Apollo Investment Management 
What's new archive - 1999

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24 December 1999:
NAV is up only an estimated 2.1% month-to-date, lagging the big stocks and the fashionable - but between AAF and the predecessor fund this is still 61% ytd, which is good enough for me. That window dressers are scrambling out of dull stocks and into the high-flyers seems now beyond question - but only, of course, with other people's money. At this stage, we are happy to be unfashionable.

ABN Amro has taken over as chronicler of long-term investment returns in the UK, and notes: "In any given year, capital gains or losses on shares tend to be much larger than the year's dividend income. But the longer the investment period, the more important is income. Over very long horizons, the value of reinvested income totally dominates capital appreciation... over the last century, an equity portfolio with gross dividends reinvested would have appreciated to more than 100 times the value of a portfolio whose dividends were not reinvested."

On a lighter note, I have added some notes and links on our patron, the god Apollo - and will now sign off by wishing a merry Christmas to all our readers.

17 December 1999:
The geographical breakdown of the portfolio arises from the bottom-up stock selections, so can change dramatically, but now looks like this: Hong Kong 29%, Indonesia and Malaysia 18% each, Singapore and Thailand 7% each, other 21%. The "other" is mainly a straight Eurobond, which at present valuation has a 12% running yield and 19% yield to maturity; with default risk believed to be low. The ordinary shares (79% of the portfolio) are on an estimated current year PE of 7.5, falling to 6.3 one year out - that represents 19% EPS growth for the year ahead. Turning the figures upside down, for those who like to compare with deposit rates at their local bank, this equates to a current year earnings yield of 13%, rising to 16%. The dividend yield after Asian taxes is 6% this year on the ordinary shares rising to 7%; for the whole portfolio, it is 7% rising to 8%. I reiterate as always that we try to buy good companies, not just stocks which look cheap - our biggest new position is Unilever Indonesia on a current year PE of the order of 20 (although less when we bought it) - but the overall portfolio numbers are still very attractive.

16 December 1999:
I've updated the page on investment philosophy - not that the philosophy has changed, just that I realised there were subjects like dividends (and H shares) on which I'd omitted to comment.

David Tice's article of 15 Dec on PrudentBear.com highlights the tremendous surge in US consumer spending. A 16% increase in LA's import container volumes in November should contribute to a tremendous second half for Asia's exporters. I'd especially mention the Hong Kong companies manufacturing in southern China - together, the world's most impressive export machine, and likely to remain so for years to come. For some of these companies, this season's boost may be a significant proportion of capitalisation; the reverse situation from Microsoft, where the US$60bn added to market capitalisation yesterday represented three years' revenues.

Writing about the companies I won't buy rather than the ones I do may eventually allow readers to build up a picture by elimination! The decisions what not to touch are often clearer, and sometimes more interesting, than the relative merits of the fast food or other cash-generating companies we often favour. There is also an element of serendipity: I am a slow writer, and crafting articles is a distraction from looking for new ideas, so if a subject has already arisen, it is often the course of least resistance to use that rather than open a new one. The shenanigans at Daya Guna Samudera prompted me to send an e-mail to an analyst friend who'd been writing on the subject, and it occurs to me this may be worth repeating here.

I would actually avoid fishy companies everywhere - including for example Thai Union Frozen Food, a favourite with some foreign investors - because (1) the business is inherently insusceptible to monitoring and therefore unusually prone to fraud (I am certainly not suggesting any such thing at TUFF, which I have not personally visited or researched), and (2) the apparent collapse of the fish catch in many countries worldwide and possibility of irreparable or at least very long-term damage to the marine environment and fish stocks. I was diving in SE Sulawesi with Operation Wallacea last year and also talking to fishermen in Ujung Pandang. There is extensive use of both dynamite and cyanide, which destroy the reefs and future habitat - incredibly short-sighted, but the prices paid by NE Asia are just too alluring. In both places fishermen report having to go further and further each year for a catch, but no action is being taken. The marine parks are just as bad as everywhere else. There is no sign of any effective policing; anyway this can only work with a determined hearts-and-minds campaign, which would clearly be difficult in Indonesia, but there is little sign of any serious effort.

In Asian markets generally, I suspect there is some window dressing going on at present, with fund managers seeking to eliminate some stocks with particularly stodgy old-paradigm names from portfolios before the year-end. Although overall portfolio performance has not yet been hit, there have been surprising mark-downs in a couple of our strongest holdings, and we've been able to buy some more at prices sharply lower than a fortnight ago, although the overall markets are up.

12 December 1999:
I have extended my article on Quality HealthCare, as I forgot to mention a few things yesterday. Subject to editorial approval, this will also be published on Webb-site.com, which I highly recommend to anyone investing in Hong Kong. It is run by my former colleague David Webb, who is doing a splendid job highlighting abuses and attempting to improve corporate governance. While on the subject of Hong Kong, I also recommend Jake van der Kamp's daily column in the South China Morning Post. While on the subject of corporate (and indeed economic) governance, investors in Telekom Malaysia unaware that they were paying for a substantial donation to Dr Mahathir's reelection may read allegations and see the supposed cheque at [www.freemalaysia.com/gathered/UMNO_fundraising.htm - link defunct?]. I have no opinion on the veracity of this article, but people may find it interesting to read it and ask their own questions. Companies make political donations in other countries, of course, but this one appears unusually large in relation to last year's profits, and unusually controversial given the current polarisation of political opinion. The Apollo Asia Fund does not invest in either of the public companies mentioned, or in companies run by any of the entrepreneurs mentioned.

11 December 1999:
Official NAV's will now come from the Administrator, but my estimate was US$103.19 at yesterday's close. I have lightened up on Quality HealthCare, both because the stock's meteoric rise had turned a small position into a large one and reduced the further upside, and because of a disagreement with the chairman on incentivisation. This is subject to independent shareholder approval, which is why I have set out my case. I have not yet purchased all of my target stocks, so will leave those more positive ideas for another day.

7 December 1999:
There is a good explanation by David Tice of the present US monetary surge, which is fuelling the speculative blow-off, in his article of 3 Dec on PrudentBear.com. The US market is dangerously stretched. For a daily update on its amazing behaviour, I still recommend Bill Fleckenstein's column [old link deleted]. (David and I also enjoy reading Richard Russell and Mike Drakulich, and Fred Hickey on the tech stocks, but these are subscription products - details of the former at www.dowtheoryletters.com.)

Investors may be assured that I try to spend most of my time thinking about individual Asian companies, rather than the timing of stockmarkets, but the US bubble presents such risks to the global financial system and to economies everywhere that it cannot be ignored. I'd like to make sure our current and prospective investors are fully aware of these risks, because of the possibility of sharp short-term valuation losses. I believe the intrinsic value of our portfolio is much more resilient, and that the absolute value is so compelling - relative to leaving money on deposit in the bank - that it is worth accepting the stockmarket risk, since the timing is so unpredictable. So I am happy to encourage subscriptions now, and to suggest dollar averaging for the nervous, but wish to make sure that all our investors realise the excesses which are taking place, since they may not be apparent from the broad indices or the mainstream media. My interest in this is not just full disclosure: in the event of significant valuation losses, I would like investors to either sit tight or buy more. Subject, of course, to my providing adequate comfort that what we are doing is sensible. Acquaintances of long standing would doubtless prefer me to shut up about the risks and get back to talking about stocks and values. I promise to do that, but not today.

6 December 1999:
The Apollo Asia Fund accepted its first subscriptions at the end of November, and the Apollo 001 Fund was folded in. Closing NAV of the Apollo 001 Fund was US$20.74. To recap the performance, NAV rose 31% in calendar1998 and 58% during the first eleven months of 1999. Cumulatively, this amounts to 107% in just under two years, outpacing the most relevant MSCI index by 46%. These figures are before fees. Charts & details here.

A number of our prospective investors found the timetable too tight to complete paperwork or free up cash for the end of November. We suspect most people will have other things to think about at the end of December, too. To avoid both missed deadlines and funds lying idle, we have arranged with HSBC that subscriptions may be made at any time, and if money is received more than a week before the next subscription day then it will earn interest until applied to the purchase of shares in the Fund.

The one market which has caused us major headaches on what should be a simple stock transfer is Malaysia. Several man-days have already been spent on this by very competent and obliging settlement staff and managers at both HSBC and the transferring broker. Unfavourable comparisons were drawn in Hong Kong with the clarity, consistency and internal logic of the regulatory regime in China, and with the efficiency of settlement in India. This is a market where turnover sometimes used to exceed that of the NYSE! Clearly, political risk is real, and can damage our wealth. We still think it is worth buying, or at least holding, specific individual stocks in Malaysia (now 18% of the portfolio), but to a limit significantly lower than under a stable and rational policy environment.

More positively, I spent last week in Hong Kong visiting companies. Our existing holdings look fine, and I have several promising new ideas, but more on this later.

22 November 1999:
Someone please tell me whether the British Virgin Islands is part of the Bermuda Triangle. The territory was shut for four days last week, starting on the day we tried to submit the Apollo Asia Fund's application for recognition, thanks to a hurricane. It reopened on Friday, in some disarray, with power still lacking in some areas. There is a direct delay, and then there is the backlog. I am told by our lawyers that we can still close the fund by the end of the month (and that yes they do mean this month), but clearly not by much, so we will go firm on that date. Any qualifying investor who would like a copy of the offer document and has not received one, please contact us. NAV of the Apollo 001 Fund has settled back to US$20.03. Next week I shall be visiting companies in Hong Kong.

16 November 1999:
The lack of a decent telecom regulator in Malaysia is daily evident in the quality of communications services. True, there are service providers which ostensibly compete, but the deficiencies of carrot-without-stick capitalism are glaringly apparent to the hapless customer. Creative destruction is long overdue. Telekom Malaysia has just changed our numbers, with three days notice. Getting business cards printed in Malaysia takes rather longer. Fortunately, changing the website is quicker: contact details here. Anyone wondering why we give out multiple telephone numbers has never worked in an emerging market. We have Maxis and Telekom fixed lines, with different international gateways, and mobile phones, and a selection of ISP's. If at first you don't get through, please try another number. The belt and braces approach does work, and we are rarely completely uncontactable.

A move which may look very foolish very quickly if the politics turns sour, but even then I would hope only in the short term: we now have 8% of the Apollo 001 Fund in Indonesia, and rising.

15 November 1999:
Bank of Bermuda's lawyers have taken six months of my life and agreement remains elusive, so in order to get the Apollo Asia Fund off the ground in the current millenium, we're parting company. HSBC International Trustee will be appointed as Custodian and Administrator, and fund documents have been despatched to our lawyers in the BVI for submission to the authorities there. I am told the turnaround time is usually about a week, so we will definitely be accepting subscriptions at the end of the month, and maybe earlier. NAV of the Apollo 001 Fund jumped 4% today, to US$20.35 - today was a seller's market across most of Asia, so I shall hope for a correction in the US before we have to do any serious buying.

14 November 1999:
Latest NAV is little changed at US$19.60, with most of our stocks drifting (they are not of the flavour fashionable during US party time), but two shares moving sharply higher. Although secessionist problems are bubbling up for the new Indonesian government, company visits in Jakarta were up to expectations and I will be a buyer of carefully selected companies there. The Apollo Asia Fund has been incorporated and the application for recognition in the BVI should be submitted tomorrow. The summary term sheet has been slightly revised, for small technicalities and the slippage in dates. My tolerance for further delays is wearing thin. I think I can now safely declare that the Fund will be open to investment at the end of November, with the possibility that we will also be able to accept subscriptions in the week beginning 22 November.

6 November 1999:
Latest NAV is US$19.54, up 2.6% in the first week of the month and 49% ytd. The resumption of wild partying in the US stockmarket has surprised me, but the reaction in Asia has been relatively subdued, due perhaps to the sidelining of key players. The Apollo Asia Fund is still expected to be ready later in the month, and a window in the paperwork should enable me to escape to visit companies in Jakarta. Watching Tung Chee Hwa cavorting with Mickey reinforces my view that Indonesia now has one of the more credible governments in the region - although, of course, it needs it.

29 October 1999:
NAV at the month-end is US$19.05, up 45% ytd (before fees). Yet further legal delays may push the launch into the second half of November rather than the first, but we seem today to have made a breakthrough of sorts so I am optimistic that (a) this will not slip further, (b) I can go back to visiting companies. Our existing portfolio of companies has been steady for the last two months; the corporate news is all fine, and the value excellent. Meanwhile, I have a long list of promising investment ideas which I am researching and checking - as long a list now as I ever remember.

27 October 1999:
Bank of Bermuda's lawyers are driving me nuts, and we will now be open to subscriptions for the new fund only in the first half of November. The good news is that, with Wall St fragile, I think this will be an excellent time to invest. Paperwork available soon!

Richard Jones of ING Barings, who has recently been meeting investors in Hong Kong and Singapore, notes "Y2K paralysis and a phenomenon which could crudely be summarised as career management". Y2K directives, often emanating from compliance and admin departments, are restricting fund managers from adding new names, pushing them even closer to benchmarks, and imposing blackout periods for trading. Career wise, "most Asian fund managers have had a good year in terms of performance" and have "not a significant desire to take additional risks against a soggy market background, with the added hassle of the Y2K issue. The trend has been towards the benchmark and then close up shop for the rest of the year! The sharp drop in volumes, with the additional burden of a seemingly more difficult external background, have merely compounded the problem as well as made everybody more and more comfortable with this stance." Interestingly, he also reports "some cash raising, but limited redemptions" - so if redemptions and Y2K disasters do not materialise, there could be an explosive New Year rally as everyone scrambles back in. Meanwhile, the next couple of months should be particularly good for bargain hunting.

23 October 1999:
Nursing the scars from excess, Asian banks may be reluctant lenders for years to come. Andy Xie of Morgan Stanley has gone on to sketch the implications, and this interpretation is most encouraging for a stock-picker:

"Restructuring is painful and will never be done voluntarily. The Asian restructuring story should not be judged by business leaders' willingness to change. Rather, macroeconomic forces will liquidate those who are unwilling to change. As the Asian money game shifts from banks to stock markets, business leaders will also change. Banks care about collateral and take comfort in size. Successful Asian business leaders have built up large conglomerates with hard assets to make banks happy. Stock markets care about profit and growth. Asian restructuring will not only lead to lower leverage, but also focused and profit-oriented companies.

Corporate restructuring so far in the region is certainly slower than expected. This is not surprising as the paramount goal of most family-controlled companies is to maintain control. However, as bank financing will not be available for some time, these family companies will have to become true stockholding companies and raise money in the stock market. As stock markets will be flooded with choice, companies that refuse to restructure will not obtain funding and so will just disappear. This is why we are optimistic about [Non-Japan Asia's] restructuring prospects."

Andy's thoughts on the sectoral implications:  (1) "banks and properties will likely be structural bear stories" for a decade; (2) "the stock market will give funds to companies with growth rather than assets. This opens the door for the rise of small and idea-oriented companies, especially in technology and services." (3) "articulate marketers will replace quiet networkers among Asian corporate leadership. Networking has been considered the expertise needed for success in Asia. This is because only a few people, including government officials and bank owners, make decisions on bank financing. To raise money in the stock market, a corporate leader must convince thousands of investors of his or her business plan. Silence is no longer golden."

22 October 1999:
Malaysia has got something right! No sooner had David Webb and I bemoaned the corporate disclosure situation  in Hong Kong and Thailand than the KLSE (doubtless coincidentally) quietly set up web access to listed company announcements. There is no archive of annual reports, prospectuses and circulars, at least as yet, but it says that all such documents will be posted in future.

Chris Wood of ABN-AMRO continues to put the case for investment in Asia most lucidly - and to do so despite a bearish view on the US. He is "...amazed to read about celebrated talking heads predicting double dip recessions in Asia next year on the view that nothing has changed in Asia and that no lessons have been learnt from the crisis. These people are plain bonkers. The changes are enormous, be they top down or bottom up. Nissan is being run by a Frenchman. Daewoo is being dismantled. Indonesian presidents are being elected by open votes live on television and US$500m Internet deals are being placed in Hong Kong. The rate of change in a positive direction could hardly be more intoxicating. Buy Asia."

18 October 1999:
3Q report posted. My latest NAV figure is US$18.90, but that is mid-morning, and Hong Kong is shut for grave-sweeping, so we have not yet felt the full impact of Friday's Wall Street falls. A summary of terms & key features for the Apollo Asia Fund has been posted. The extraordinary volumes of legal and regulatory paperwork are progressing, and the Fund is due to be open to investors by the end of October, or at the very latest early November. When ready, the Apollo 001 Fund will be folded in, so that I just have one basket to watch, and a strong vested interest in the eggs therein.

6 October 1999:
NAV fell 6% in September, to US$18.68, but rebounded to US$19.04 at today's close. The paperwork for the Apollo Asia Fund is progressing. Our three plantation companies all reported respectable earnings, warned of a poor six months to December, and announced significant dividend increases - the latter presumably reflecting some long-term confidence in the face of short-term adversity.

24 September 1999:
Problems with our Malaysian internet provider over the last couple of days are unexplained, and our jaring e-mail is for some reason inaccessible. The website is now in two locations:  www.apolloinvestment.com on a US server, and www.aimskl.com/Apollo (discontinued 2002 - Ed.)

Best contact e-mails: research@apolloinvestment.com for company announcements, brokerage research, etc;  cbarnes@apolloinvestment.com for Claire Barnes;  and info@apolloinvestment.com for general queries.

The market declines over the last two days have taken their toll, and NAV at today's close was US$18.63.

Seemingly interminable legal and bureaucratic delays have been holding up the Apollo Asia Fund, which I now expect to be available to professional and qualifying investors some time in October.

16 September 1999:
A long-germinating article on the dissemination of corporate information and the responsibilites of stock exchanges has been posted here. NAV is now US$19.16, down 4% month-to-date.

6 September 1999:
Holders of very different views on international stockmarkets and global financial stability can agree on one thing: the relative attraction of Asian markets, arguably an all-way bet.

5 September 1999:
Updating spreadsheets last week on two very different companies in our universe, I was struck by the similarities in some key numbers, and even more struck by the differences in others. The one I sold has since gone up more than the one I bought - so my decision would now be even more clear-cut. Our type of company may shed some light on the companies the Fund will seek to buy, and on the many opportunities it is likely to miss.

My final diatribe on UAF looks at on the surprisingly wide range of lessons and issues arising from what should have been a safe investment. Never let it be said that I don't do my best to scare off new investors. The Fund's historic performance, of course, includes this disaster. Fortunately some of our other investments have done rather better.

4 September 1999:
Added a further comment on dollar cost averaging, which the Apollo Asia Fund will be happy to accommodate. This note also includes the latest absolute and relative performance charts for the Apollo 001 Fund.

Some readers will share my concern about the dangers of the US stockmarket bubble. One of the first columns I read in the morning, along with various subscription products, is Bill Fleckenstein's Market Rap, which is both recommended and free - fellow cynics and potential converts may find this at [old link deleted].

2 September 1999:
NAV has been hopping on the spot for two months, and at the end of August it was US$19.91, up 52% before fees for the year-to-date. We have made relatively few changes in the portfolio of late, since our companies continue to perform well operationally and to represent outstanding value:  we now estimate the current year portfolio PE to be 7.5 (representing an earnings yield of 13%), with an after-tax dividend yield of 7%. Annualised turnover for the year to date has been of the order of 15% - it won't necessarily stay so low, and if market volatility rises again it could be dramatically higher, but we try to avoid unproductive churn.

The restructuring of the Fund has been held up by the Mandatory Provident Fund rush in Hong Kong, but we hope to finalise all the paperwork in the next couple of weeks and welcome new investors in September and October. The Apollo Asia Fund Ltd will still only be offered privately, to professional and qualified investors.

Sharp-eyed investors may notice that the prospective dividend yield on our portfolio has fallen over the last two months although the NAV is little changed. None of our companies have caused us to cut our dividend forecasts: this results from rebalancing of the existing Malaysian holdings, in favour of one very high-growth company with a payout ratio currently below our portfolio average. Rest assured that the management makes very good use of the earnings it retains.

27 July 1999:
2Q report posted. Regional markets stabilised today, and the NAV at the close was US$19.65.

26 July 1999:
NAV at end-June was US$19.75; last week it was somewhat better at well over US$20, but as of this evening we are back to US$19.55.

Many of our companies have been reporting, and the only surprises have been pleasant. Profits and newsflow have generally been in line with my expectations, but the dividends have in some cases been substantially higher. One of our HK shares for example has now paid or declared dividends amounting to 45% of the cost of our first purchases, less than a year ago - and the company remains a market leader in its growing niche. Overall, our portfolio is on a prospective current-year PE of 7.6, and an after-tax dividend yield of 7.8% - valuations which, in combination with the quality of the companies and managements concerned, give me considerable comfort. UAF has gone from the portfolio, so investors need face only one more diatribe on the background. I hope to post the 2nd quarter report tomorrow. Apologies for the delay:  I returned last week from a trip to the communications-deficient archaeological site of Caesarea Maritima and have had a busy few days of company meetings. Again, these have tended to confirm my happiness with existing holdings, and the frictional 3% cash in the portfolio will be swiftly deployed therein.

25 June 1999:
NAV is now US$19.85, up over 50% ytd before fees; Asian markets as a whole have risen on a strong tide of liquidity, with high domestic savings supplemented by foreign portfolio inflows. Some of our companies have been moving up, and all appear in good shape with business as normal, but all of the March figures are still awaited, and there is no fundamental news to report. Our one real dog, the convertible bond of Union Asia Finance, is seeing some discussion on the proposed restructuring; I hesitate to say either progress or even a real negotiation, but the situation should become clearer in the next few months. In our valuation they are marked to the only bid price which appears substantive, 10.5c, at which price even the inadequate BankThai offer would represent a 22% baht yield to maturity.

16 June 1999:
NAV is now US$18.04, up over 9% month-to-date and 37% ytd; these figures are before accrual of fees. The only actions taken have been to top-slice or temporarily eliminate some of the higher-flying shares and rebalance into shares I now consider more attractive. Mostly I have added to existing positions, as I prefer a relatively concentrated basket of our high-quality companies to the opportunities I can find elsewhere. In the last three months I have added just one new name to the portfolio, and that is a company which I first visited fifteen years ago. This is now one of our larger holdings:  to give an idea of concentration, the largest position represents 13% of the portfolio, and the top six account for 63%. I generally initiate new positions at a maximum of 10%.

As a result of the rebalancing, despite the rise in NAV, the ordinary share portfolio is still by my estimates on a current year PE of 7.3, with an after-tax dividend yield of 6.4%. I expect earnings growth for next year of the order of 20%. By "current year" I mean the next financial year to be reported; 37% of our portfolio is in shares due to report shortly for the year which ended in March 1999, with a further 22% on financial years running to June 99, so a fair proportion should be already in the bag. I should stress that we keep a very close eye on the growth potential, the quality of brands or franchises, and on companies' ability to generate free cash flow - we try to buy good companies, and this is not just portfolio-management-by-numbers.

Despite the rise in NAV, and the risk of serious turmoil when the US bubble bursts, I have been steadily subscribing new money to the fund.

15 June 1999:
My article on the Bank of Thailand's appalling behaviour over Union Asia Finance prompted wry recognition from a fellow fund manager, who almost made me fall off Boat Quay with "of course, they have done this before..."  Apparently the central bank committed - firmly and irrevocably - to underwriting a rights issue for Finance One at Bt10, when the stock was trading at less. My friend, well aware of the financial state of the company, nevertheless invested on the strength of the BoT's undertaking. The BoT reneged, and shareholders were wiped out.

Asian companies frequently assume that they can abuse shareholders with impunity because there will always be new 'cannon fodder' - hence the welcome frequently accorded to promising new stockbrokers arriving in Asia. I benefitted from this myself, back in the early eighties, and quickly met some very interesting tycoons. Over the years I have dodged quite a few cannon balls, so it is distressing to fall victim to gunners from an ostensibly blue-chip institution.

These Thai fiascos highlight various deficiencies in the functioning of the markets, as well as in the collective institutional memory. This is directly relevant to the efficiency of capital allocation - key to the last Asian crisis, and not necessarily improving, now that the markets are awash with liquidity. Policy makers should be interested in the many small changes which could improve transparency and efficiency. Maybe we investment professionals should be collaborating with the better regulators to examine anomalies and compile positions on regional 'best practice' as well as a chamber of horrors. Maybe Singapore can develop a better bond market. (Maybe Kuala Lumpur can become a regional financial centre... no, only kidding, the government have blown this one for the time being - although who, one year ago, would have thought that it could become Asia's best city for lovers of classical music?)

1 June 1999:
The fund's NAV rose 25% in May, to US$16.48, even as the big-cap stocks lost steam. Cumulative outperformance of the MSCI Far East-ex-Japan index now stands at 40%.

6 May 1999:
Panic buying of Asian markets by underweight institutions, coupled with savings rates which are unprecedented even by Asian standards and very low local interest rates, have driven the Singapore index and many Hong Kong big-caps to pre-crisis highs. For non-momentum investors, this can be justified only in relation to bubble prices in the US and Europe. Hong Kong now has very positive real interest rates, and Singapore may get every policy move spot-on but now has the neighbours from hell. Our small-cap portfolio has been making reasonable gains, and looks to us infinitely more attractive:  see update on portfolio value.

30 April 1999:
NAV is up 21% for April and 12% year-to-date, but I am uneasy about the stampede into Asian markets, and incensed by press reports of the proposed Malaysian restructuring of CLOB shares. Valuations of big-cap shares are again looking stretched, although our portfolio remains highly attractive.

19 April 1999:
I should have waited another half day: the portfolio was up 5% this morning! A feverish rush to re-enter the Asian markets was not something we'd expected. I have placed an order to take partial profits on one of our broking stocks, which is gapping up and has almost tripled since purchase, but will be making no other immediate changes. Some of our stocks are now seeing sudden sharp moves, after long periods of inactivity - this is characteristic of small companies, especially now that the number of analysts and fund managers watching them has thinned dramatically.

On the website of AIMS Asset Management is David Crichton-Watt's latest letter to investors in the Floreat Fund, highlighting a number of special-situation stocks offering equally spectacular value, but also highlighting the deficiencies of an open-ended fund structure. Investors rarely recognise quite how damaging these can be until personally caught out. This is, however, why I wish to discuss appropriate structures personally with would-be investors.

18 April 1999:
The fortnight's delay in posting the 1Q report has fortunately enabled me to report a recovery, so NAV is now unchanged year-to-date. This is disappointing, as money is once again pouring indiscriminately into Asian big-cap stocks, but we prefer the game we are playing. Meanwhile our companies are steadily laying the base for strong future growth, and the valuation numbers for the overall portfolio are extraordinarily attractive.

3 March 1999:
New feature article: Perfidious Thais. Subject matter: put not your trust in central bankers. Classification: soapbox.

1 March 1999:
NAV is down 7% for the first two months of 1999, but none of our companies have produced any disappointments, and their specific operational news has been generally quite positive - which is more than can be said for the macro headlines. The portfolio numbers remain very attractive: 6.0 times expected current year earnings (this is based on the next full year to be reported, which in many cases are for Dec 98 or Mar 99), and 5.1 times next year's. We are more concerned about qualitative factors than fine-tuning the forecasts at this stage of the cycle, but 1998 was hardly an easy year, and for all our companies the earnings are believed real. The after-tax dividend yield on the portfolio is estimated at 7.3%, and price-to-historic-book is 75%.

27 February 1999:
Some of the recent headlines in Malaysia have been rather depressing, as have the tribulations of our friends with the computer virus Happy99. Sabri Zain has excelled himself with his latest parody, so I have added a link in the poetry & doggerel section.

6 February 1999:
Performance in calendar 1998 relative to funds in Lipper Hong Kong's database:  the Apollo 001 Fund, had it been included, would have outperformed all Asian funds in the database except the specialist Korea funds, which were up by between 24% and 124%, and GAM Singapore/Malaysia, which was up 33%. (Congratulations, Adrian and Mike!) As always, past performance should not be regarded as any guide to the future.

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