In This Week’s Issue…

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

Milltrust International partners with WWF and EISAL in the Fight Against Climate Change

Climate change is a major issue for investors with implications far beyond visible catastrophic risk. One area where these risks most likely lurk is embedded in investment portfolios. Institutional investors are becoming more aware of the risks to their investments from climate change and we have started to see some investors in Europe and the US taking action on this issue. WWF-Hong Kong’s finance program’s core objective is to get investors in Asia to start taking action. In Asia, climate change awareness and the motivation for action is relatively low.

It is within this context that Milltrust InternationalWWF-Hong Kong and Environmental Investment Services Asia Limited (EISAL) are pleased to announce their new partnership and collaboration for the upcoming launch of the Climate Impact Asia Fund, a liquid long-only equity impact UCITS strategy that invests into leading companies in Asia that are actively focused on tackling environmental pollution and climate change.

Additionally, a meaningful portion of the Fund’s fee revenues will directly support WWF-Hong Kong’s conservation projects in Asia whose mission is to stop the degradation of our planet’s natural environment and build a future in which people can live in harmony with nature.

Key Story

 

The MSCI Emerging Markets Index has retreated nearly 20 percent since a peak in January, but has just resisted falling into a bear market as a commodity rebound and a pause in the U.S. dollar’s rally helped the benchmark index pare losses.

Emerging economies hold the key to sentiment, with recent losses fueling fears that turmoil could spill over into developed markets. While focus remains on efforts from Argentina to Indonesia to sustain confidence, the potential for President Donald Trump to announce another round of tariff hikes on Chinese imports as soon as Thursday also looms large.

Asia is bearing the burden of turmoil far from its shores, thanks in part to benchmark indexes that leave the world’s fastest-growing region particularly exposed when investors opt to dump emerging markets as a class. Its growth and market development mean Asia in some sense has become a victim of its success, dominating the broader emerging-asset universe, especially when it comes to equities. Deepening financial linkages between China and the rest of the world are also elevating the role of the world’s No. 2 economy.

Despite the contagion risk, some investors have seen the selloff as an opportunity to buy on the basis of stronger fundamentals, such as easing inflation, trade surpluses and widening growth differentials between emerging and developed markets.

Key Feature

 

Emerging Markets have been hit with a severe bout of risk-off in August stemming from heavy selling relating to the deteriorating crisis in Turkey. Latin America was not spared and the market sell-off in Brazil was exacerbated due to presidential poll results which showed an alarming improvement for the left wing-workers party (PT), along with heightened populist rhetoric from the parties leading candidates.

In a macro context, it’s worth noting that Brazil’s balance of payments has never looked better, with a marginal current account deficit that’s more than fully funded by foreign direct investment. Interest rates and inflation are at multi-year lows, and reserves are over 200bln. The main weakness is the fiscal deficit, but Brazil is nothing like Turkey, despite the related sell-off. Going forward, the upcoming presidential election will be the main driver of assets in Brazil, but we take comfort in the fact that the market appears to be pricing in a negative outcome.

The market sell-off in Argentina worsened as well, due to a corruption scandal involving former President Cristina Kirchner. Although this is a structural and political positive for the country as it discredits the countries leading populist entity in Argentina, the market sold off heavily given concerns that the scandal would or could implicate corporate Argentina. We believe the market is over-extrapolating from Brazil’s own Lava Jato scandal and that the effect on corporate Argentina will be limited.

Key Investment

 

BeiGene focuses on oncology therapeutics and develops drugs through both in-house R&D and cooperation with branded names. The company now has 200 employees in R&D, a global clinical team of 300+, and a sales team of 200. In house, it has three proprietary programs, namely zanubrutinib (BTK inhibitor), tislelizumab (PD-1 antibody) and pamiparib (PARP inhibitor). In-license, it acquired commercial operations in China of ABRAXANE®, REVLIMID® and VIDAZA® from Celgene in 2017. We like the company’s growth potential for its manufacturing capabilities, applying for a global label, doing clinical trials on broad labels and experience in commercialization. The company announced strong first quarter results at the beginning of May. The Celgene products showed good results. Its Zanubrutinib and BTK clinical updates have been positive. Beigene also added the heavyweight professional Xiaobin Wu as the General Manager of China. He was most recently served as the Regional President of China for Pfizer who has the largest Chinese pharmaceutical business

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