In This Week’s Issue…

by Alexander Kalis Managing Partner & Head of Investments at Milltrust International

In Asia, Chinese President Xi Jinping was enshrined in China’s Constitution, an honour only previously granted to two other leaders Mao Zedong and Deng Xiaoping. CNN explores what an all-powerful leader in China means for the rest of the world, while Forbes considers how his One-Man Rule is likely to impact the markets, in particular with risks for credit to continue to be funnelled into unproductive SOEs in order to propel growth. Meanwhile, there is also greater importance being put on environmental protection, an area which is set to benefit strongly from significant investments going forward, in particular in areas ranging from new energy and electric vehicles to energy conservation and sewage treatment.

In India, Leo Puri, Managing Director at UTI, claims that India is in the middle of a 3-5 year recovery and the earnings recovery will happen slowly over the next few years. These views are corroborated by Livemint, who put forward that recent data releases ranging from cooling of inflation to a rebound in exports and factory output suggest a favourable shift in the economic climate, recovering from the disruption caused by GST rollout and last November’s demonetisation drive.

Thailand has laid to rest King Bhumibol Adulyadej in a final farewell ceremony which has drawn thousands of his supporters. Meanwhile, Thai markets have seen continued strength and the global forecast for Asian markets remains firm thanks to solid earnings news generally and support from crude oil prices.

In the Philippines, the country has been battling a weakening peso which has now reached an 11-year low. This is despite the country’s economic fundamentals being sound with low inflation, a growing economy, and a moderate current account deficit, as explained by Bangko Sentral ng Pilipinas Governor Nestor A. Espenilla Jr.

Finally, in Singapore, Grab, one of Milltrust’s private equity investments in Singapore, announced it was taking on US$700 million in debt to expand its car rental program. Uber’s competitor in Southeast Asia, already claiming to be the leading on-demand transportation platform in the region, now targets to also be the region’s biggest rental car fleet by this time next year.

Moving on to Latin America, Scott Piper, Manager of the Milltrust Latin America Fund has kept an underweight position to Mexico. He explains that the Mexican economy has been sustained by consumption, which has given signs of weaknesses recently. Industrial production has failed to take advantage of a weaker currency and still has posted downbeat numbers. This is all in a context of relatively high valuation of the Mexican equity market. Meanwhile, other industry players are actively betting against the country due to NAFTA renegotiation risks of a worst case’ or no-deal scenario gaining significantly.

In Brazil, President Michel Temer’s administration turned its attention today to pressing its reform agenda, but it is unclear if it has the support to govern after convincing a small majority in Brazil’s Congress not to suspend the leader and make him stand trial on corruption charges.

In the Middle East, Saudi Arabia continues to press ahead with market reforms, opening up its IPO market to foreign investors. The country is also announcing bold initiatives to further diversify it economy from oil, such as NEOM, the £380 billion new city tech hub to be built across the country’s borders with Jordan and Egypt. Meanwhile, plans for Saudi Arabia to return to ‘moderate Islam’ has been met with some scepticism.

Finally, in Russia, Putin urged for the economy to become more dynamic and efficient, and activate new sources of growth.

We hope you enjoy this issue.

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