The Sunday Times April 24, 2022 13
MONEY
BHP Holdings (BHP) is a miner of iron ore
and copper, but fewer folk are aware of its
huge investment in potash production in
Canada, the world’s biggest source of the
stuff.
BHP claims its vast site at Jansen in Sas-
katchewan could produce fertiliser for
more than a century, with output fore-
cast to begin in five years’ time. Unfortu-
nately, all those rewards remain in the
future, while the risks and costs are here
and now. So perhaps it was no surprise
the share price fell down a deep hole
when BHP announced its $7.5 billion bet
on Canadian potash last August. By con-
trast, this long-term investor felt that was
an unduly short-term reaction and went
on buying BHP.
Most recently, as reported here at the
time, that meant paying £24.92 for sharesJust as a real war in Ukraine is affecting
agriculture, shipping is being disrupted
by a trade war between America and
China, and by Covid. In all cases,
restricted supply and rising demand is
pushing up prices. So I paid $1.35 on
Wednesday to top up SHIP shares, which
I originally bought for $1.21 last August.
Of course, shipping is a cyclical indus-
try and prices can fall without warning.
However, I cannot imagine a world in
which we won’t need to transport com-
modities and other cargo by sea. Simi-
larly, to return to where we began, food
will never go out of fashion.
So I reckon both BHP and SHIP are sell-
ing goods and services that people will
always want to buy, earning big asset
allocations in this small investor’s “for-
ever fund”.That was my reaction when HM Revenue
& Customs (HMRC) said it intended to
revoke Moscow’s status as a “recognised
stock exchange”, making it more difficult
to invest there. Assets already frozen
include more than £3 billion invested in
Russia by 22 European fund managers,
including Amundi, BlackRock and JP
Morgan. Institutional investors have an
estimated €5.7 billion (£4.4 billion) in the
pariah state, according to the
independent statisticians Lipper.
My second thought was that this sad
saga highlights an important advantage
that individuals enjoy over institutional
rivals. With no worries about what the
marketing department may say, or
waking up the board of directors, we can
react to news events without delay.
For example, after investing in Russia
for more than a decade, I sold all my
shares immediately after I read about
the Salisbury poisonings in March 2018.
It wasn’t easy — I had more than doubled
my money in BlackRock Emerging
Europe (BEEP) investment trust and
would have liked to stay for more.
Work first took me to Moscow in the
Nineties and, more recently, I visited
Gazprom’s site at Bovanenkovo, inside
the Arctic circle. So I know that many
ordinary Russians are like us and had
hoped to play a small part in what the
Germans call Wandel durch Handel, or
reform through trade.
Those hopes died with Dawn
Sturgess, given novichok intended for
the former Soviet spy Sergei Skripal and
his daughter, Yulia. But it was not until
after the invasion of Ukraine that the
Church of England disinvested, and
other professional investors continue to
dither. Do slickers in stripy shirts — or
dog collars — not read the newspapers?What took
them so long?
I’ve been warning of a global food crisis.
These shares will help you ride it out
£4.4bn
The estimated value of European
pooled funds invested in RussiaN
ever mind the row about
Rwanda, or the political fuss
about “partygate”, a far
more fundamental issue for
many people in the years
ahead will be food security —
or in plain English the ability
to feed ourselves.
War in Ukraine could be
followed by famine else-
where because of the region’s global
importance in the production of wheat,
as discussed here a couple of months ago.
What is less widely understood is the
long-term disruption of agriculture likely
to be caused by the fact the world relies
on Russia and its allies for 38 per cent of
all potash, a fertiliser essential for mod-
ern, efficient farming.
Coming down from the clouds, Britain
faces its worst food production crisis
since the Second World War, according to
Minette Batters, president of the National
Famers’ Union. She said the soaring cost
of potash has already added £800 million
to costs, prompting farmers to avoid
planting crops that require plenty of fer-
tiliser. Batters argues that food security
should be a national priority. “We have
legislation about tree-planting but not
even a commitment on ensuring domes-
tic food production,” she said.
Regular readers will know that I have
been banging on about investing in agri-
culture for years and, in particular, pre-
dicted commodity price inflation here
last August. That was when I topped up
my investment in the agricultural com-
modities giant Archer-Daniels-Midland
(stock market ticker: ADM). I first
invested in ADM at $42 in 2016; last sum-
mer I paid $59. The shares cost $93 now.
Believe it or not, the main attraction of
ADM for this investor remains income,
not dreams of capital gains. The grains
giant yielded 2.5 per cent last August,
despite delivering dividends every year
since 1932 and raising shareholders’
income every year since 1981. However,
its soaring share price in recent months
has squeezed its yield to 1.7 per cent
today and made ADM my sixth most valu-
able holding. That’s not far behind John
Deere (DE), the tractor-maker, another
farming essential. DE is my second most
valuable holding since shares I bought for
$82 in November 2013 have trundled
higher to trade at $410 on Friday.
Looking forward, the potash shortage
has prompted my main Isa selection for
this year’s allowance. Most people knowJanuary, just before its record dividend
distribution and share price spike. Maybe
autopilot ain’t always the best way to nav-
igate fast-moving markets.
Speaking of navigation, I invested the
rest of my Isa allowance in Tufton
Oceanic Assets (SHIP), which manages a
fleet of second-hand, seagoing vessels.
This is a risky business, as demonstrated
when the Ever Given containership
blocked the Suez Canal last year and the
Ever Forward got stuck in the mud of
Chesapeake Bay last month.
But SHIP owns neither vessel and I like
its 5.9 per cent dividend yield from
marine transport’s essential role in the
global economy. About 90 per cent of
world trade is transported by sea, accord-
ing to the Organisation for Economic
Co-operation and Development (OECD).Ian Cowie Personal Account
in February to maximise my entitlement
to its record dividend distribution last
month. That was worth a four-figure sum
to this shareholder.
More importantly, I believe there is
further to go with BHP’s newish chief
executive, Mike Henry, and his focus on
“forward-facing” commodities, such as
potash. So I paid £29.23 to top up my Isa
on Wednesday, obtaining 8.6 per cent
income that really is tax-free because this
business relocated to Australia where its
dividends suffer no deductions at source,
unlike British shares. The price remains
unpredictable in the short-term and
closed at £26.95 on Friday.
But I had better not say any more about
BHP for fear of irritating passive-aggres-
sive types whose UK tracker funds
dumped the miner when it left London inco-manager of the Mobius
Investment Trust, said:
“Taiwan to us is the cradle of
innovation and the cradle of
governance in Asia. There’s
no country in Asia that has
more comprehensive and
clean accounts than Taiwan.”
Taiwan Semiconductor
Manufacturing Company is
one of the biggest dividend
payers in the world,
according to the wealth
manager Janus Henderson,
and semi-conductors remain
in high demand across the
globe.
The iShares MSCI Taiwan
ETF has returned 86.7 per
cent over five years, although
its return is flat over the past
12 months.
The countries are all
developing, so while they
may produce high returns
they also come with big risks.
Yearsley said that single-
country Asian funds should
account for no more than
0.5 per cent of your portfolio.
Rob Burgeman from
Brewin Dolphin, the wealth
manager, favours regional
funds, although most of these
will have high weightings to
China. Burgeman suggested
Baillie Gifford’s Pacific
Horizon, which has 20 per
cent in China, 27 per cent in
India, 13 per cent in Korea
and 6 per cent in Vietnam.
Burgeman said: “China
hasn’t been great for a while
now, but not having it in your
portfolio is a big bet in itself.
We would normally suggest
around 10 per cent being
exposed to Asia Pacific, with
China representing at least
some of this.”
Parmar suggested Pacific
Assets Trust, which has a
good long-term performance
record. Its share price is
10 per cent below the value of
the assets it owns, presenting
a potential opportunity. The
trust has 7.9 per cent of its
portfolio in China and 4.4 per
cent in Hong Kong.
Jason Hollands from
Bestinvest highlighted funds
in his firm’s best-buy list that
have low weightings to
Chinese stocks, including
Jupiter Asian Income,
Utilico Emerging Markets
Trust and Schroder
Oriental Income.
Respectively they were up
7.2 per cent, up 8.9 per cent
and down 6.9 per cent over
the past year.If you’re worried
about China
then take a look
at Vietnam
Funds that invest in the
shares of Chinese companies
have typically lost more than
a third of their value since last
February. Some see this as a
buying opportunity, others as
justification for steering clear.
The sharp fall in share
prices was led by the
Chinese Communist Party’s
crackdown on companies in
sectors such as private
tutoring, alongside
indebtedness in the property
sector. But the list of red flags
extends well beyond that.
Shanghai, the world’s most
populous city, remains in a
strict lockdown because of
China’s zero-Covid policy.
Accusations of genocide
against Uighur Muslims in
Xinjiang and the removal of
Hong Kong’s democratic
rights are other reasons why
investing in China is
unpalatable for many.
Some would argue that the
fall in share prices makes
Chinese firms cheap. Because
China is cutting interest rates,
its technology stocks should
do better than their western
counterparts, said Mike Sell
from the fund house Alquity.
It is possible, though, that
China’s economic — and share
price — growth has plateaued.
Targeted GDP growth of
5.5 per cent, while relatively
high, would be the lowest
annual rate in three decades.
Other countries in Asia
could take up the slack.
Vietnam, for instance, is at a
similar stage of its
development as China was 20
years ago, according to Ben
Yearsley from Shore Financial
Planning — including having a
one-party state.
Priyesh Parmar from the
research company Numis
said that the Vietnam
economy is expected to grow
6.5 per cent in 2022. Itcontinues to benefit from a
young population, emerging
middle class and strong
foreign investment as
companies diversify supply
chains away from China.
Yearsley likes the
VinaCapital Vietnam
Opportunity Trust, which is
up 79 per cent in five years.
Brook Tellwright from
Waverton Investment
Management said that a lot of
the southeast Asian
economies do well in times of
high inflation because they
are commodity exporters and
prices are rising.
He highlighted Indonesia,
where wages are rising. That
should lead to higher
consumer spending and give
the economy a boost. The
HSBC MSCI Indonesia
exchange traded fund (ETF)
is up 14.6 per cent this year
and 30 per cent in 12 months.
Taiwan has one big risk:
China is keen on
reunification. However, the
severe sanctions imposed on
Russia after its invasion of
Ukraine may deter China
from using force, according
to economists and politicians
in Asia and elsewhere.
Carlos Hardenberg,David Brenchley
GROWTH POTENTIALiShares MSCI Taiwan ETF
VinaCapital Vietnam
Opportunity Trust
HSBC MSCI Indonesia ETF160%04080120-40Source: FE fundinfo201720182019 2020 2021BLOOMBERG VIA GETTY IMAGES; GETTY IMAGES; REX FEATURES; AFP