During the quarter, we took advantage of the market dislocation to add to our high-conviction holdings as well as to establish a few new positions in better-quality companies that we found expensive prior to the coronavirus outbreak.

Against the backdrop of market volatility, we aimed to identify companies that may emerge from the crisis in a stronger position. These tend to be companies that are leaders in their industry and continue to gain share in their sectors under adverse market conditions. We also looked at companies that have a strong capital structure that can�help them to weather a potentially prolonged downturn in business activity. When we see certain companies with some debt but very stable cash flow streams and if these companies trade on distressed valuations, we take such selected risk.

In terms of positioning, we focus on the longer term and assess on what the post-coronavirus world may look like, balancing the risks/rewards in that light. We think this period of market stress will result in consolidation within many industries and our intention is to identify those that will emerge as the main beneficiaries and establish positions in these companies at attractive valuations.

China remained our largest country position while from a sector perspective, consumer staples was our biggest relative overweight as a result of our bottom-up stock selection process.

We Reduced Our Underweight Allocation to Taiwan

In the quarter, we sought to analyse the impact of the enormous stimulus packages announced by policy makers and their impact on various sectors. We think that investments in technology infrastructure will gain from these stimulus measures and technology companies will likely be beneficiaries.

In Taiwan, we initiated a position in Taiwan Union Technology, a maker of copper-clad laminates, which we think will benefit from our expected growth in data center demand. Taiwan Semiconductor, one of the world's largest contract chipmakers, also remains as one of our top portfolio positions. We continue to hold an off-benchmark position in Silergy, a Taiwan-listed designer and maker of a broad range of high-performance analog integrated circuits.

Outside of technology, we established a new position in Chailease, a well-run leasing company catering to small- and medium-sized enterprises. While the business is cyclical, we like its track record as it has been operating in Taiwan for over three decades and has weathered several major downturns. Its high return-on-equity through the cycle, driven by the high-quality and stable leasing franchise in Taiwan and growing China business, provided impetus for us to invest in the company. With its track record, we are confident that it has picked quality customers. Given its share price weakness, we deemed it good value to add this name to the portfolio.

China Overweight Reduced on Elimination of Select State-Owned Enterprises

In China, we trimmed our overweight allocation as we exited several names for stock-specific reasons and concerns about the impact of the coronavirus on state-owned enterprises (SOEs), as well as to give ourselves room to add higher quality stocks that have corrected to attractive levels.

We exited 3SBio as we found its management's execution lacking. The company, which had a good pipeline of drugs at its initial public offering, has disappointed us following management changes and the inability to push the pipeline into an approval process. We closed our position in Sinopharm Group and Beijing Enterprises amid concerns that these SOEs may be tapped for national service, such as asset injections or dividend cuts, that may not be beneficial to them. Sinopharm, China's largest and sole nationwide pharmaceutical distributor, weakened relative returns in the quarter. We believe that while Sinopharm will benefit from industry consolidation, its management execution had disappointed.

We sold our small position in AAC Technologies as the competitive environment for its acoustics business continues to be intense and its haptics business appears to be struggling. This move is also in line with our decision to reduce our exposure to the Apple supply chain, even before the coronavirus outbreak, on concerns about inventory in the first half of the year.

While we reduced our exposure to several SOEs, we initiated a position in Shandong Weigao, a Chinese maker of consumable medical products such as syringes and puncture needles along with orthopedic products. We view Shandong Weigao as an earnings compounder. We like its solid business fundamentals, attractive valuation and possible future catalysts, such as its plan to separately list the faster-growth orthopedics division in the A-share market, a potential asset injection, and improving free cash flow.

We also found opportunities in select Chinese transport infrastructure stocks with earnings recovery prospects and attractive valuations following the virus-induced market weakness, such as Shanghai International and Beijing Capital International Airport. While their short-term earnings will likely suffer, we think these companies should benefit from an eventual resumption in domestic and outbound travel growth and duty-free spending. We started investments in Trip.com, a Chinese online travel service provider, as we view its share price weakness as short term and think it may benefit from pent-up demand following the coronavirus outbreak's containment.

Allocation to Consumer Staples and Consumer Discretionary Enhanced

At the sector level, we moved more overweight consumer staples as we found opportunities in names whose valuations became more reasonable following the market weakness. For example, we started to invest in Budweiser Brewing, one of the largest pan-Asian brewers in terms of profit and revenues, given its more palatable valuations following its share price correction since the initial public offering. We like the company's track record in premium beer positioning and best-in-class margins.

We also took advantage of the market's weakness to establish positions in decent quality names such Godrej Consumer Products, one of India's largest listed fast-moving consumer good companies, and cash generative pan-Asian retailer Dairy Farm.

As we saw opportunities in travel names such as the previously mentioned Trip.com, we became more overweight to the consumer discretionary sector. In this space, we initiated positions in Galaxy Entertainment, one of Macau's casino operators that has a stronger balance sheet compared to its rivals and which may benefit from pent-up demand.

We also established a position in Haier Electronics, a maker of washing machines, water heaters and household refrigerators in China. We believe Haier is more defensive than its other Chinese rivals as the washing machine business is less related to the property cycle. Moreover, the coronavirus outbreak will likely usher in a pricing war and market consolidation may accelerate, benefiting leaders like Haier on the other side of the cycle.

We Reduced Our Overweight in Communication Services

In the communication services sector, we exited certain stocks where our conviction and thesis have waned or where growth prospects dimmed. For example, we eliminated China Unicom, an integrated mobile operator whose pace of revenue recovery was slower than our initial expectations. Our thesis of Unicom being a market share gainer weakened as we do not expect much differentiation in Unicom's 5G network service quality compared with its two other rivals.

We closed our position in NetEase, a Chinese online gaming company, on valuation grounds and more volatile earnings. We think it has hit a growth wall and that its margin recovery has been priced in by the market. While its 2020 game pipeline is solid and first-quarter mobile game revenue will likely benefit from the coronavirus outbreak, in the medium term the room for margin improvement is limited. At the end of the quarter, we trimmed our overweight in communication services.

We Moved to Better Quality Names in Health Care

Within the health care sector, we initiated positions in names we perceived to be of better quality in terms of product cycle and future growth prospects but eliminated select SOEs. At the end of March, we were more underweight in this sector.

We started to invest in companies we view as earnings compounders such as the previously discussed Shandong Weigao. We also established a position in Sino Biopharmaceutical, one of the highest-quality pharmaceutical companies in China with a strong sales team and an efficient research and development system. We believe the market is underestimating the speed of the company's transformation to an innovative drug firm and its capability to deliver new drugs to the market. We took the opportunity to invest in the company before it enters its next product cycle, which is expected to produce drugs that will drive sales growth in 2021 and 2022. As previously mentioned, we exited 3SBio and Sinopharm due to poor management execution.