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The Mekong Fund gained +0.4% in March

With the exception of China & Japan, Asian Markets continued to firm up in March, the Hang Seng Index +1.6%, MSCI Asia ex Japan Index +3.1%, FTSE ASEAN +3.1, & Thai SET Index +2.7%. Hang Seng China Enterprises Index slipped -0.2%, Meanwhile, The Mekong Fund gained +0.4% in March

The so-called Trump rally stalled after the replacement bill for Obamacare failed to pass Congress, leading to markets questioning the new President’s ability to push through promised tax reforms and his infrastructure plan. However, the gas attack in Syria gave Trump the opportunity to strike back at Assad’s airport launch pad, demonstrating decisiveness, sympathy, and independence from Russia all at once. The missile strike happened to have been ordered at the time of President Xi Jinping’s visit to the US, perhaps overshadowing trade talks, but giving Xi a taste of things to come.

We expect China to give the US trade team some minor but face gaining concessions, whilst the US will  open the door for more Chinese investment. In 2016, at US$ 46 billion, China already invested more in the US than vice versa, and within a few years China’s total investment in the US will easily surpass the US’ total US$ 228 billion investments in China. Trade issues may also be mixed up with Chinese cooperation on pressuring North Korea to demilitarize, although this runs contrary to Trump’s promise to prioritize economic issues. Perhaps the President is finding that his office can be more decisive on geopolitical issues than economic ones, and a few wins on this front will strengthen his political capital at home.

Although commodity prices remained lacklustre in March, oil & gold have begun to rally strongly this month, partly due to the missile attack on Syria and rising tensions on the Korean peninsula, driving related stocks higher. We added to PTT, Petrochina, Zijin Mining & Newcrest at lower levels. Lithium stocks such as ORE and Wealth Minerals have also begun to move up, as the exponential demand for lithium becomes ever more apparent.

The “election” of Ms. Carrie Lam as the new Chief Executive of Hong Kong, by an elite “electoral college”, has caused few ripples. Although the first female CEO, she seems to represent the pro-Beijing status quo. However, given the lack of a grass roots mandate Ms Lam may have to work hard to win over the populace. Whether that will mean embarking on more aggressive public housing programs at the expense of the property cartel, remains to be seen. We remain short of HK property stocks such as SHK Props, but long Chinese ones like Soho.

In Thailand, the 20th Constitution was signed by the King with great fanfare on Chakri Dynasty Day, but drafting of organic laws will push elections well into the 2nd half of next year. Meanwhile, the Thai economy remains resilient, with residential property prices and tourism underpinning the optimism. We added to Airports Authority (AOT), Erawan Hotels, Minor International, BDMS Hospitals, and Thai Airways on recent weakness.

In Myanmar, the Daw Suu Kyi’s NLD completed its first year in power, with many observers frustrated with the pace of reform. Recent bi-elections saw NLD maintain its predominance in Yangon, but lose out to provincial parties in Shan State, Rakhine & Mon. We expect cabinet members to increasingly reach out to the business sector to generate economic ideas and growth.

With the new Foreign Investment Law and Companies Act expected to be implemented in the next 2-3 months, Myanmar’s handful of listed companies and wider range of unlisted public companies, will all theoretically be open to 35% foreign ownership. We are encouraging the development of an OTC exchange, to incubate companies for a full listing on the Yangon Stock Exchange (“YSX”). Although the larger companies, such as Max cement continue to favour foreign listings, whilst “national  assets” such as the banks, likely to seek listings on the YSX itself.

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