World and Asian Markets took a dive in October, with the Hang Seng Index losing -10.1% (YTD -16.5%), the MSCI Asia ex Japan Index -10.9% (YTD -18.1%), the MSCI AC ASEAN Index -6.3% (YTD -13.7%), and Thai SET Index sliding -7.3% (YTD -6.4%); Knight Mekong Fund +0.4% (YTD -3.8%).

Slightly disappointing 3rd quarter earnings in some of the US technology companies triggered a sharp sell-off in the FAANGS, exacerbated by unresolved US/China trade friction, and Fed tightening. Although the derating of the tech sector may continue for some time, short-term the sector may stabalize. We covered our short positions in Alibaba and the FAANG index, although have no intention to go long (even on Tencent which is already down from 450 to 260).

China H shares fell again, and are now grossly oversold. The RMB remained stable, although flirting with the 7:1 USD level. More importantly, President Xi Jinping gave an undertaking to Japanese PM Abe not to devalue the Chinese currency. We added to domestic plays in anticipation of new stimulus measures, including China Communications Construction, China Life, Beijing Enterprises, and CP Pokphand; as well as special situations such as Lenovo, ZTE, and Fosun. Shares have begun to bounce back on White House hints of a trade deal being done at the G20 meeting on 30 November, (which we do not expect to be de-railed by the Democrat Party winning control of the US House of Representatives).

Oil prices have cooled off, despite the slightly weaker dollar, and ahead of the re-imposition of US sanctions on Iran. This was probably engineered by the Saudis seeking to cool down international outrage over the killing of Saudi journalist Jamal Khashoggi in Istanbul. The US does not seem at all likely to change its pro-Saudi alignment. We added to CNOOC and Petrochina.

South-East Asia joined the market rout, although we expect it will bounce back quicker than other emerging markets. Thailand has still not formally announced an election date, pending news on the Coronation, which is now rumoured to be coming after the election, not before. We covered index hedges late in October, and added to OCBC and Singapore Telecom.

In all this turmoil, gold seems to be showing some signs of life; we added to gold share holdings.

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

Firstly BRM Agro is beginning construction of its first rice mill which will have an initial capacity of 6 tons per hour compared to our original plan for a smaller 3 tonnes per hour mill. Upon completion in 2Q19, this mill should enhance our overall profitability for next year. BRM is also appointing a new auditor that is approved in by regulators in the Singapore, Thailand & Cambodia, and we are about to finalize appointing a financial advisor for the listing in either Thailand or Singapore.

Secondly, Gold Cement, is expected to finalize its 45 year lease on the entire Sinminn cement plant in the next three months as well as conclude an agreement with a strategic investor from either China or South Korea who would hold approximately 1/3 of the equity. This would pave the way for a listing in either Bangkok or Singapore. GC’s auditor has also just received SEC approval to audit SET listed companies which should accelerate the process.

Thirdly, Max Cement is carrying out its limestone survey program to quantify its limestone reserves in order to supply a planned second production line which would support its planned listing on the Singapore Catalist Board. Max already has IFRS accounts, audited by Deloittes, and a listing sponsor and placement agent have already been selected.

Finally Mandalay Myotha Industrial Park is seeking a Singapore listing whilst at the same time entertaining takeover bids from Chinese industrialists due to its strategic location and favourable commercial structure.

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