Most Asian Markets fell slightly in September, with the Hang Seng Index losing -0.4% (YTD -7.1%), the MSCI Asia ex Japan Index -1.6% (YTD -8.1%), the MSCI AC ASEAN Index -0.4% (YTD -7.8%), and Thai SET Index rising +3.6% (YTD +1.0%); Knight Mekong Fund +2.8% (YTD -2.4%).

Nervousness persisted over Fed tightening and tech valuations, the unresolved US/China trade friction, and (unfounded) worries about emerging markets contagion. The US imposed 10% tariffs on US$ 200 billion of Chinese exports to the US, and China retaliated with tariffs on US$ 60 billion US exports to China. However, a rejig of NAFTA was completed,  as well as a US/South Korea deal. Japan is next.

Whether this bodes well for China, or they risk being treated last and worst is anyone’s guess. The President wants to do a deal, but others in the US government may have more sinister intentions to what they perceive as a geopolitical rival. The risk that trade rebalancing pushes China into a current account deficit (surplus is down to just $68 billion), and somehow triggers massive domestic debt defaults, remains the biggest risk factor in Asia. Although the Chinese government seems to have no inclination to devalue the RMB, quite the reverse.

Meanwhile, soaring oil prices, ahead of the re-imposition of sanctions on Iranian oil, and underpinned by strong global demand, also has to be factored into the equation. Most Asian countries are net importers of energy.

Within South-East Asia, Thailand stood out as a bright spot, possibly because an election was “announced” or at least heavily touted for February-May next year. Elections are usually good for the Thai stock market, especially construction shares, due to optimism for new government initiatives.

In terms of our funds’ key non-correlated pre-IPO investments, there has been significant progress on a number of fronts:

BRM Agro weathered the rainy season in Cambodia, with its high burms and water management systems working well. Construction has begun on its rice mill, which will boost profitability for next year. BRM also appointed a new auditor, which straddles the Singapore/Thai & Cambodia jurisdictions, and we are about to finalize a financial advisor for the listing in either Thailand or Singapore.

Gold Cement, is expected to finalize its 45 year lease on the whole Sinminn cement plant in the next 3 months, as well as sign up a 1/3 strategic partner from China, paving the way for a backdoor listing in Bangkok. GC’s new auditor just received SEC approval to audit SET listed companies.

Max Cement will carry out its limestone drilling program after the rainy season (October/November), a pre-requisite for its Singapore 2nd Board IPO. Max already has IFRS accounts, audited by Deloitte, and a listing sponsor and placement agent are already selected.

Mandalay Myotha is seeking a Singapore listing, whilst at the same time entertaining takeover bids from Chinese industrialists.

The heavy tech sell-off in early October enabled KACF to cover its Alibaba and other short positions at a good profit