least because there is a growing focus on shareholder returns.

South Korea, for example - dominated by family-controlled conglomerates known as ‘chaebol’ - changed its commercial code this year to improve shareholder rights. The country follows in the footsteps of Japan, which has been overhauling corporate governance rules for several years.

Shareholders are reaping the rewards, with companies returning cash via dividends. Buybacks are also becoming more prevalent, according to Doug Ledingham, lead manager of Stewart Investors Asia Pacific Leaders

‘Companies are using cash to buy back stock at reasonable valuations,’ he says. ‘In the US, you tend to have buybacks that are funded by debt, which offset very lucrative stock-based compensation. It’s largely left pocket to right pocket. In Asia, these buybacks actually reduce share counts and increase value.’

How do I invest?

There are important risks to be aware of. Asia contains lots of emerging markets, and these are considered riskier than developed markets. Volatile exchange rates, low liquidity, corporate governance scandals and economic shocks can all cause problems for investors. This year, the entire region is also navigating tariffs imposed by the US.

If you are comfortable with these risks, however, there are various ways to invest in Asia - and the following funds featured on Fidelity’s Select 50 are a good starting point.

Schroder Oriental Income Fund

Annual dividend yield: 3.6%

This investment trust hunts down high quality, high yielding stocks in Asia Pacific. With a team of over 40 analysts based across six offices in the region, it has plenty of firepower to do so - and it has increased its dividend every year since it launched 20 years ago.⁵

The geographical makeup of the portfolio is striking. China represents just 18% of the fund, compared with 36% of the index. In contrast, Singapore is over-represented.⁶

Portfolio manager Richard Sennitt gives a couple of reasons for this. He flags that the Chinese market contains lots of internet platform companies, with low or no dividends - not suitable for an income-focused fund. In contrast, Singapore has been good at returning cash to shareholders and is increasingly important as a financial centre.

• More on Schroder Oriental Income Fund

Fidelity Asian Smaller Companies Fund

Historic dividend yield: 5.2%

Small companies tend to be less well researched, which can lead to unfairly low valuations. Fidelity’s Asian Smaller Companies Fund tries to take advantage of this, investing in smaller businesses across the likes of China, Indonesia and India. It benefits from an extensive, high-quality pool of equity analysts, and intentionally targets areas that are out of favour.

It offers particularly high exposure to Indonesia, which makes up about 15% of the portfolio. Indonesia’s appeal lies partly in its geography: it consists of thousands of islands. This limits its entrepreneurial culture and allows a small number of incumbents to dominate the market. Fund manager Nitin Bajaj argues these businesses are often on attractive valuations and offer high returns on equity.

Investing in smaller companies increases risk, but also boosts potential returns. As such, this fund would be a useful addition, as a small weighting, to the riskier allocations within a diversified portfolio.

• More on Fidelity Asian Smaller Companies Fund

Source:

¹ Reuters, 14.10.25
² Schroders, 17.2.23
³ UNFPA population trends, October 2025
⁴ Worldometer, population of Asia 2025
^5,6 Schroders, October 2025