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

In Asia, the IMF expressed concerns on China’s continuing rising levels of debt which is posing “large risks” to the economy. This serves as a stark reminder on the importance for investors to navigate their China-focused investments carefully at this particular juncture. At Milltrust, we favour professional, locally-based investment managers such as Fang Zheng CIO at Keywise Capital and manager of Milltrust’s Keywise China Fund, who is specifically avoiding some strong performing sectors such as Chinese real estate which he deems at risk from increased government controls, regulations, and the introduction of new taxes in 2018.

Of course, China remains full of ground-breaking ideas and initiatives which can spur growth, and create fundamentally sound investment opportunities, the latest being the idea of creating a “mega regional market” with India in order to tap into the huge demand of over 2.5 billion people living in both the countries.

In India, the equity market has been going through a consolidation phase with indices shedding around 300-350 points from their highs in the recent past. This is likely just an end of year profit booking taking place, according to Ramesh Damani, member of the BSE, and there should not be a reason for investors to panic.

As an interesting trivia fact, Bitcoin’s stratospheric rise in the last month means that the market cap of the bitcoin is now greater than that of any Indian company listed on any of the stock exchanges in the country. In fact, it is more than the market cap of the top two companies — Reliance Industries and TCS. Investors should be rightly worried that cryptocurrencies could face greater regulation going forward, as recently demonstrated by Bank Indonesia declaring bitcoin payment illegal due to the “huge risk’ that cryptocurrency volatility poses to the economy. Yet, the cryptocurrency craze suddenly doesn’t seem so crazy in countries that know a thing or two about hyperinflation and this has prompted Latin America’s wealthy families to buy up Bitcoin.

Inflation is no longer the immediate concern in Brazil though, and continues its decline while the economy inches forward from a brutal recession. Policymakers at the Brazilian central bank on Wednesday cut the benchmark Selic rate by 50 basis point to a historic low of 7 per centreflecting the improved state of the economy.

In the Middle East, clashes erupted in the occupied West Bank and over the Israeli-Gaza border and tensions rose in the wake of President’s Trump’s announcement to switch the US embassy to Jerusalem. His policy shift was condemned across the Arab and Islamic world.

Elsewhere, the World Bank approved a $1.15bn loan in support of Egypt’s economic and fiscal reform program, while the UAE said it had a clear and comprehensive vision to diversify its economy and achieve an optimal balance between its various sectors to ensure sustainability and create new business opportunities.

In Africa, South Africa is now at a crossroad with the African National Congress (ANC) about to make one of the most important decisions in its 105-year history when it chooses the party’s next leader during its upcoming elective conference in Johannesburg.

And finally, Russia’s Vladimir Putin said he will seek another term as president in next year’s election; an announcement that most likely comes at no surprise to anyone.

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