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31 Dec 08:
Added to the doggerel page, a final record of 2008: 'Twas the night before bailout.

22 Dec 08:
Cassandra discusses recency bias: 'If you can't tell who the sucker is...' How to assess the sustainable level of activity is currently a key question for many sectors: it would be easier to prioritise the investment options if we knew the answers.

Santa Claus writes... about operational details including the Nintendo distribution rights for South-East Asia.

16 Dec 08:
John Hussman examines 'Recognition, Fear and Revulsion'; Arundhati Roy 'The monster in India's mirror'.

12 Dec 08:
Added to the doggerel page, history set to music: 'Monster Crash'. Thanks Murray.

3 Dec 08:
The NAV of the Apollo Asia Fund fell a further 4.2% in November, to US$559.84; charts.

7 Nov 08:
The NAV of the Apollo Asia Fund fell 20.3% in October, to US$584.67; charts.

31 Oct 08:
October's NAV performance is likely to have been only the second worst in the fund's history, but although valuations of companies have in many cases reached levels comparable to those in the 1997-98 Asian crisis, the outlook now seems more complex. That crisis was local; the global systemic risk is new. Asia then exported its way out of trouble, and built up its reserves: both the export-model and the dependability of those reserves have now been thrown into question. There has been much more evidence over the last two weeks that trade finance is extremely problematic and that there is now a severe region-wide and global credit crunch. Companies in many sectors are slashing production, hiring, and capex; consumers worldwide are retrenching. Idle ships and the collapse in freight rates have now been widely reported; alarms are bleeping on Asia's export machine, and if this is more than a temporary glitch then the implications for an interconnected world are hard to fathom. In any case the disruption seems likely to have a much more significant psychological and economic impact than seemed likely a month ago. The universe of stocks of interest to us has expanded dramatically, but the assessments of risk and of future potential have become more complicated. We have been buyers during the month, but proceed with caution.

21 Oct 08:
Mainstream press reports of CITIC Pacific's US$2bn losses on FX contracts are inadequate. The contract details are interesting (and the losses relative to upside should be salutary), but this is of wider importance for Hong Kong corporate governance: read David Webb on CITIC Pacific's time bomb. This news update mentions counterparties including HSBC, BNP, and Citigroup, and the interesting term "accumulator", which some would associate with the racetrack...

15 Oct 08:
We estimate the NAV of the Apollo Asia Fund to be US$665.40 at today's close, down a further 9% for the half-month and 26% since its peak at end-May. The fund now has 7% cash, and 18% in Japan.

Even a week ago we were thinking about economic damage to Asia primarily in terms of reduced demand in export markets, plus some casualties of local credit tightening, notably in China. However, prolonged disruption to trade finance could cause major economic and social upheaval. Shipping lines say tight credit cutting world trade: anecdotal evidence is of cargos piling up at the dockside and ships lying empty. Some companies cannot get letters of credit; one shipper presented a valid letter of credit which the bank had no cash to honour. Others have seen emergency clauses invoked to change LIBOR-based funding to banks' higher cost of funds; two Hong Kong companies have seen their loans called when their respective chairmen passed away, which I suspect would normally be a technicality. Another interesting report: RBI may have to offer dollar lifeline to banks. It has been suggested that Asian banks may need to raise capital, not because their balance sheets are impaired but in order to fund the expansion of trade finance into the gap left by retreating western banks, whose activities in Asian countries have been slashed as they pull capital back to home base. Anecdotal evidence from our readers, and any ideas on quantifying new trends, would be appreciated.

I have also been wondering how Singapore banks can lend to companies operating in China at rates which are, when swapped into Rmb, substantially lower than those of the local banks (4% rather than 7%, according to borrowers I spoke to this week); what risks are being run here; and what percentage of balance sheets is thus deployed. Can a reader enlighten me?

14 Oct 08:
Unsustainable returns, unrepayable debts, and collective denial are examined by George Monbiot, urging that we 'now rethink our catastrophic ecological trajectory'.

7 Oct 08:
The Gods of the Copybook Headings were out of fashion for years. Martin Hutchinson revisits their maxims of economic and financial management.

6 Oct 08:
The 3Q report, 'Crisis and Opportunity', has been posted here.

5 Oct 08:
All plantation investors and others involved in palm oil, and all Malaysians, should watch the 36minute documentary 'What Rainforest?', now available online, and start asking questions. The film mentions the rapid disappearance of the rainforest (government statistics apparently count all land with foliage as 'forest') and the environmental problems of monoculture, but focusses mainly on current land acquisition practices in the Malaysian state of Sarawak, the extraordinary abuse of Native Customary Rights, the plight of the people displaced, and the lack of legal redress to date.

3 Oct 08:
The NAV of the Apollo Asia Fund fell a further 9.1% in September, to US$733.65; charts.

30 Sep 08:
The US is 'on the brink of war with Pakistan' noted Robert Baer in Time magazine on 17 Sept. Tariq Ali agreed: 'Bush's war widens dangerously'. The rest of the American press is showing little interest in the wisdom of destabilizing Pakistan, a nuclear power with its own financial crisis, according to a fascinating analysis by Anthony DiMaggio: 'Pakistan, the Media and the Politics of Nuclear Weapons'. A "defence" budget of US$612bn (before extras for war) was nodded through Congress with little discussion. The end of the American era may be messy.

8 Sep 08:
The NAV of the Apollo Asia Fund fell a further 3.2% in August, to US$806.98; charts. Apologies for the delay in updating the web site.

We have been grumbling for years about our inability to show the NAV chart on a semi-logarithmic scale with sensible axis numbers. Thanks to Luke Howard Taylor, we now can: it is here. The semi-log scale shows more accurately the rates of growth, avoiding any illusion that they have accelerated in recent years (which were actually pedestrian, compared to the earlier years). It also show the early years more clearly, but the corollary is that the fluctuations of recent years are less evident, because recent volatility has been modest by earlier standards. Having seen it, I'm inclined to stick with a linear scale for the regular monthly charts: please let me know if you disagree.

27 Aug 08:
At last new content for the poetry & doggerel page: Macro Man's Dollar! Dollar! burning bright...

7 Aug 08:
When the dividend we received on a Thai NVDR was less than on the foreign shares of the same company, we thought there had been an error - but NVDR dividends can be taxed more heavily. The explanation is at Thai dividend taxation and NVDRs.

6 Aug 08:
Jeremy Grantham's latest quarterly responds to recent developments with a significant negative reassessment of the outlook for emerging markets over the next couple of years: they may yet form the next bubble, but right now face significant risks. The following Letter to the Investment Committee, 'Living Beyond our Means: Entering the Age of Limitations', is the essential reading.

5 Aug 08:
The NAV of the Apollo Asia Fund fell 3.7% in July, to US$833.40: charts. The Fund will open to limited new subscription over the next couple of months: existing investors and correspondents are invited to contact us if interested.

13 Jul 08:
The 2Q report has been posted.

3 Jul 08:
The NAV of the Apollo Asia Fund fell 3.9% in June, to US$865.01: charts. It will have fallen further in the first few days of July.

3 Jun 08:
The NAV of the Apollo Asia Fund rose 1.6% in May, to US$900.01, fractionally above the previous high set seven months ago: charts.

6 May 08:
The NAV of the Apollo Asia Fund rose 4.5% in April, to US$885.72: charts.

2 May 08:
Must read: Jeremy Grantham's 1Q08 letter - 'Immoral Hazard' for entertainment, and 'The Emerging Emerging Bubble' (p.9) for profit.

Bob Bunker, the reform and corporate-governance candidate, failed to win a Hong Kong Exchanges & Clearing board seat because the government voted against him and if favour of Vincent Lee. Bob Bunker had the majority of independent votes; since the government already controlled 7/13 of the board, it should properly have abstained, so that independent shareholders could elect independent directors. 'Hong Kong's Bureaucrats and the Stock Exchange' discusses this bizarre decision. The linked 'Hong Kong's Power Elite and a Company's Collapse: Ocean Grand' shows the desirability of reform.

30 Apr 08:
The audited 2007 accounts of the Apollo Asia Fund have just been e-mailed to investors. If you are an investor, do not receive that 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.

I regret that the notes to the accounts are even more long-winded and obfuscatory than ever. Our auditors tell us that the additions are required by the new accounting standards; more is not better, as the Plain English Campaign could have explained.

Meanwhile the accounts of Phoenix Gold Fund have again been qualified because the directors insist on valuing unlisted options at intrinsic value rather than on the Black-Scholes model. David Crichton Watt wrote to shareholders that "this resulted in the NAV being some US$800,000 less than Messrs Black and Scholes would have imagined it to be. One might have hoped that the recent debacle in the financial markets might have brought the accounting profession to realise the folly of model-based accounting, but that is not the case... we will continue to value options at prices that appear realisable."

I continue to support a rollback to International Accounting Standards.

23 Apr 08:
Malaysians are optimistic about newly announced anti-corruption measures. Many remain sceptical, after decades of stories like 'Malaysia's Exim Bank: a morass of bad loans'. Maybe this time will be different.

21 Apr 08:
Carmen Reinhart succinctly discusses the recurrence of sovereign default, and thinks it unlikely that this time is different: 'Eight hundred years of financial folly'.

15 Apr 08:
Comment about accounting now seems divided between those influenced by language who assume that "fair value" must be good in principle, and those who realise that its pursuit is an illusion and the consequent abandonment of objectivity a disaster. Martin Hutchinson lucidly explains 'the degradation of accounting'. He recommends the reinstatement of time-proven historic-cost accounting, and that many small financial institutions be allowed to flourish or die. I heartily agree. All industries need the rejuvenation of new entrants and competition. Capital adequacy is relevant to banks but not to all businesses, and size-ist regulators have hindered the development of fund management and other sectors here in Malaysia.

10 Apr 08:
The 1Q report has been posted. A postscript: it says nothing about the international backdrop, about which I assume you already have enough to read. The crisis may intensify from here, but my own view is that cash, precious metals, certain properties, and certain shares, should all play a role in the preservation of wealth, and that the world is too uncertain to put all bets on one. If you agree, what you want to know from us is how the companies which we monitor are faring, and whether we are currently able to buy shares which strike us as reasonably attractive. Armageddon is always possible, but meanwhile we can provide a cautious green light on this detail.

8 Apr 08:
The Fund owns no shares in Hong Kong Exchanges & Clearing, but has a strong interest in its performance, so I was delighted to hear that Bob Bunker is seeking election to the board. Would all shareholders please remember to vote in the AGM on 24 April? The indispensable David Webb has ably explained the details, and I endorse his recommendations to vote for Bob Bunker & Bill Kwok, and against all other candidates.

3 Apr 08:
The NAV of the Apollo Asia Fund fell 1.7% in March, to US$847.55: charts.

5 Mar 08:
The NAV of the Apollo Asia Fund rose 4.9% in February, to US$862.10: charts.

14 Feb 08:
New on the poetry & doggerel page: 'Where have all the dollars gone? Gone to Dubai every one'.

12 Feb 08:
Counterparty risk and poor documentation are scrutinized in 'Default swaps intensify credit crunch' - the link is to the second, more relevant, page. Our hitherto-embarrassing lack of investment in India has been partly because of discomfort with the documentation for many P-note structures (the new Indian regulations removed the clause which originally disqualified us from FII status, and introduced a new bar). As noted on 3 Aug, Asian back offices and documentation quality may also be under strain, following the record volumes and cost-cutting relocations.

8 Feb 08:
Good wishes to readers for the Year of the Rat, described in my one book on Chinese astrology as 'a time of intensely creative activity; a time when new horizons loom into view, bringing the startling realisation that a thousand possibilities have not been tried... the time for new methods, fresh plans, and projects for re-organisation and re-vitalisation to be discussed.'

4 Feb 08:
The NAV of the Apollo Asia Fund fell 5.5% in January, to US$822.17: charts. Two-way markets are back, and the opportunities for Asian stockpickers are becoming much more interesting. We have been buying during the month in Hong Kong, Japan & Singapore, but still have 14% cash.

31 Jan 08:
Three excellent additions to the poetry and doggerel page: 'Leverage is as leverage does', by Cassandra; 'Shall I compare thee to a levered trade?', by Macro Man; and belatedly, the illustrated 'Broker Joe', by Cameron Crise.

16 Jan 08:
Worth reading: a 12 Jan interview with Marc Faber, and to put bad market days in context, Allan Nairn on food prices in Indonesia.

11 Jan 08:
The 4Q report has been posted.

9 Jan 08:
The NAV of the Apollo Asia Fund rose 2.1% in December, and 17.5% for the year, to US$869.77: charts.

Claire Barnes

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