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Asian Markets trended higher in August, with the Hang Seng Index +2.4%, MSCI Asia ex-Japan Index +1.0%, FTSE ASEAN +-0.2%, Thai SET Index +2.9%. Mekong Fund slipped -0.3%

Asian markets and currencies gained ground, as indications of Fed funds tightening lessened, combined with more positive economic data from China.

US political worries and North Korean sabre rattling remain the most likely trigger for a correction in highly priced US tech shares, which would then spill over to cause a global correction.

Having observed the shenanigans of Thai politics in the last 10 years, Steve Bannon’s departure from the White House reminds me of Suthep’s departure from the Democrat Party in 2013, so he could work “outside the system” and lead the PDRC’s anti-Thaksin movement. Bannon has a hardcore group of 50m followers on his Breitbart media group, which will up the response to the mainstream anti-Trump media. The risk of civil unrest in the US may magnify, as Trump’s base rises up in response to perceived establishment obstruction of their hero.

Meanwhile, perhaps symptomatic of the technology bubble, the cryptocurrency mania has been at least temporarily deflated by China’s decision to ban new (and old) ICOs (Initial Coin Offerings / digital crowdfunding). However, other countries, such as Singapore and the US are regulating them as securities. We expect cryptocurrencies and other blockchain technologies to gradually become more mainstream. It remains to be seen if increased regulation will bolster the market or constrain it.

Commodity prices, especially copper & gold, continued to recover in August, on US$ weakness, North Korea tensions, Hurricane Harvey, and the Chinese economy. Oil, gold, lithium & copper production companies offer some of the best value in the global equity markets, so we are maintaining reasonable levels of exposure to the likes of Newcrest, Orocombre, Zijin & PetroChina. We also increased our position in Kingsgate, after the Thai government lifted its suspension on their Akara (gold) Mining project in central Thailand.

The Thai market enjoyed a brief rally after former PM Yingluck Shinawatra failed to show up for the Supreme Court for the verdict on her management of the ill-fated rice-pledging scheme. Rumours spread that she had been tipped off that she would receive a stiff jail sentence, and fled to Dubai via Cambodia. Critics accused the NCPO of being complicit in “leaving the gate open”, as she slipped by the cohorts of police and army staff following her every move. The reality is that in some ways, Yingluck’s departure suits all sides. The military avoids the risk of her a being painted as a jailed martyr and democracy icon (aka Aung San Suu Kyi), stirring up political unrest, and generating international criticism; whilst at the same time being able to claim that her flight proves her guilt, and weakening the Pheu Thai leadership. The stock market cheered the news, since many see this as the end of the political war with one clear winner, whilst also increasing the likelihood of an earlier parliamentary election and return to qazi-democratic civilian rule. Unfortunately, no one tipped off the former Commerce Minister, who was given 42 years.

Political oppression appears to be a regional trend this month, with the jailing of Hong Kong activists Joshua Wong, Nathan Law and Alex Chow for their leadership of the Hong Kong pro-democracy umbrella movement in 2014, albeit mild sentences compared to those common in China or Myanmar of old. Over in Cambodia, Khem Sokha, President of the Cambodia National Rescue Party, has been arrested for treason in conspiring with overseas powers (implicitly the US), to overthrow the state. This may affect Hun Sen’s re-election results next year.

In Myanmar, the plight of the Rohingya is hitting international headlines, and criticism is growing over the Lady’s inaction. However, the fact that Rohingya militants attacked first, reduces sympathy towards them in some quarters. The vicious cycle continues. On a positive note, the NLD government will be under increased pressure to at least deliver on economic progress. We expect the new Companies Act to be passed at the current Parliamentary session and open the stock market and OTC markets to foreign participation. The government has also begun bringing in more experienced deputy ministers to work with party stalwart ministers.

Several of our strategic investments are making good progress, and can be expected to massively boost our funds’ performance in the coming months:

BRM Agro successfully purchased 750 ha. of Cambodian rice land at US$ 1,700 per ha., approximately 1/20 of Thai rice land prices. BRM will now focus on warehouse construction, and an existing rice mill upgrade.

Gold Cement in Myanmar is in final negotiations to convert its 40% holding in Sinminn Cement into 100% of a 45-year lease. This transaction is expected to be completed in September, and pave the way for a large Chinese group to buy into Gold Cement. Gold Cement will then expand Sinminn’s production capacity from 1.1 million tons per annum to 4 million tons p.a. through China export loans. A reverse takeover listing is being progressed in Thailand, concurrently.

Max Myanmar has secured a new limestone deposit to give itself longevity and is looking to fast-track its Singapore 2nd board listing.

Singapore Myanmar Investco (SMI), successfully completed a private placement through CLSA, widening its shareholding and generating working capital for its Yangon retail expansion.

We plan to visit both Mac and Gold Cement next week, after attending the Euromoney Conference in Naypyidaw.

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