Foreign money flooded back into emerging markets in late March, inspired by dovish noises from the US Fed, and the oil price recovery to the US$ 40 mark. A meeting of major oil producers on April 17th, may lead to production cuts. However, we scaled back on our holdings in Petrochina, PTT & PTTEP in Thailand, and takeover target Santos in Australia, since they are already discounting an oil price of US$50 per barrel. Meanwhile, the Gold price faltered as it approached resistance at US$ 1300, and we temporarily sold Medusa & Silverlake Resources, whilst holding on to Zijin & Newcrest. In Myanmar, the new NLD backed President Htin Kyaw was sworn in, along with Army Vice-President Myint Swe (U Tan Shwe’s son-in-law). Htin Kyaw wasted no time in appointing his ministers, including Daw Suu as Foreign Minister & President’s Office Minister; she may also be given a new position: “Councillor to Parliament” in order to avoid the constitution’s separation of legislature and executive. Other ministers in the cabinet are yet to show their policy stripes, although all are NLD loyalists, and likely to be re-shuffled in 12-18 months. aw Suu’s top priorities appear to include upgrading education, and national reconciliation in respect to the seven non Burman states, and the six self-administered zones. We are progressing a Karen empowerment hydro project with this theme in mind. In other Myanmar news, the Yangon Stockmarket formally opened on the 25th March, with Serge Pun’s FMI as the first listed stock. Foreign participation is pending the issuance of the new corporate law by parliament, and Myanmar Exchange Bank (the major shareholder in YSX) being removed from the US sanction list. We are preparing portfolio holding, Gold Cement for listing. In Thailand, the Stockmarket has been one of the best in Asia YTD, partly due to the over sized energy sector weighting, and partly attributable to the recovery in telecom stocks after Jasmine defaulted on its commitment to become the 4th operator. Local retail investors have been selling heavily as the SET Index reached 1400, whilst foreign institutions have been piling in, normally a signal to sell and wait for a pull-back. Meanwhile the new “constitution” is ready, with an empowered fully appointed Senate built in. The referendum is set for August 7th, and it remains to be seen whether the people will reject the constitution as being un-democratic or accept that any form of representation is better than none. Thai construction stocks began to rally after the interim government announced they will go ahead with the high-speed rail link between Bangkok and Nakhon Ratchasima; basically half way to Khon Kaen and the Laos border at Nong Khai. Apparently it has not yet been possible to agree an acceptable interest rate for China’s loans, but we expect this will happen eventually. We have added to CK and ITD, and await the imminent relisting of KTECH Construction. Upcoming elections in the Philippines on May 9th may see Presidential favorites Davao strongman Rodrigo Duferte or Sen. Grace Poe sharing the podium with Bongbong Marcos as likely Vice-President. The winners are decided based on “first past the post”, unlike Indonesia, which has a run-off poll between the top two candidates if no one secures over 50% of the votes in the first ballot. In the United States, It may be too early for markets to assess the potential impact of political changes there, especially since we are in the rhetoric before policy stage of campaigning, but after the summer it could become a key driver. Likely Democrat nominee Hillary Clinton has reversed her position with regards to the Trans Pacific Partnership, and all other candidates were already against TPP. Trump’s plan to charge countries for America providing security, is not unreasonable, except that the US already charges indirectly through hoarding foreign countries’ reserves enabling massive printing of money when needed. A Trump win could be good for commodities as he would focus on rebuilding American infrastructure, whilst his (and other nominees’) threats of increased import taxes on goods from Asia would probably not materialize since US corporations would lobby against it and US consumers would suffer. Additionally, Asia is less dependent on US exports nowadays, with Thailand, for instance, exporting just 10% of its goods to the US (although it accounts for almost ALL of Thailand’s trade surplus).
- Manager Comments Q2 2020 – Listed Private Equity Fund July 23, 2020
- Manager Comments Q2 2020 – Listed Infrastructure Fund July 23, 2020
- Manager Comments Q2 2020 – Vietnam Fund July 23, 2020
- Manager Comments Q2 2020 – Asia Frontier Fund July 23, 2020
- Manager Comments Q2 2020 – Mekong Strategy Fund July 23, 2020