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Asian Markets were mixed in September, with the Hang Seng Index -1.5%, MSCI Asia ex-Japan Index -0.3%, FTSE ASEAN +0.3%, Thai SET Index +3.2%. Knight Mekong Fund gained +1.7%

Global money flows continued to support markets generally in September, although technology shares lacked momentum and NASDAQ rose just +1%, and the Dow Jones +2%. The Hong Kong and Chinese markets consolidated ahead of the National People’s Congress, although Hong Kong has started to see foreign flows in early October. With perception changing with regards to a hard landing in China, large pension funds may increase “emerging markets” exposure in the next 12 months. EM GDP growth over the next 5 years is expected to be +32%, outpacing +24% in developed economies, although this can also be played through the shares of European & American multi-nationals.

In September, many Chinese investors were focused on the announcement by Chinese authorities that all cryptocurrency platforms must close down by the end of September. We expect they will reopen under tighter regulation in due course. The Bitcoin price itself enjoyed a rollercoaster ride, dropping -40% from a high of US$ 5,000 to $3,000 before bouncing back to $4,200 by month end. Negative comments from Jamie Dimon on the falsities of bitcoin may only be a prelude to more mainstream participation in digital currencies.

The Thai market proved to be one of the best performers last month, as the 10% jump in the oil price triggered a rally in market heavyweights PTT & PTTEP, and other energy shares. Our portfolios remain focused on Mekong plays, and laggard sectors such as construction and residential property. The upcoming funeral of the much loved King Bhumibol Adulyadej on October 26th, following the Anniversary of his passing on 13th October, may subdue the market in October. After the completion of the official mourning period, we can expect to see political activities increase in Thailand. General Prayut’s visit to the White House included a promise to stick to the election roadmap, leading to elections and a more buoyant economy & stock market next year.

Meanwhile, Myanmar remained in the international headlines for all the wrong reasons, as the situation in Rakhine worsened, and the Lady’s speech to the diplomatic corps did little to satisfy the critics (with Oxford even revoking her “Keys to the City”). However, economic policies may now be given a higher priority, and we expect the new Companies Act to be passed in the current Parliamentary session, allowing the stock market and OTC markets to invite foreign participation. We remain committed to investing in Myanmar whilst seeking ways to positively impact the people in the communities we invest in.

In Cambodia, our funds’ strategic investee company BRM Agro, having successfully purchased 750 ha. of Cambodian rice land at US$ 1,700 per hectare last month has now been offered 70% of an existing rice mill at an advantageous price.  We expect to conclude the acquisition within this year.

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