Global Asset Allocation, Politics & Governance, Ecstrat

John-Paul Smith

Global Asset Allocation, Politics & Governance

Ecstrat

Ecstrat is a consultancy advising on asset allocation between global equity markets, with a focus on the intersection of governments, geopolitics, governance and markets.
 
Over the past few years and more especially since the Great Financial Crisis (GFC), investors have become more focused on short-term market movements and real-time returns and have consequently neglected the analysis of the underlying structural themes that underpin longer term performance.
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More specifically we believe that the evolution of governance-based relationships between investors, controlling shareholders, labour and the state is one of the primary determinants of both relative and absolute performance between individual equity markets.
 
We will endeavour to provide investors with some of the context surrounding governance-related issues which encompass many different disciplines including history, economics and political science, as well as the financial metrics which are the most obvious manifestation of the structural characteristics of each market.
 
We will pay particular attention to the shifts and potential inflection points for governance in individual markets as these are often the best lead indicators for both economic and market performance.

Cross Asset Strategy

In this series of reports, we focus on the major sovereign and corporate governance drivers of the individual emerging markets. As usual the emphasis is on the context and marginal shift in the relationship between the listed corporate sector and the major stakeholders in particular the state, from a minority shareholder’s perspective. This very granular focus makes us sceptical about the customary marketing hype from the investment management industry concerning the inevitability of long term EM equity outperformance, as the fundamental criteria do not seem to justify this optimism.The main governance issues for emerging equity investors in 2017 are as follows:<ul><li>The Chinese authorities will continue to favour fiscal and monetary stimulus over the implementation of corporate reforms until they are no longer able to do so;</li><li>The incoming US administration is more likely to impose stricter sanctions against Russia than to repeal them;</li><li>Minority investors will not necessarily be beneficiaries of the current attacks on the chaebol structures in Korea;</li><li>The ongoing debt squeeze and the Tata imbroglio will prompt incremental change in the management of Indian family/promoter controlled companies;</li><li>There is a low likelihood of further forced redistribution of control among listed Polish companies, but the governance risks are higher in Turkey and Malaysia;</li><li>Populist politicians are likely to gain further ground in Korea, Chile, Mexico and Brazil</li></ul>

In this series of reports, we focus on the major sovereign and corporate governance drivers of the individual emerging markets. As usual the emphasis is on the context and marginal shift in the relationship between the listed corporate sector and the major stakeholders in particular the state, from a minority shareholder’s perspective. This very granular focus makes us sceptical about the customary marketing hype from the investment management industry concerning the inevitability of long term EM equity outperformance, as the fundamental criteria do not seem to justify this optimism.The main governance issues for emerging equity investors in 2017 are as follows:The Chinese authorities will continue to favour fiscal and monetary stimulus over the implementation of corporate reforms until they are no longer able to do so;The incoming US administration is more likely to impose stricter sanctions against Russia than to repeal them;Minority investors will not necessarily be beneficiaries of the current attacks on the chaebol structures in Korea;The ongoing debt squeeze and the Tata imbroglio will prompt incremental change in the management of Indian family/promoter controlled companies;There is a low likelihood of further forced redistribution of control among listed Polish companies, but the governance risks are higher in Turkey and Malaysia;Populist politicians are likely to gain further ground in Korea, Chile, Mexico and Brazil

Emerging Market Equities in 2017; Key Issues to Monitor by Market (Part 1 of 7)

Economist, Centennial Asia Advisors

Jason Tan

Economist

Centennial Asia Advisors

At Centennial Asia Advisors, we tell it like it is. We have no vested interests, no need for a China wall, and no reason to skew our outlook any other way. With over 30 years experience covering Asia’s political economy, you can be sure our conclusions and analyses are based on the unadulterated facts. Through years of fine-tuning our research methodologies, we deliver a quality of macroeconomic analysis few other houses can match.

Centennial Asia Advisors is an independent research and advisory firm that works with governments, multilateral institutions, financial firms and leading MNCs.

Economic Policy and Strategic Advisors

Macroeconomics

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China released a White Paper detailing its policy on security cooperation in the Asia-Pacific. China seeks to establish a “multi-layered, comprehensive and diversified” consensus to underpin it taking on greater responsibilities. China warned against provocative actions in the South China Sea and cautioned small- and medium-sized countries from taking sides with the larger countries.</li>
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China’s Liaoning aircraft carrier sailed into the Taiwan Strait for the first time ever, prompting Taiwan to put…</li>
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China released a White Paper detailing its policy on security cooperation in the Asia-Pacific. China seeks to establish a “multi-layered, comprehensive and diversified” consensus to underpin it taking on greater responsibilities. China warned against provocative actions in the South China Sea and cautioned small- and medium-sized countries from taking sides with the larger countries.

China’s Liaoning aircraft carrier sailed into the Taiwan Strait for the first time ever, prompting Taiwan to put…


China Seeks to Reshape the Asia-Pacific Security Order

Investing in high growth Asian frontier economies., Asia Frontier Capital

Scott Osheroff

Investing in high growth Asian frontier economies.

Asia Frontier Capital

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.

Thematic (Sector/Industry)

Though 2017 has started on an uncertain note surrounding the policies of the new US President, our conviction in the long-term story of Asian frontier markets is not diminished as these countries have very favourable demographics backed by rising disposable incomes, are going through political reform, and are benefitting from increased foreign investment due to lower wages relative to China. Further, companies in the Asian frontier markets are still relatively under-researched relative to larger emerging markets and therefore offer convincing long term opportunities.

Though 2017 has started on an uncertain note surrounding the policies of the new US President, our conviction in the long-term story of Asian frontier markets is not diminished as these countries have very favourable demographics backed by rising disposable incomes, are going through political reform, and are benefitting from increased foreign investment due to lower wages relative to China. Further, companies in the Asian frontier markets are still relatively under-researched relative to larger emerging markets and therefore offer convincing long term opportunities.

AFC Asia Frontier Fund – 2016 Review and 2017 Outlook

Destabilising capital flows push central banks into defensive mode:<ul>
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Bank Negara intervened in Nov 16 to restrict the non-deliverable forwards (NDF) market. BNM’s moves to restrict the NDF market have created uncertainty among portfolio investors, inclining them to sharply reduce their allocation of funds to Malaysia.</li>
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The PBOC has undertaken a slew of measures to stem outflows, including placing higher scrutiny on citizen’s conversion quotas and stricter requirements for banks reporting…</li>
</ul>

Destabilising capital flows push central banks into defensive mode:

Bank Negara intervened in Nov 16 to restrict the non-deliverable forwards (NDF) market. BNM’s moves to restrict the NDF market have created uncertainty among portfolio investors, inclining them to sharply reduce their allocation of funds to Malaysia.

The PBOC has undertaken a slew of measures to stem outflows, including placing higher scrutiny on citizen’s conversion quotas and stricter requirements for banks reporting…


Asian Central Banks: Rising Regulatory Risks for Investors

Doing bespoke work since 2002....., Custom Products Group

Patrick Hansen

Doing bespoke work since 2002.....

Custom Products Group

Custom Products was started 14 years ago at Lehman Brothers by current co-founder Patrick Hansen, CFA. After 3 years at Lehman, Patrick moved the team to Macquarie Securities where Simon Rigney (co-founder) joined. 3 years ago we took Custom Products independent. 

Our core strength can be summed up three words. 1- Customization - we have very little off the shelf products and most work is done on a one on one bespoke basis. 2- Speed - We pride ourselves in our ability to get requests back to the client very quickly. 3- Confidentiality - We do not redistribute. There is no grace period where we wait a week and then mass blast. Any request stops with that client.

Here is the Asian ex-Japan Hated by the Street screen. The goal of the Hated by the Street screen is to identify names where the stock price has been beaten up and the analysts have given up. However, the valuations have gotten to levels worth looking at. We measure the Street's Love / Hate of a stock by calculating the % of BUY recommendations to total recommendations. Below we have screened for names in Asia ex-Japan with<div class="sk-insight-content__block"><ol><li>% of BUY Recommendations below 30%.</li><li>PBR is currently 20% below the 7-year historical median PBR</li><li>Current PBR is less than 2x.</li><li>1-year price performance is below negative 10%.</li><li>More than 5 Analysts currently cover the name. </li></ol></div>

Here is the Asian ex-Japan Hated by the Street screen. The goal of the Hated by the Street screen is to identify names where the stock price has been beaten up and the analysts have given up. However, the valuations have gotten to levels worth looking at. We measure the Street's Love / Hate of a stock by calculating the % of BUY recommendations to total recommendations. Below we have screened for names in Asia ex-Japan with% of BUY Recommendations below 30%.PBR is currently 20% below the 7-year historical median PBRCurrent PBR is less than 2x.1-year price performance is below negative 10%.More than 5 Analysts currently cover the name. 

Deep Value and Hated by the Street in Asia....

Vietnam

Vietnam Enterprise Investments Limited is an investment holding company incorporated in the Cayman Islands.  The primary objective of the Fund is to achieve a balanced portfolio of investments in Vietnam giving rise to long-term and short-term returns and capable of yielding recurrent earnings and/or capital gains.  

Vietnam Enterprise Investments (VIETENI KY)

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Vietnam Enterprise Investments (VIETENI KY)

Emerging Market Equities in 2017; Key Issues to Monitor by Market (Part 1 of 7)

In this series of reports, we focus on the major sovereign and corporate governance drivers of the individual emerging markets. As usual the...

John-Paul Smith

China Seeks to Reshape the Asia-Pacific Security Order

China released a White Paper detailing its policy on security cooperation in the Asia-Pacific. China seeks to establish a “multi-layered,...

Jason Tan

AFC Asia Frontier Fund – 2016 Review and 2017 Outlook

Though 2017 has started on an uncertain note surrounding the policies of the new US President, our conviction in the long-term story of Asian...

Asia Frontier Capital

Asian Central Banks: Rising Regulatory Risks for Investors

Destabilising capital flows push central banks into defensive mode: Bank Negara intervened in Nov 16 to restrict the non-deliverable forwards...

Jason Tan

Deep Value and Hated by the Street in Asia....

Here is the Asian ex-Japan Hated by the Street screen. The goal of the Hated by the Street screen is to identify names where the stock price has...

Custom Products Group

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)