In This Week’s Issue…
by Alexander Kalis Managing Partner & Head of Investments at Milltrust International

President Trump concluded his trip to Asia this week which included stops to Japan, South Korea, China, Vietnam and the Philippines. Showing U.S. interest in the region, Trump’s multi-tasked tour also advocated “America First” by putting an overemphasis on bilateral trade, touted the “Indo-Pacific” policy and reassuring allies.

In India, a country which Trump wants to make the core of his Asian policy, the economy remains on track to grow by 6.8% in 2017-2018, and 7-7.5% in 2018-19 as businesses are expected to recover from the impact on the GST rollout.

On the other hand, China’s economy continued to slow in October, as the country put the brakes on real estate and pollution. One recent new Chinese rule has mandated a boost in electric vehicle production which is raising fears of a glut of battery-powered cars that carmakers will be hard pressed to sell, possibly triggering a war of attrition.

Yet, Morgan Stanley remains bullish as IPO activity in China has picked up significantly, and we are seeing a healthy pipeline of high quality ‘new economy’ companies with scale coming to the market. This reflects the successful rebalancing of China’s economy over the past few years from a factory-led model of growth to a more diversified one including a broader mix of services and consumption.

In Southeast Asia, the ASEAN Summit did not tackle many of the region’s problems, with critics saying that it only aimed at projecting the Duterte administration as the head of the regional bloc. Observers also deplored the Southeast Asian leaders’ missed opportunity to condemn the two major human rights issues affecting their region: Myanmar’s handling of the Rohingya crisis and the Philippines’ bloody campaign against illegal drug traffickers.

Moving on to Latin America, S&P Global Ratings declared Venezuela to be in default after it missed two interest payments on its debt. Meanwhile, several Brazilian companies are racing to go public before the end of the year, amid concerns a wide-open 2018 election may cool demand for new stock issues.

In Africa, in a murky episode that is still unfolding which follows last week’s dismissal of Vice President Emmerson Mnangagwa, the Zimbabwean military took temporary control to ‘target criminals around the head of state’. It looks as though the patience of the man known as “the crocodile” has finally snapped. President Robert Mugabe was said to be detained at his home with First Lady Grace Mugabe reportedly out of the country.

In the Middle Easttrade and tourism have made the UAE the best performer in MENA, while Saudi Arabia’s latest crackdown on corruption continues to impact markets and in particular oil which is now trading back above $60; a level likely to test OPEC’s ongoing solidarity.

Finally, commodities tumbled this week after industry data showed U.S. stockpiles unexpectedly rose. Russia added to the pain by stating it was too early to announce an agreement to extend output cuts. In terms of its economy, Russia’s growth slowed more than forecast, and was only being sustained through borrowed money, prompting some commentators to urge the country to undergo bigger structural changes in order to reduce its reliance on Russian consumers who are borrowing more to buy real estate and imported products.

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