iShares Southeast Asia Trust 2025 Annual Report: Key Insights for Investors

Overview

The iShares Southeast Asia Trust, managed by BlackRock (Singapore) Limited, has released its audited annual report for the year ended 31 December 2025. The Trust consists of four sub-funds:

• iShares MSCI India Climate Transition ETF
• iShares J.P. Morgan USD Asia Credit Bond ETF
• iShares USD Asia High Yield Bond ETF
• iShares MSCI Asia ex Japan Climate Action ETF

This report provides detailed performance reviews, portfolio breakdowns, and important governance and financial updates for each sub-fund.

Key Points and Performance Highlights

1. iShares MSCI India Climate Transition ETF

• ESG & Climate Focus: The fund tracks the MSCI India ESG Enhanced Focus CTB Select Index, aiming to exceed EU Climate Transition Benchmarks and maximize exposure to positive ESG factors, with 99.91% of assets aligned with the ESG focus.
• Performance:
  • NAV per unit at US\$14.17, with 4,930,000 units outstanding.
  • Fund size: approximately US\$69.9 million.
  • 2025 1-Year NAV Return: 2.55% (vs index 3.42%).
  • Market price return for 1-Year: 2.92%.
• Top 10 Holdings (as of 31 Dec 2025): HDFC Bank (9.21%), Reliance Industries (8.06%), ICICI Bank (4.96%), Infosys (4.69%), Mahindra & Mahindra, among others.
• Sector Allocation: Financials (31.53%), Consumer Discretionary (14.92%), Information Technology (10.81%), Materials (10.00%).
• ESG & Climate Impact:
  • Significant reduction in carbon emissions intensity vs. parent index.
  • Annual 7% decarbonisation pathway.
  • Strong improvement in green revenues relative to fossil-fuel revenues (weighted average improvement from 592% to 990%).
• Risks & Ratios: Expense ratio: 0.66%; Turnover ratio: 31.50%.
• Other Notes: No borrowing, no securities lending, or repurchase transactions. No soft dollar commissions received.
• Taxation: Subject to India capital gains tax, with provisions made for unrealized capital gains tax. Recent tax rate changes may impact future NAVs.

2. iShares J.P. Morgan USD Asia Credit Bond ETF

• Portfolio Breakdown: 99.21% in debt securities, 0.34% in mutual funds.
• Credit Quality: Well diversified, with 15.4% in BBB+, 10.63% in A-, 7.27% in A+, and exposure across the investment grade and high yield spectrum.
• Substantial Distribution: Quarterly distributions paid in 2025 totaling over US\$2.35 million.
• Top Holdings: Petronas Capital Limited, BlackRock ICS US Dollar Liquidity Fund.
• Risks & Ratios: Expense ratio: 0.20%; Turnover ratio: 57.37%.
• Other Notes: No borrowing, no securities lending, or repurchase transactions. No soft dollar commissions received.

3. iShares USD Asia High Yield Bond ETF

• Portfolio Breakdown: 98.46% in debt securities, 1.37% in mutual funds.
• Credit Quality: Large allocation to BB-/BB+ (over 35%), with 16.7% unrated. The fund offers exposure to higher-yielding, riskier Asian credits.
• Fund Size: US\$775.6 million at year-end (down from US\$1.1 billion in 2024), indicating significant net redemptions/portfolio contraction.
• Substantial Distribution: Quarterly distributions paid in 2025 totaling over US\$75.6 million.
• Risks & Ratios: Expense ratio: 0.50%; Turnover ratio: 67.42%.
• Other Notes: No borrowing, no securities lending, or repurchase transactions. No soft dollar commissions received.
• Potentially Price Sensitive: The significant decline in fund size (from US\$1.1bn to US\$775m) may signal large redemptions or portfolio rebalancing, potentially impacting liquidity and future expense ratios.

4. iShares MSCI Asia ex Japan Climate Action ETF

• ESG & Climate Focus: Tracks the MSCI AC Asia ex Japan Climate Action Index; 100.08% in listed equities.
• Performance:
  • 2025 total return after tax: US\$280.5 million (up from US\$46.6 million in 2024).
• Fund Size: US\$1.71 billion at year-end 2025 (up from US\$1.23 billion in 2024).
• Top 10 Holdings: Taiwan Semiconductor Manufacturing (6.32%), Tencent (4.36%), Alibaba (4.36%), HDFC Bank, Reliance Industries, DBS Group, etc.
• Sector Allocation: Information Technology (25.96%), Financials (25.97%), Consumer Discretionary (13.42%), Communication (9.94%).
• ESG & Climate Impact:
  • Significant increase in exposure to companies with SBTi-approved targets (59.96% vs 40.97% in 2024).
  • Improvement in exposure to companies with credible climate track records (16.75% vs 4.28% in 2024).
  • 34.7% of the parent index excluded due to ESG criteria.
• Risks & Ratios: Expense ratio: 0.18%; Turnover ratio: 25.61%.
• Other Notes: No borrowing, no securities lending, or repurchase transactions. No soft dollar commissions received.
• Potentially Price Sensitive: The rapid increase in fund size (from US\$1.23bn to US\$1.71bn) and strong net returns could indicate growing investor demand and may positively impact share prices.

Important Shareholder Updates & Price-Sensitive Information

• Substantial Asset Flows: The iShares USD Asia High Yield Bond ETF saw a significant contraction in assets, while the iShares MSCI Asia ex Japan Climate Action ETF experienced strong asset growth. These fund flows could impact liquidity, tracking error, and future expenses.
• Taxation Developments: The manager continues to make provisions for India capital gains tax on the MSCI India Climate Transition ETF. Recent tax rate increases (short-term capital gains tax up from 15% to 20% in July 2024) may impact future NAVs and distributions.
• ESG Progress: All equity funds have reported strong progress on climate and ESG indicators, which could make them more attractive to sustainability-focused investors.
• Expense Ratios: Remain competitive and stable, despite market volatility and sector allocation changes.
• No Soft Dollar Arrangements: The manager has confirmed no soft dollar commissions or arrangements, supporting good governance and transparency.

Governance, Audit & Compliance

• The annual report is audited by PricewaterhouseCoopers LLP, which issued an unqualified opinion. No material misstatements or control issues were identified.
• The manager and trustee confirm full compliance with the Trust Deed, regulatory limits, and accounting standards.

Conclusion

The 2025 annual report of the iShares Southeast Asia Trust highlights robust ESG integration, strong performance in selected ETFs (particularly the MSCI Asia ex Japan Climate Action ETF), and a notable shift in investor flows between credit and equity strategies. Tax changes affecting Indian equities and significant fund movements in the high yield ETF are potential triggers for future valuation adjustments.

Investors should closely monitor ongoing regulatory changes, asset flows, and the evolving ESG landscape, which may continue to drive performance, risk, and share price volatility in the coming year.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should consult the official prospectus and their own advisors before making any investment decisions. Past performance is not indicative of future results. The information is compiled from publicly available audited financial statements and is believed to be accurate at the time of writing, but may be subject to change.

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