Global Multi-Asset Investment Strategist, True Insights

Jeroen Blokland

Global Multi-Asset Investment Strategist

Build Well-Diversified Multi-Asset Portfolios

True Insights

Our research helps investors build well-diversified multi-asset portfolios and profit from market developments. In addition, our unique and proven Macro – Sentiment – Valuation (MSV) investment framework ensures a consistent flow of new investment opportunities. Together with our market views, these opportunities will be reflected in our live ETF-based Global Multi-Asset Portfolios.

Cross Asset Strategy

<ul>
<li>We increase the weight of Developed Market Equities but remain short/underweight. We lower the weight of gold and cash and remove the marginal overweight in Developed Market Treasuries.</li>
<li>US equities have celebrated the end of more recent Fed tightening cycles and tend to outperform Gold and Commodities when inflation has peaked.</li>
<li>We remain underweight Developed Market Equities because of deteriorating Macro Indicators and earnings expectations that are too optimistic.</li>
</ul>


We increase the weight of Developed Market Equities but remain short/underweight. We lower the weight of gold and cash and remove the marginal overweight in Developed Market Treasuries.
US equities have celebrated the end of more recent Fed tightening cycles and tend to outperform Gold and Commodities when inflation has peaked.
We remain underweight Developed Market Equities because of deteriorating Macro Indicators and earnings expectations that are too optimistic.


Changes in Portfolio Weights: Calibrating the Weight of Nominal and Real Assets.

<ul>
<li>Tighter lending standards for Commercial &amp; Industrial loans point to a US recession.</li>
<li>Tighter lending standards for Commercial &amp; Industrial loans suggest the US high yield default rate should quadruple this year to above 7% from 1.7% last year.</li>
<li>Equity market valuation has recently increased, moving in the exact opposite direction of lending standards.</li>
</ul>


Tighter lending standards for Commercial &amp; Industrial loans point to a US recession.
Tighter lending standards for Commercial &amp; Industrial loans suggest the US high yield default rate should quadruple this year to above 7% from 1.7% last year.
Equity market valuation has recently increased, moving in the exact opposite direction of lending standards.


Fed Lending Survey: Bad for Growth, Spreads, and Equities

Marketing Director, Asia Frontier Capital

Asia Frontier Capital

Marketing Director

Investing in high growth Asian frontier economies.

Asia Frontier Capital Ltd. is a pioneering fund management company based in Hong Kong that specializes in investing in high growth Asian frontier economies by managing the AFC Asia Frontier Fund , AFC Iraq Fund and the AFC Vietnam Fund.

The AFC Asia Frontier Fund invests in public equities of Asian frontier countries that are seeing increasing consumption due to favorable demographic trends, rising incomes and high GDP growth. The fund invests in listed equities of companies that have their principal business activities in Bangladesh, Bhutan, Cambodia, Iraq, Laos, Maldives, Mongolia, Myanmar (Burma), Nepal, Pakistan, Papua New Guinea, Sri Lanka and Vietnam. The AFC Asia Frontier Fund is positioned to take advantage of the continuing economic shifts in these countries and offers high returns combined with significant diversification opportunities. This fund is directed by the founder and CEO of Asia Frontier Capital, Thomas Hugger, who has been investing in frontier markets across Asia and Africa for more than 20 years.

The AFC Iraq Fund was launched on the 26th June 2015 and aims to achieve long-term capital appreciation for investors by capturing value and growth potential in the post conflict high-growth & resource rich Iraq market. The fund emphasises long term investment horizon to truly capture the opportunity in Iraq. The fund's investable universe consists of locally listed companies that have their principal business activities in Iraq as well as foreign listed companies that have the majority of the business in Iraq as a whole including the prosperous Kurdish Region of Iraq (KRI). The AFC Iraq Fund offers access to investments in post conflict recovery potential of Iraq, including the KRI, and/or stability in its territory. The AFC Iraq Fund is managed by Asia Frontier Capital (Iraq) Limited, Cayman Islands under the executive leadership team of Thomas Hugger (CEO & Fund Manager) and Ahmed Tabaqchali (CIO) who have more than 47 years of investment experience as well as an extensive background covering global, emerging, frontier and MENA markets.

The AFC Vietnam Fund invests exclusively in listed Vietnamese equities to capture value in growth companies with a focus on the small to medium size companies. This market segment offers a unique investment opportunity as the valuation gap between large- and small-cap stocks in Vietnam is presently much wider than in comparable neighboring markets and the valuations are significantly depressed versus their regional peers. The fund adopts a fundamental-quantitative approach and employs an in-house earnings model to identify attractive companies where we see high growth opportunities. In conjunction with targeting the maximum upside potential the portfolio has been structured to mitigate corporate government and liquidity risks. The fund invests in a diversified portfolio of 70-90 attractively valued companies to carefully control concentration risk.  This approach allows the fund to sell, or buy, positions without having a significant market impact. The fund is directed under the executive leadership of Thomas Hugger and Andreas Vogelsanger who have more than 50 years combined experience managing investments in frontier markets, Asia and around the world.

For more information about the fund, management team and investment strategy please contact us at info@asiafrontiercapital.com.

<ul><li>The AFC Iraq Fund was up 15.9% in April, outperforming its benchmark, the Rabee Securities RSISX USD Index, which was up 12.5% for the month.</li><li>For the year, the AFC Iraq Fund is up an estimated 47.9% outperforming the index’s increase of 36.7%.</li><li>The market and the fund’s solid performance for the second month in a row on the back of February’s super performance enhanced by a revalued currency, underscores the underlying strength of the market’s recovery that has discounted the currency’s upheaval, as discussed here recently, and is beginning to discount its stability. </li></ul>

The AFC Iraq Fund was up 15.9% in April, outperforming its benchmark, the Rabee Securities RSISX USD Index, which was up 12.5% for the month.For the year, the AFC Iraq Fund is up an estimated 47.9% outperforming the index’s increase of 36.7%.The market and the fund’s solid performance for the second month in a row on the back of February’s super performance enhanced by a revalued currency, underscores the underlying strength of the market’s recovery that has discounted the currency’s upheaval, as discussed here recently, and is beginning to discount its stability. 

AFC Iraq Fund April 2023 Update: "Tag Ends of Currency Upheaval Sparks Market Rally"

Research from Water Tower Research, Water Tower Research

Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Equity Research Firm

Thematic (Sector/Industry)

<ul><li>It was a good week for most global equities, with the MSCI World Index and the S&amp;P 500 gaining 1.77% and 1.57%, respectively.</li><li>However, the small-cap Russell 2000 and the NASDAQ dropped 1.83% and 0.66%, respectively, as investors digested a mixed bag of corporate earnings.</li><li>Cannabis stocks broke a seven-week losing streak and the MSOS ETF surged 6.87% this week.</li></ul>

It was a good week for most global equities, with the MSCI World Index and the S&amp;P 500 gaining 1.77% and 1.57%, respectively.However, the small-cap Russell 2000 and the NASDAQ dropped 1.83% and 0.66%, respectively, as investors digested a mixed bag of corporate earnings.Cannabis stocks broke a seven-week losing streak and the MSOS ETF surged 6.87% this week.

The Highlights : Cannabis News for the Week Ending April 28, 2023

<ul>
<li>Year-On-Year, M2 broad money supply has dropped by 4.1%. The 6-month annualized rate of decline is a whopping 6.5%. </li>
<li>As a result, Excess Liquidity (Money Supply Growth - Nominal GDP growth) has turned very negative, revealing money is being drawn from equities at a historically rapid pace.</li>
<li>Given the historical relationship between Excess Liquidity and Valuation, the forward P/E ratio of US Equities must drop to 16 from 19 for the two variables to align.</li>
</ul>


Year-On-Year, M2 broad money supply has dropped by 4.1%. The 6-month annualized rate of decline is a whopping 6.5%. 
As a result, Excess Liquidity (Money Supply Growth - Nominal GDP growth) has turned very negative, revealing money is being drawn from equities at a historically rapid pace.
Given the historical relationship between Excess Liquidity and Valuation, the forward P/E ratio of US Equities must drop to 16 from 19 for the two variables to align.


Money Supply-Driven Excess Liquidity Unveils 20% S&P 500 Downside Blog

United States

The MSCI World Index is a free-float weighted equity index. It was developed with a base value of 100 as of December 31, 1969. MXWO includes developed world markets, and does not include emerging markets. MXWD includes both emerging and developed markets.

MSCI World Index (MXWO INDEX)

Changes in Portfolio Weights: Calibrating the Weight of Nominal and Real Assets.

We increase the weight of Developed Market Equities but remain short/underweight. We lower the weight of gold, which remains overweight, and cash.

Jeroen Blokland

Fed Lending Survey: Bad for Growth, Spreads, and Equities

Based on tighter lending standards, the US high yield default rate should quadruple to above 7% from 1.7% last year, and bond spreads must widen...

Jeroen Blokland

AFC Iraq Fund April 2023 Update: "Tag Ends of Currency Upheaval Sparks Market Rally"

The AFC Iraq Fund was up 15.9% in April, outperforming its benchmark, the Rabee Securities RSISX USD Index, which was up 12.5% for the month.

Asia Frontier Capital

The Highlights : Cannabis News for the Week Ending April 28, 2023

It was a good week for most global equities, with the MSCI World Index and the S&P 500 gaining 1.77% and 1.57%, respectively.

Water Tower Research

Money Supply-Driven Excess Liquidity Unveils 20% S&P 500 Downside Blog

Money Supply is shrinking, taking liquidity out of the stock market at a historically swift pace, but valuation does not reflect this at all.

Jeroen Blokland