Apollo Investment Management
What was new - 2007 archive

To What's new? currently

29 Dec 07:
The December valuation will be finalised on or after Jan 9th - a few days later than usual, as I shall be out of telecom range meanwhile. Apologies for any inconvenience, and a Happy New Year to all readers.

19 Dec 07:
As credit-bubble-bailout estimates soar, worried US taxpayers have dusted off The Tax Poem.

7 Dec 07:
'The Fright before Christmas' is not only the best entry for years on the poetry & doggerel page; it is an admirably succinct summary of the year's financial news, and ends with sound investment advice. Cheers!

4 Dec 07:
The NAV of the Apollo Asia Fund fell 4.6% in November to US$852.05; charts.

3 Dec 07:
'An irrelevant Fed: thimbles of water in a forest fire' says John Hussman.

30 Nov 07:
David Webb has written a cautionary tale on why you should never buy financial products you don't understand, and some recent casualties among Hong Kong listed companies: Deutsche Bank's toxic derivatives. Webb-site is providing a great public service, as most such disasters go unreported, with the victims sometimes too embarrassed to complain. Banks are presumably now multiplying their efforts to offload unwanted risk, so caveat emptor.

Read 'Counterparty risk problems with Credit Default Swaps?': apart from the main issues, the comments from a fund manager about back office problems confirm our suspicions of 3 Aug.

26 Nov 07:

Theirs not to reason why,
Theirs but to view & buy,
Into the valley of Death
Rode the six hundred thousand landlords.

'The Charge of the Buy to Let Brigade' is the latest addition to the poetry & doggerel page. At least chroniclers are now at work. Time enough to polish incipient literary gems during the Great Depression.

25 Nov 07:
Just added to the poetry & doggerel page: 'Old Mother Shipton and the Mystery of the Markets'. And thus we discover another good blog: I'm glad we did not permanently miss out on The Twelve Days of Crisis. Thanks Murray.

10 Nov 07:
I hoped that extraordinary global markets would by now have generated more literary content for the poetry & doggerel page, but meanwhile there is www.wallstreetmeltdown.com. Thanks Stewart.

5 Nov 07:
The NAV of the Apollo Asia Fund rose 1.5% in October to US$893.22; charts.

12 Oct 07:
I have many friends with stories similar to these of repression in Burma. (For ongoing coverage, see The Irrawaddy.) Readers wishing to respond may consider Prospect Burma, a UK charity with which I have been familiar for several years. It funds education of Burmese students overseas, hoping not only to help the individuals but that they in turn may eventually help to rebuild the country (deemed at independence to be one of the brightest economic prospects in Asia; a few decades of mismanagement can wreak impressive destruction.) The education system inside is dysfunctional, so Prospect Burma receives many more applications than it can currently fund.

8 Oct 07:
The 3Q report has been posted.

4 Oct 07:
The NAV of the Apollo Asia Fund rose 7.8% in September to a new high of US$880.16; charts. This is underperforming markets which we consider irrationally exuberant; we've been selling some of our higher flyers, usually to see them go on to much greater heights. The cash level is 17%.

17 Sep 07:
'Incredibubble!' declares David Webb of the mainland markets, pointing out the absurd priorities of Hong Kong's policymakers, and listing a few of the many backlogged problems on which they should be focussing instead.

4 Sep 07:
The NAV of the Apollo Asia Fund fell 1.6% in August, ending at US$816.53 after plunging closer to 10% mid-month; long-term charts. The cash level is 16%.

3 Sep 07:
'One can go some distance in a mine field without anything blowing up it's just that the overall odds aren't good', observes John Hussman, in 'Knowing what ain't true'.

24 Aug 07:
A correspondent tells me that the Bloomberg article on Wells Fargo is 'inaccurate... misleading... wrong... you cannot find a more conservative balance sheet in the US', so please ignore that example, which I did not verify. However, we agree that fair value accounting has allowed some front-loading and inflation of profits. 'The fair value accounting edifice is built on sand' warned accounting professors in yesterday's FT: 'Pursuit of convergence is coming at too high a cost'.

23 Aug 07:
More on the deficiencies of "fair-value" accounting: 'Wells Fargo Gorges on Mark-to-Make-Believe Gains'. The example is from the US, but I believe that abandoning historic-cost objectivity will prove to have both caused and facilitated distortions worldwide.

20 Aug 07:
The downside of increased consumer choice and technology access: female abortion/infanticide, and skewed demographics - and not just in India.

13 Aug 07:
Property & infrastructure developers are again favourite topics of Malaysia bulls. I don't follow the details closely, for various reasons: (1) they are too often valued on inappropriate multiples of unpredictably-recurrent earnings, (2) changes of leadership over the cycles (the favourites of one-two decades ago are mostly vanished or obscure names today), (3) frequently, environmental & ethical specifics. However, anyone following more closely should be aware of a dark side which the brokers may not emphasize: 'We built this city: workers from Burma at risk in Malaysia'. Filipina maids are also harassed by Rela, a vigilante force which is a disgrace to the country; international awareness rises when well-connected tourists fall prey. Calls for Rela to be abolished in preparation for the country's 50th-anniversary celebrations deserve all appropriate support.

6 Aug 07:
Consumer confidence is a contrary indicator, and household risk exposure is already high, notes the always-sensible John Hussman this week.

3 Aug 07:
Useful background charts on US mortgage finance through 2006 are
here, with a link to the March report by Credit Suisse from which they are copied.

Can any reader enlighten me on the relative size of bank deposits and yield-based funds in individual Asian countries? I have seen a number of articles extolling the safety of Asian economies because of low leverage and high savings, but am currently more interested in the exposure of individuals & companies to losses on their 'cash equivalents', especially since current accounting practice means we have to ask each company rather than being able to rely on the published accounts. High-net worth individuals and cash-rich companies in Asia are steered by their bankers into a variety of inappropriate products (see notes from June), with US$ frequently the default currency...

... products often aiming higher than Axa's US Libor Plus funds, which had the modest objective of returning 0.50% more than 1-month Libor, but apparently failed to emphasise the possibility of not returning the capital (chart shows 22% loss in the month of July). Axa says it was unfortunate that without a careful reading of the prospectus, these 'might have been construed as low-risk funds'. The FT's article explains that Axa stepped in 'to prevent the funds from being forced to sell underlying investments, which would trigger a further downward spiral in prices', and that such a rescue is very unusual. You rarely read risk warnings clearer than that.

Joe Mysak's article citing the SEC's white paper on documentation standards and comprehension of US municipal bonds is interesting (potential investors in munis should also read his earlier article, 'Rhode Island auditor tells pension plan horror tale'). In the course of our occasional plain-vanilla dealings with brokers we are asked to sign increasingly complex and lengthy documents, some of which are so unreasonable that we refuse. Results vary: either back offices insist that they are standard and our proposed business relationship is blocked, or an intelligent human reviews the boilerplate for what may have been the first time and amends it. Legal precision, never abundant, is in short supply given activity levels and innovation; the general emphasis of regulators on quantity versus quality and on form versus substance has not helped. Back office strain is also a growing problem, even for our well-established counterparties. I can only wonder what may be going on in more innovative parts of emerging-markets finance.

2 Aug 07:
The NAV of the Apollo Asia Fund, although higher mid-month, rose a short 1% in July to US$829.89; charts. At today's close, I estimate the NAV to be US$812.92, down 2% in two days. After exiting or trimming some of our weaker and more expensive holdings, the Fund has 15% cash, no borrowings, and no shorts. I assume that our readers are following credit bubble repercussions and international market sentiment themselves; I currently find the two blogs http://globaleconomicanalysis.blogspot.com (Mish's global economic trend analysis) and http://calculatedrisk.blogspot.com (Calculated Risk) worth checking.

17 Jul 07:
'A tale of three tribes' highlights extreme (but sadly not rare) examples in which the benefits of economic development do not trickle down, and furthermore whole societies and cultures are destroyed. The issues here should be central to mainstream economic discussion; at present there is minimal awareness. Many such crises in Asia were ignored while there was still undeveloped land to which the victims could retreat; population growth, resource depletion and the false promise of biofuels are rapidly destroying the last havens.

13 Jul 07:
Investor feedback over the last week ranges between reasonable comfort and a preference for our current long-only stance, so I don't need to claim a casting vote to stick with it, at least for now. In the week since writing the 2Q report, the NAV has continued to rise modestly, and the gap with the regional index has continued to widen. At today's close, our unofficial NAV estimate is US$839 per share, up a mere 2% month-to-date: the index rose 7% in the first 7 days of the month before flattening out for the next two. We have about 8% cash, and are clearly not in the most fashionable parts of the market. Nevertheless, in the event of a major market setback, investors should expect the NAV to suffer commensurately. After some discussion of hedging methods, it seems best to recommend that those investors who would like their holding hedged should do so directly, as there is nothing we would do which you can't. But first, ensure that you are more confident than Michael Panzner, who reckons that most believers in bear market insurance will discover 'the same old shortcomings'.

Trickle-down economics may have its own Wikipedia entry but is not visible in all parts of Asia. Shawn Crispin says that in 'Cambodia's cowboy capitalism', 'increasingly the perception is that the benefits are only gushing up...'

9 Jul 07:
Suspecting that CDOs and other dodgy credits are not confined to hedge funds, pension funds, dozy local authorities and the other hits reported to date, I ran an internet search on 'money market fund' + 'CDO' and read with interest the portfolios of a few funds run by big firms such as Fidelity & ING (but many other big names would have similar products), their prospectuses, and the usual difference in emphasis between marketing material (the outcomes hoped) & prospectus disclaimers (the outcomes feared). If you own any money market funds or high yield funds, I recommend you do the same. If the fine print seems too troublesome, I recommend sticking with short-dated government securities (held directly, not through a bond fund) and bank deposits. If you take comfort from claims that your fund holds mainly AAA-rated securities (and some are apparently achieving quite modest spreads over bank deposits by focussing on BBB?), note the contempt with which ratings are regarded by many professionals, and ponder the forced sales which may ensue if the portfolio manager is compelled to maintain a particular mix after rating downgrades (which usually follow and rarely lead a verdict made by the markets). Problems may be containable (from the manager's perspective) for many months, and then become unmanageable quite quickly (eg if redemptions accelerate). Remember the old adage: 'if you must panic, panic early...' - and if that seems irresponsible, ensure holding power, and remember not to panic late. Pension funds have holding power and investment risk: for open-ended funds, the biggest risk may be redemption risk.

Another currently-interesting blog: Calculated Risk.

6 Jul 07:
The 2Q report has been posted.

I've been writing for at least 5yrs about the desirability of liquid and transparent Asian-currency bond markets, accessible to individuals, small companies and charities, and the benefits to society which could be achieved by more efficient capital allocation. With very little progress, and too many investors reaching dangerously for yield in preference to low bank deposit rates, it's good to see William Pesek of Bloomberg writing about 'the dire need for world-class debt markets'. The Asia Securities Industry & Financial Markets Association, ASIFMA has useful objectives although there is no indication on its website whether it is yet making any progress. AsianBondsOnline is an ADB website which looks promisingly useful but on partial inspection has links to many government and local authority pages which no longer exist, have not been updated for five years, or tell non-bank investors to subscribe to bond funds (appalling advice: issuing entities may be indifferent, but it should be made clear to investors that buying a bond fund is not at all equivalent to buying a bond which he may sell at a time of his own choosing, or hold to maturity). Follow-through with practical procedures for the investor with a spare US$50,000 to US$50m would be most helpful, especially if the author could check that the advice is implementable. I personally know investors at (and beyond) both ends of that range who might take immediate action, if the path into and out of government & high-quality corporate bonds were proven. (Purveyors of lower-quality corporate paper need not contact us.) In the medium term, the objective should surely be that retail investors who can trade shares should be able to trade government bonds in similar size, and that those with yet smaller amounts should have access through post offices or a government agency; the UK may provide one suitable model?

A kind correspondent has pointed out that the e-mail webmaster@apolloinvestment.com has not been working for some time. Apologies; it works now. Hence, presumably, the recent shortage of financial poetry & doggerel contributions. Recent market turmoil may inspire? Something must rhyme with cov-lite...

5 Jul 07:
NAV of the Apollo Asia Fund rose 2.5% in June to a new high of US$821.99; charts.

30 Jun 07:
'Is your pension fund a dump for toxic waste?' asks Paul Tustain, in the best single article I've seen on this most important of all financial issues.

26 Jun 07:
Can the CDO pricing issues be papered over, and for how long? Sensible articles include 'Bear Stearns, hedge funds & toxic waste' by Paul Tustain; 'Banks fight to postpone day of reckoning' by Axel Merk (I'm not sure about his classification of the euro as a hard currency); 'Wall Street bets its chips on fantasy' by Bill Fleckenstein, and Mike Shedlock's updates on 'Mish's Global Economic Trend Analysis'.

Where is all the low-grade debt ending up? Apart from pension funds and insurance companies (in which the beneficiaries usually have little say), in money market funds, debt funds and structured products which the banks will be trying to sell with increased vigour, and in the portfolios of those private clients foolish or vulnerable enough to take their advice or allow discretion. Wealth warning (with apologies for repetition): money market funds can go to zero, and should not be regarded as alternatives to fixed deposits. Accountants may classify these as 'cash equivalents', but investors should not.

A Malaysian finance director told me recently that it was much easier to park his large cash reserves in fixed income funds than in bank deposits (does this reflect new entrepreneurialism versus lumbering bank bureaucracy, or could the banks be skewing their procedures?), and that fund returns are tax-free whereas deposit interest is taxable - a policy anomaly which may well be common, and should be corrected.

The Singapore private banking unit of at least one major global bank is recommending Indonesian bonds to clients with very low risk-tolerance. By amazing coincidence, some of the least creditworthy groups in Indonesia are again raising funds in the international markets. The relevant history is less than 10 years...

Masya Spek tells me that Asia Pacific Resources Holding International Ltd (APRIL) is discussing with international banks a possible US$3-500m debt issue, and writes:

'Last week APRIL became the first Indonesian company to join the World Business Council For Sustainable Development. This does not automatically mean that April's operations are sustainably run.

'APRIL's principal operating subsidiary, Riau Pulp, started operating in 1995 with 850,000 tonnes of capacity, eventually to be supplied by acacia trees grown in the company's plantations. Development of these plantations progressed more slowly than expected but this did not deter the company from expanding its pulp capacity. By 2001, the company had 2m tonnes of capacity, predominantly produced with mixed tropical hardwoods (MTH) obtained from the company's proposed plantation sites and from land clearing carried out by sister palm oil plantation companies. These practices became increasingly difficult to justify, and in 2001 the company changed course. It embraced sustainable development and designed a roadmap to achieve fibre sustainability for its Indonesian operations by 2008 (later revised to 2009).

'APRIL was delisted from the New York stock exchange in 2001, so annual reports ceased to be available, but from 2002 the company started to publish occasional sustainability reports and updates. These show that for the 6-month period through 30-Jun-06 (the most recent period for which data are available) 47% of pulp was made using the company's acacia fibre, while the balance still used MTH. The implied annualised production of 4.2m cu.m. of acacia wood represents significant progress since 2001 when it hardly produced any, but is still some way from the 9 mio cu.m. needed to achieve sustainability in fibre production. While APRIL aimed to grow 4-fold to overtake the leading Japanese producers in size, it pledged not to expand its operations in Riau until the company achieved sustainability ['April takes aim for top of the paper pile', Financial Times 21Feb06; see also 'Indonesia's corporate cleanup', FT 20Feb06].

'For the company to remain sustainable in the narrow definition of not consuming more fibre than it grows, it would need to develop additional plantations well before before commissioning new capacity. Tree plantations typically need 7-8 years to mature, whilst a pulp mill is built in 12-18 months. However, before 2006 was over, and with the 2009 sustainability target far from secure, APRIL was known to be looking to expand capacity to 3m tonnes per annum. Quietly, sustainability seems to have been redefined as not using illegally logged timber, rather than not taking more fibre than it is growing.

'It was only towards the end of 2006 that APRIL/Riau Pulp finally agreed on a restructuring of its outstanding debts to Indonesia's Bank Mandiri, which had been in default since 1998. Within weeks, on 26 Jan 07, Indonesian weekly Tempo published documents showing how the owners had allegedly creamed off US$7.2m from three group palm oil producers by means of fictitious forward CPO contracts. Not only might APRIL uphold a different practice of sustainability, buyers of its debt should realise that governance concerns remain equally relevant.'

Finally, a bursting bubble which may be containable: in Pu'er tea.

19 Jun 07:
Today is the 62nd birthday of Aung San Suu Kyi. 17 years after her election victory, she remains in detention. Burma used to be one of the most promising countries in Asia: today it is a disaster, and few of the companies with investments in 'Myanmar' have found them rewarding. I hope that one day it will again be investible.

12 Jun 07:
The recent flood of low-grade debt requires the riskiest tranches to be offloaded somewhere. Greek pension funds have been in the news; Bill Fleckenstein and David Evans of Bloomberg are worried about US pension funds. Banks worldwide are becoming more aggressive in persuading individuals to chase higher returns; smartly dressed bankers from the big US firms flatter small industrial companies that their past performance has gained them privileged access to financial products reserved for the sophisticated. Frank Partnoy's 'Fiasco: The Inside Story of a Wall Street Trader' described the process in memorable detail, and should be read by all with money to invest.

In this context, I was intrigued to notice that Venture Corporation, a former darling of the Singapore market, now has about as much capital tied up in 'collateralised debt obligations with embedded credit derivatives' as in its factories and manufacturing equipment. This apparently seemed a good idea at the time, but the instruments mature only in 2008-9 so acquisitions meanwhile have been debt- financed. A full-dividend policy, paying out everything not immediately required for expansion, would have been safer: returns on equity would have been higher, and a well-run business is rarely short of offers to finance its business expansion.

Some commentators were reassured that US first quarter reporting passed without financial disaster, and concluded that new age financing had painlessly dispersed systemic risk. My suspicion, on the contrary, was that market-fundamentalist accounting is postponing the emergence of problems: judgment is no longer required to be exercised in provisioning, and prudence is deemed old-fashioned - instead we have "fair value", relying either on a mechanistic marking-to-market, by reference to last trade. The nature of niche markets is that when problems emerge, they first become illiquid (and even more easily manipulated); only later when other options have been exhausted can a single distressed-seller cause prices to fall off a cliff. I then discovered that US accounting rules require holders of CDO paper to value it with reference to questionable models (such as the aptly-named Monte Carlo simulations) from the far-from-disinterested rating agencies. 'I knew it was bad but...' says John Succo (must read). 'The levels at which investors are carrying [mortgage-backed securities] paper is not reflecting underlying reality as the holders simply hold their collective breath and the rating agencies ignore a worsening environment.'

Before buying a money market fund or structured product, remember the old maxim:

'More money has been lost reaching for yield than at the point of a gun.'

And before assuming that a money market fund will be liquid when you need it, consider the Paper Chase.

5 Jun 07:
NAV of the Apollo Asia Fund rose fractionally in May to a new high of US$802.28; charts.

29 May 07:
John Hussman dismisses the argument that rising inflation might justify high equity valuations in 'Inflation, correlation, and market valuation', and concludes that 'when valuations are rich and inflation begins to trend higher, the potential outcomes for stocks can be particularly negative.' His assessment of the US market climate is 'unfavorable valuations, moderately favorable price trends, and a combination of overvalued, overbought, overbullish, rising-yield conditions that has historically produced not only returns below Treasury bills, on average, but deep, abrupt "panic" declines.'

The almost-universal focus on GDP (rather than GNP or other more sensible objectives) and the lack of discussion in any country larger than Bhutan has long seemed baffling. George Monbiot notes the disconnect between government departments, observing that 'Britain's future prosperity has been hardwired to rising use of transport fuels'.

18 May 07:
With divestment campaigns escalating, rather than dying down after rational review of Berkshire Hathaway's democratic debate, and China-bashing reaching new levels of hysteria and hypocrisy with talk of a 'Genocide Olympics', it seems appropriate to question the motives of those whipping up such media frenzies: read John Walsh on 'The strange campaign to strangle Sudan: beware the do-gooders in body armor', and ponder the possible links with US protectionism and its waning diplomatic influence. And also, of course, the unintended consequences. It is no longer lost on Asian central banks that they have been channelling too much into US treasury and agency securities. Now there's a divestment campaign which could bite... and if China is to be banned from funding those who may use the proceeds to buy weapons and aircraft, they could have quite an impact - but for now it's in no-one's interests to conduct it through the media.

15 May 07:
Shawn Crispin fears we are reaching a 'point of no return for southern Thailand'. Tony Allison reproduces a Gabelli chart, 90 years of US credit to GDP, to illustrate 'a sea of debt'. Martin Hutchinson grumbles about central banks 'washing their hands in bubbles'. Stephen Roach is worried about 'denial on protectionism'.

7 May 07:
Uncommon sense in the latest comments from John Hussman and Bill Fleckenstein, on the extent of current exuberance, the inaccuracy of some bubblevision commentary, the value of liquidity, and the importance of avoiding big losses.

4 May 07:
NAV of the Apollo Asia Fund rose 3.4% in April to a new high of US$797.54; charts.

18 Apr 07:
The accidental killing of a colossal squid twice the size of any previously known prompts an eloquent lament by Dr Mark Norman on the destruction of marine life of which we still know so little, and the insouciance of consumers. The Fund owns no fishery stocks.

13 Apr 07:
The 1Q report, slightly delayed by a short Easter break, makes the case for long holidays.

The audited 2006 accounts of the Apollo Asia Fund are now ready for despatch. This is the one time of year when we usually e-mail our investors, but we know that some of the e-mail addresses are no longer valid. We try to keep up with changes, when we know them, but... if you are an investor, don't receive this e-mail, and would have liked to, please get in touch. The despatching address, if you need to whitelist it for your spam filters, will be info@ this domain. Those of you who do receive e-mail and would prefer not to, likewise please let us know.

This time last year, we asked our investors whether they would be happy to dispense with the audit, and replace it with an official NAV or financial statements from the Fund's administrator, HSBC Institutional Trust Services. Most of you would have been happy with this (although several of you noted that it was unconventional), but one very experienced institutional investor thought that the audit provided useful reassurance. My own view remains that a new startup fund should consider dispensing with audit, provided (very importantly) that it has reputable and independent administrators and custodians. However, it is important to us that our existing investors are wholly comfortable, so the audit stays. The text of this year's report is still more opaque and contains more boilerplate than I would like, but our auditors tell us that this is required by the new accounting standards, on which many readers will already have heard my views. It has been streamlined as much as we could manage, and I thank KPMG, as well as AIMS' long-suffering financial controller Hue See Leng, for their help in this regard.

11 Apr 07:
Are any paper assets good alternatives to holding physical gold and silver? James Turk revisits the custodial arrangements of the gold and silver ETFs in 'The paper game' and 'Can we trust the silver ETF?'. If ETFs are trading vehicles, many investors and speculators will prefer to take the risks and leverage of mining shares for at least part of their precious metal exposure. David Watt's 1Q report of the Phoenix Gold Fund opines that gold prices are poised to rise, and that gold stocks are cheap in relation to the bullion price.

'Marine predators are on the verge of extinction, but the fishing industry still rips the environment to shreds with impunity', says George Monbiot, complaining that eating swordfish and rare tuna is still promoted by celebrity chefs and respectable newspapers: 'Sharks deserve the conservation status we give to the giant panda'.

10 Apr 07:
'Enough already - why corporate reporting so seldom enlightens': FT comment.

3 Apr 07:
NAV of the Apollo Asia Fund rose 1.8% in March to a new high of US$771.07; charts.

28 Mar 07:
'Asian decoupling unlikely' says Stephen Roach (and Jim Walker).

22 Mar 07:
Regulators should relax provisioning standards, given that IFRS are about fair value and not conservatism, according to Datuk Amirsham Aziz of Malayan Banking. He is of course correct about IFRS, but was it desirable for conservatism to be abandoned, for banks in particular, and accounting standards in general?

Meanwhile a director of UK listed companies recently bemoaned the diminished time available for boards there to discuss useful business issues, given the blowout in time devoted to the hopelessly subjective fair-value deliberations, and this is certainly becoming a problem in Asia. The bureaucratic burden of Continuing Professional Education and other box-ticking also appear to consume a growing portion of the effort of directors worldwide. Many annual reports now contain reams of incomprehensible boilerplate verbiage, through which the hapless investor must wade in search of useful information. In Malaysia, the Management Discussion and Analysis in some annual reports is so cursory as to provide little clue as to the company's products and services, let alone the important trends and strategic outlook for the business.

Regulators in Hong Kong appear so befuddled that they can no longer see that investors (as opposed to speculators, closet indexers, and many managers of Other People's Money) need to know how many shares and options are in issue in order to evaluate a company, and when and at what price these were issued. This sounds basic, and should be, but apparently is not. (It would also be helpful to show an option total, rather than providing pages of line-by-line listings which must be added by any reader desirous of knowing what the last available figure was, which for most Hong Kong companies currently means last June).

This is detail, which many regulators would rather not consider. And why should they, when they can just assure us that their regulations accord with international practice, or that they are working on such alignment? and thus the important detail becomes lost in the forest. Abolition of IFRS and rollback to International Accounting Standards might not solve all these problems, but it would seem a good start. Removing all pressure on laggard countries to adopt IFRS should be the first step.

Astonishing, isn't it, that Americans are shocked by the existence of 'insider trading' in Vietnam (when so little information is public?) Forearm yourself to escape sanctimonious conversations: read 'Lies, Market Manipulation and Wall Street: Jim Cramer Comes Clean'; the YouTube video is here.

20 Mar 07:
Stephen Roach explains the 'four uns': 'Unstable, Unbalanced, Uncoordinated, and Unsustainable'. Would that US policy-makers were so clear.

6 Mar 07:
The possibility of 'reversing Indonesia's anti-corruption drive' may set off a few warning bells for investors in a stockmarket which has more than quintupled over 4.5 years. Institutional integrity is not only important to economic efficiency; the number of problems over the years relating to security of company ownership and enforcement of contracts suggests to us that the valuation of shares should be discounted relative to other also-imperfect South-East Asian markets. More fundamental legal reform than ever seemed likely would have been desirable, but even the progress which was made now seems to be fizzling. Other market participants clearly take a different view of the risk-reward balance, but the fund is out of Indonesia for now - for stock-specific reasons, as ever, but there seem to be more promising places to seek replacements. Dissenting views, anyone?

'The heavy lifting of Chinese rebalancing': Stephen Roach explores the magnitude and challenges of the task.

5 Mar 07:
NAV of the Apollo Asia Fund rose 2.7% in February to US$757.72; charts. However it is down 3% so far in March (to mid-morning on 5th, with double-digit percentage whipsaws in individual stocks), so there has been no net progress for the year. We currently have 10% cash.

12 Feb 07:
The US 'housing finance breakdown: a saga of corruption, stupidity, and government complicity' is now being tracked by The Mortgage Lender Implode-o-Meter. The Apollo Asia Fund owns no HSBC shares.

6 Feb 07:
Martin Hutchinson says 'Ban the options scam'. Must read. The belief that markets are the answer to all valuation issues is clearly delusional. Ban options, reinstate historic cost accounting, downsize regulatory agencies corrupted by lobbyists.

2 Feb 07:
NAV of the Apollo Asia Fund fell 0.3% in January to US$737.75; charts.

30 Jan 07:
Martin Hutchinson compliments Singapore as a rare example of rational economic policy-making in 'The dilemma about doctors'.

16 Jan 07:
Investors may wish to know how the Fund has been faring given further deterioration in Thailand. Our Thai holdings are down 7% for the half-month, which would have reduced NAV by 2%, but the odd gain elsewhere has mitigated the decline to 1.2%, for an NAV of $731.33 (unofficial estimate). Three of our eight Thai stocks are foreign controlled, but those three account for 79% of our Thai holdings by value. After all the policy flip-flops and inconsistencies, it is hard to be sure of the implications. Yet again we have taken no action in that market (last Thai trade was in August, brokers must love us). The announcements are indeed daft enough to cause severe damage to the economy, and perhaps to our more immediate economic interests, so we have not been buying any dips, or even plunges; but we suspect that Thailand's once-famous pragmatism will again come to the fore. (Should that read 'hope'? a dangerous word in investment, which should raise a red flag... if informed readers think this dangerous complacency, please let us know.)

6 Jan 07:
The 4Q report has been posted.

4 Jan 07:
Aeon Stores (HK) announced on 13 Dec a proposed change in the agreement with its Japanese parent, & gave more detail in a formal circular of 3 Jan; the vote is on 26 Jan. The benefits are clearly explained; the case for giving up its exclusive rights to operate Jusco department stores in Guangdong province is less clear, and no trade-off is quantified. Might the new arrangement cause future conflicts of interest between the HK company and its parent? We are seeking clarification on the company's rationale, and would be happy to hear from any reader with a view.

Meanwhile, Martin Hutchinson recommends US investors to consider Japan & India for better corporate governance: 'The slide into managerial capitalism'.

I have read some comments attributing this week's Thai stockmarket weakness to the bombs or to their short-term impact on commerce, but the bigger issue is declining confidence in the competence and stability of this government. We'll leave the politics & theories to others, but the exchange control flip-flops were clearly a fiasco, and the decision to review policy on foreign direct investment structures is unfortunately timed.

3 Jan 07:
NAV of the Apollo Asia Fund rose a short 2% in December, closing at a new high of US$740.11; charts.


Claire Barnes

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