Apollo Investment Management
What was new - 2011 archive

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14 Dec 11:
Setting the mood for Christmas 2011 and raising the musical standard of the doggerel page: the beautifully sung 'Hallelujah Corporations!'

12 Dec 11:
Padini Holdings is holding its AGM on Friday 23rd December. We have notified the company that we will be voting against the reappointment of the auditor and reelection of the newly-appointed director, and would gladly share our reasoning with interested investors.

The Securities Commission is soliciting feedback on whether poll voting should be mandatory (public consultation paper on 'independent chairman and voting by poll', responses due by 15 Dec). Our answer is yes, and the results should be reported. David Webb lucidly explained why, back in 2003: '... you don't have to win each vote to make your point, but there's no point in standing up if you won't be counted. If, for example, the majority of independent shareholders voted against the reappointment of an independent director, but the controlling shareholder used his 51% shareholding to re-elect his friend, then the market should still be informed of the outcome and the level of the opposition... We cannot even begin to contemplate management accountability in Hong Kong without transparency in the voting process.' The long campaign by webb-site.com explains the case for poll voting in detail. Malaysia should go for it.

5 Dec 11:
The NAV of the Apollo Asia Fund fell 1.0% in November, to US$1,251.58; charts.

18 Nov 11:
'The scandals exposed as a result of Malaysia’s political PR and greenwash campaigns through companies like FBC Media have clearly been revealed as the tip of an iceberg of media corrupted by money' notes Sarawak Report, with fascinating insights into the sponsorship and commissioning of programmes on Bubblevision and its peers: 'The BBC Owns Up As FBC Scandal Deepens!'.

17 Nov 11:
'Wealth, Illth, and Net Welfare' is a succinct summary by Herman Daly of the absurdities of the current obsession with GDP growth. His book 'Beyond Growth: The Economics of Sustainable Development', published in 1997, goes into much greater detail, with a rigour which convinces me (I look forward to hearing back from economist readers), and a delightful clarity of language. Highly recommended.

7 Nov 11:
'Dodd-Frank takes paper chase complexity to new heights', ran the original headline of a recent article by Gillian Tett. Startling statistics introduce the concept of 'complexity cubed'.

Martin Wolf was pithily scathing about the intransigence of sovereign creditors, in an article originally entitled 'Creditors can huff and puff but they depend on debtors', which quotes A.E.Housman - latest addition to the doggerel page, along with this year's first carol: In the Greek midwinter.

3 Nov 11:
As with London buses, so with our financial doggerel page: no new appearances for an eternity, then an abwunderance. See 'Eliot's Eurocrat', 'The Charge of the Euro Brigade', and more, in a treasure trove of recent contributions at http://macro-man.blogspot.com/ - a blog I should clearly follow.

2 Nov 11:
The NAV of the Apollo Asia Fund rose 2.0% in October, to US$1,263.83, clawing back only a fraction of the recent decline; charts. 9% of NAV is now in companies which have a significant portion of their business physically under water in Thailand, and the risk of immersion of such a large percentage of Thai industry is one which we had not considered. Nor, we suspect, had most of the country's multinational investors. While most existing factories will doubtless be reopened when the floods recede, the scale of future FDI is likely to be affected.

Readers interested in the importance of energy to national prosperity (eg the links of 1 Aug relating to the United Kingdom), will appreciate Kris de Decker's analysis of the contribution of peat to the Dutch golden age.

Two fine additions to the doggerel page: Groupoem - an IPO for the ages, and an essential summary of the bank reform debate in The Ballad of Diamond Jim.

1 Nov 11:
Please sign the petition for Hong Kong to ban shark fin at official functions.

16 Oct 11:
The 3Q report has been posted.

4 Oct 11:
The NAV of the Apollo Asia Fund fell 8.0% in September, to US$1,238.60; the two-month fall since the last peak has been 12.3%. The sell-off continues month-to-date. Charts for the performance page will be updated only later in the month; apologies.

30 Sep 11:
David Webb notes that Bank of Communications 'has recently demonstrated a nasty wrinkle in China's tax code': tax on bonus issues. His earlier article, 'Truly pointless bonuses and splits', is a useful resource for investors trying to persuade companies not to waste our money.

2 Sep 11:
The NAV of the Apollo Asia Fund fell 4.6% in August, to US$1,346.93; charts.

10 Aug 11:
Excellent reading, especially for those of us still learning to interpret company accounts: John Hempton's current analysis of Trina Solar, memorably described as 'death or glory Chinese stock market style', and the initial debate thereon.

2 Aug 11:
The NAV of the Apollo Asia Fund rose 6.6% in July, to US$1,412.40; charts.

1 Aug 11:
'Britain must rebalance its energy supply and demand' says Hervey Gibson of Cogent Strategies International, in a short article which packs some very punchy statistics. Readers may be familiar with the history of UK primary energy production, with peak coal production in 1913, and the huge North Sea oil and gas windfalls which starte in the 1970s. (The dramatic linked chart by Euan Mearns is from an article by Hugh Sharman entitled 'The coming UK energy meltdown'.) Prof Gibson has set this history in context, and translated it into monetary terms. In 1913, Britain had an energy surplus of 2% of GDP, which fell progressively to a 5% deficit in 1975. The North Sea windfall restored the country to a 2% surplus in 1983, and it remained in surplus until 2004, before sinking back into deficit - now 2.5% of GDP and deteriorating. Prof Gibson has been kind enough to send a longer version of his article, with this striking chart of the UK primary energy balance as a % of GDP - and notes that since 1925 there has been a strong correlation between Britain's energy balance and its relative growth performance. The contribution of financial services may have been overstated... and in Asia, too, energy windfalls are often taken for granted.

27 Jul 11:
'Complexity is the perfect moat', observes Charles Hugh Smith - 'once the fiefdom expands to manage all those new rules, only a handful of corporations can possibly afford the regulatory reporting burdens'. Must read: 'Complexity and Collapse'. Furthermore, he observes, 'cartels and monopolies lobby politicos and agencies to crush small business (potential competition) with overlapping regulations so onerous and costly that compliance alone will drive the small businesses under': 'Here's why small business isn't hiring, part II'.

A frustrated investor has set up a new blog, http://cgmalaysia.blogspot.com, with his recommendations to SC Malaysia, noting that 'enforcement is the problem, not the rules'.

26 Jul 11:
The Securities Commission Malaysia requested feedback on its Corporate Governance Blueprint 2011. Ours is here. Quarterly reports are endangered. If you wish them to continue, as we do, please make that known: CGblueprint@seccom.com.my

25 Jul 11:
Jeremy Grantham's 2Q report discusses resource limitations, with a clarity and eloquence I could never achieve. I would rank energy much higher on the list of concerns, and would be happy to see this play out as Grantham fears - which makes metals and water correspondingly more difficult. Nevertheless this is essential reading. I believe that resource limitations, their political and environmental consequences, and the cost of unproductive complexity (including inappropriate responses to the foregoing), will prove the key issues for investors over the next few decades - very different from those in which most of us learned our trade.

22 Jul 11:
The 2Q report has been posted, on bureaucracy and overcomplexity.

8 Jul 11:
The NAV of the Apollo Asia Fund rose 2.5% in June, to US$1,325.52; charts.

4 Jun 11:
Indonesia is the world's third largest emitter of greenhouse gases; coal mining is a major driver of deforestation; pulp and paper production is expected to triple by 2025; and further expansion is expected in palm oil - according to Asia Sentinel: 'The Rape of Borneo'. Redd-monitor explains the loopholes in Indonesia's commitments to Norway, with fascinating maps showing how little primary forest remains, in an article which asks 'Is Indonesia's 'moratorium' worth the paper it's written on?', and includes a short video from Al Jazeera showing the environmental destruction in another which concludes 'Corruption, deforestation and abuse of human rights. Business as usual, then, for Indonesia'. It is not just investors in coal mining and plantations who should be aware of the magnitude of these issues. We are no longer destroying small corners of an enormous forest. Now there are small fractions left, and we are burning through it fast. All of us who invest in Asian growth, consume Asian electricity, or buy Asian manufactured goods (all computer users, for sure) need to ponder the impending collision between expectations of growth and resource depletion / environmental destruction.

3 Jun 11:
The NAV of the Apollo Asia Fund rose 2.0% in May, to US$1,293.30; charts.

5 May 11:
'How will previous shareholders feel about Bumi Armada's re-listing?' asks a local blogger, quoting at length from my 2003 grumbles when it was forcibly privatised on one third of its proposed relisting multiple. (Dear Moolah, the article was forwarded by a friend, and I now see that you have quoted us before - would you be kind enough to let us know directly when you do so? and preferably just link to the original, for accuracy?) My 2003 article, 'Pirates attempt to seize whole Armada', was subtitled 'pitfalls of investing in Malaysia'. I wonder how much has changed.

4 May 11:
The NAV of the Apollo Asia Fund rose 3.7% in April, to US$1,268.25; charts.

30 Apr 11:
'Who's to blame for high oil prices?' Jon Callahan dismisses the scapegoating of speculators and shows the importance of developing-world demand with admirable brevity and clarity, enabled by the images from his expanding series of databrowsers.

27 Apr 11:
'Time to wake up: days of abundant resources and falling prices are over forever', says Jeremy Grantham. Must read.

My friends at Scubazoo are superb film-makers, and document some of our most precipitous resource declines. Their observations on the manta gill raker trade are depressing, and news to me; thereafter one may be cheered by their footage of crazy underwater animal behaviour.

15 Apr 11:
An earlier age of trade and globalisation is beautifully evoked in the 2009 National Geographic documentary 'Secrets of the Tang treasure ship', about the cargo now exhibited in Singapore (see entry of 4 Mar). This is available on the internet: parts 1, 2, 3, 4; so too is a good five minute video in Mandarin and English.

8 Apr 11:
The 1Q report has been posted.

4 Apr 11:
The NAV of the Apollo Asia Fund rose 1.0% in March, to US$1,222.46; charts.

10 Mar 11:
The most detailed article I have seen on the Lynas refinery in Malaysia is in the New York Times: 'Taking a risk for rare earths'. And as the linked article says, the problems of Malaysia's last rare earth refining project at Bukit Merah are little mentioned nowadays: 'Mitsubishi quietly cleans up its former refinery'.

Both banks and fund managers need more competition, rather than more regulation, observes Antonio Foglia in a letter to the FT.

The fund management industry always needs to be rejuvenated, and challenged, by new start-ups. Hitherto it has been quite normal for such start-ups to be small and slow, building experience with the savings of the founder, who might well have served an apprenticeship in broking or an established investment firm, but nevertheless needs time to learn about pitfalls, challenges, and systems. Slow starts are ideal, and to be encouraged. They pose no systemic risk, and offers to the public are already strictly regulated in almost all jurisdictions. When the customers are professional investors, they can safely be left to look after their own interests by ensuring that administrative / custodial / personnel structures are appropriate. Requirements for more capital, more paperwork, or a large headcount, are unnecessary. Banks and large established firms have more personnel and are therefore more likely to be familiar to regulators. Additional regulations which may not be a significant inconvenience to such large institutions can choke small firms - especially start-ups prepared to prioritise investment performance and sound systems over the maximisation of assets, which have to keep costs as low as possible. All unnecessary overheads increase the dangers for such long-term players. We welcome competition in this space, and implore regulators to be aware that the long-term health of the fund management sector requires regular infusions of such fresh blood.

4 Mar 11:
When a company whose entire business model is based on the efficient management of inventory collapses, and the admininstrator alleges that its inventory management systems were grossly inadequate, observers do wonder what the managers, directors and auditors were doing all along. The Accountancy and Actuarial Discipline Board of the Financial Reporting Council in the UK has launched an investigation into the work conducted by chartered accountants working at Aero Inventory, and by Deloitte as auditors. The company collapsed in November 2009 so more than fifteen months have elapsed, but better late than never. We hope that the results of this and other investigations will eventually be published, in order that those inclined may learn from the experience - certainly we as investors would like to do so. Some risks were evident, and had appeared to us to be in the price, but the possibility that it did not have inventory management systems capable of performing as described had never actually occurred to us - nor, presumably, to its blue-chip airline customers.

The 'Tang Cargo' is now on display at the ArtScience Museum in Singapore, until 31 July, and will then go on world tour for five years. (Jewel of Muscat, the replica ship built in Oman which sailed last year to Singapore, is to be displayed separately in Sentosa.) An excellent catalogue, 'Shipwrecked: Tang Treasures and Monsoon Winds', has been published by Smithsonian Books. The C9th Belitung wreck was South East Asia's most exciting archaeological discovery of recent decades: an Arab or Persian ship, built of African timber, sewn together with coconut rope. The ship sank while returning from Tang China with large volumes of targeted-mass-market ceramics and some exquisite treasures of imperial quality. The best online introduction to the story of the wrecked ship, her cargo, and this earlier age of prosperity and globalisation, is in the 2009 National Geographic article: 'Made in China: a 1,200-year-old shipwreck opens a window on ancient global trade'. Other links and references may be found at www.maritimeasia.ws/topic/chronology.html#Belitung. The exhibition is highly recommended - as is the Genghis Khan exhibition, on at ArtScience museum until 10 April. Well worth a trip to Singapore.

2 Mar 11:
The NAV of the Apollo Asia Fund fell 1.6% in February, to US$1,210.10; charts.

24 Feb 11:
HSBC has a revised list of information it requires under 'Know Your Client' or KYC regulations: now 9 pages long instead of 4, and available at www.apolloinvestment.com/HSBCIT_KYCrequirements.doc.

The world needed financial system reform, and instead is being suffocated by bureaucracy... see Joseph Tainter's classic, 'The Collapse of Complex Societies'.

18 Feb 11:
The latest in a long series of excellent posts by John Hempton on US-listed China stocks is the most entertaining so far: 'China Agritech: more miracles in the plant'.

17 Feb 11:
In 'Embarrassment of Riches', written just before Chinese New Year, Andy Xie tackled important questions about the global boom of the last decade. Why do most people feel poorer? Is the prosperity a mirage? Is the GDP measurement wrong?

8 Feb 11:
The NAV of the Apollo Asia Fund fell 3.2% in January, to US$1,229.32; charts.

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

4 Jan 11:
The NAV of the Apollo Asia Fund rose 5.8% in December, to US$1,270.51; charts.


Claire Barnes

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