LATIN AMERICA – by Itaú Asset Management
The election of Donald Trump surprised the markets as polls had indicated the victory of Hillary Clinton. Financial markets are reacting negatively to the outcome, although some are reacting worse than others. Donald Trump ́s proposals, his trade protectionism bias in particular, represent a risk to economic activity to many economies, especially in emerging markets. In Latin America, the biggest risk lies with Mexico, given the level of exports to the US as well as the level of integration of the two economies. It is difficult at this point to quantify the level of risk aversion which will prevail in global markets. Nonetheless, it is also important to highlight that, markets’ initial reaction isn’t necessarily an indication of the future as the Brexit event has shown. As was the case in June, Central Banks will likely have to remain supportive, maintaining the monetary policies looser for longer and, therefore, providing a support to equity markets. Also, although we do not minimize the relevance of Donald Trump ́s election and its risks, but we remind our clients the strength of institutions in the US. All relevant possible changes, such as revisions of trade agreements, must be discussed and approved in congress. So despite the importance of the position, a President, has his power restricted by other institutions.

As for the Portfolio, we have been positioned conservatively to face this outcome with a Beta of 1.02. We have been overweight Brazil, an economy fairly closed, much more dependent on its own domestic market than on exports. We currently have a neutral in Mexico, a decision taken to decrease the Portfolio’s risk given the binary nature of the presidential election in the U.S. We are analyzing the new scenario and will act on the portfolio to minimize risks and to take advantages of possible opportunities.

INDIA – by UTI International 
I would want to cover the impact of US election and another big development of demonetisation of the currency notes of Rs 500 and Rs 1000 which has come into immediate effect from November 7 midnight .

Trump win in the US elections
There has been lot of apprehension on trump winning as he has promised a protectionist policy and hinted in taking measures to improve the local production and stimulating local growth. It is heartening to note that he has not commented anything negative on India as such and in fact his sound bytes on India has been positive . Of course, if USA resorts to protectionist policies, there remains risk of slowdown in the exports sector which exports meaningfully to USA, however given that we are domestic driven economy the impact will be much less. There could be impact on IT services, there could be scenarios of disruption in the offshore IT delivery which looks unlikely given the massive scale of the offshore IT industry which can cause chaos in the US corporate system, however there could be increased cost of visa compliance and local hiring which can dent margins of the IT firms . In our view, the IT sector has underperformed massively in the last one year and this represents an opportunity to increase exposure as there will be cyclical recovery in the business next year and more important the free cash flow yields are very attractive on this sector. The other outsourcing sector Healthcare will see less impact as he was not focussed on pharma pricing .  US remains one of the largest FDI investors in India , there could be some risk in case trump forces the companies to repatriate the cash back to USA .

Demonetization of the currency
In a significant move , the government banned the current Rs 500 and Rs 1000 notes with immediate effect and new notes would be introduced . This move is intended to curb corruption and black money or parallel economy which is estimated to be around 20% of the formal economy . All the old 500 and 1000 INR notes have to be exchanged with the banks after giving identify proof and income above a certain level can be taxed . On the longer term , this is a masterstroke which will integrate the parallel economy with the formal economy and boost the tax GDP ratio significantly . This has huge implications for consumption in the long run, however as large part of the system runs on cash , this can create short term disruption in consumer facing sectors which accept cash . This move will hurt the real estate and jewelry sector which are the favored parking places for unaccounted money and there could be sharp fall in the real estate prices and jewelry sales . On the longer run , this will channelize the savings from real assets such as real estate and gold towards financial products which bodes well for the long run.  The supply of cash into the system will also lead to lower inflation and increase in the deposits can push the banks to purchase more of government securities which can lead to lower rates and thus more rate cuts cannot be ruled out .

We see short term negative implications for consumer discretionary in particular , however the long term prospects looks very good the industry .

In terms of positioning , we are looking to increase exposure more towards auto ancillaries from auto OEM and would look to increase positions in healthcare and IT given the short term stress in consumption related sectors. this is more of a tactical play . On the longer run, we remain positive on financial services and consumer discretionary.

CHINA – by Keywise Capital
Before the US election, we were prudently positioned and the exposure was at around 82% as we reckoned at that point there were uncertainties that will affect the market sentiment. Yesterday morning during the count of vote of US election, the market did experience extremely sharp volatility in Asia and our cautious approach paid off and protected the performance of the fund with relatively low exposure

As now the US election uncertainty is removed and we see initial sign of market stabilization, we remain cautious over the next few weeks until we have a better view. The economic indicators are mixed in China. While most reported numbers in the last few months are on the steady side and pointing to a managed slowing-down, the deprecation of RMB is accelerating and causing some market concerns. Our assessment is that macro-economic conditions will remain steady in the next few months, and RMB depreciation will be a gradual process.

We remain constructive towards the market in the mid-term.  The implementation of Shenzhen-Hong Kong stock connect is a major event and will improve liquidity in Hong Kong and Shenzhen. It will help to fulfill the requirement of MSCI inclusion of China to the index.  The valuation in Hong Kong is not stretched either. We believe that this should reward stock-picking approach really well. We will closely monitor the development in China.

ASEAN – by Lion Global Investors
​Trump’s victory  has certainly taken markets by surprise, including ourselves. The initial market reaction has been a selloff in Asian equities and a decline in bond yields. This reaction is reminiscent of the market volatility that ensued after  the surprise Brexit referendum results.  Asia corrected as the market priced in the impact of protectionist policies which could materially affect exports and investments in the region. However, it appears that US investors think the fiscal spending policies and tax cuts proposed by Trump has a larger impact in lifting economic growth and inflation expectations in the US, compared to potential risks to the global economy if he pulls the US back from free trade.  As such, US equities have risen while bond yields in the US have spiked.

Markets will now focus on what Trump actually does and is able to execute. Not all of Trump’s policies are clear and there is significant uncertainty about the extent to which campaign rhetoric may be followed, though the main issues of rebuilding US infrastructure, tax cuts, and relooking at trade agreements such as NAFTA or TPP are all on the table. The focus will clearly be on increasing US growth. Any policies that are anti-China and anti-trade will have negative spill-over effects for Asian trade and growth prospects amid an already sluggish economic environment. A stronger USD as a result of higher growth and higher US rates could also lead to tighter liquidity for the region.

At this moment, the portfolio is defensively positioned with around 11% cash level. We expect  the US government going forward to be anti-globalization and this will have a negative impact on global trade. Countries in ASEAN with high trade to GDP are Singapore, Malaysia and Thailand. Indonesia and Philippines are more domestic driven. Unfortunately, Philippines are exposed to USA through the Business Process Outsourcing (BPO) business and also export of foreign worker to USA. We do not expect these activities to be reversed but will most likely stagnate in the immediate term, pending new US government policies. So only Indonesia stands out post the recent US election.

We are currently already overweight Indonesia and underweight Philippines, Malaysia and Thailand. So no major changes. On weakness, we will concentrate our buying on domestic plays

Milltrust SEDCO MENA Fund is positioned predominantly within companies that derive their revenues from the MENA region. The fund’s exposure in the petrochemical sector within Saudi Arabia which sells products globally (mainly to Asia) at a total weight of 11.12% of the fund is more correlated to oil and certain petrochemical products prices movements than it is to US foreign policy. As we understand the risk of a new US policy that would potentially put globalization in reverse which should put pressure on emerging markets generally (we are yet to see how this unfolds) the total portfolio remains significantly defensive with a total expected volatility of 12.9% compared to benchmark’s volatility at 18.8% and a beta of 0.67. Our top convictions in the aviation support space in Saudi Arabia, food producers in Kuwait, supermarkets operators in Qatar or logistics and mall operators in UAE should fundamentally remain immune to the fluid situation that the global markets are adhering to currently.

About Milltrust International Group
Milltrust International (“Milltrust”), the fast growing investment management platform, is an award-winning global investment organisation located in Singapore and London which offers investment advisory expertise focused on emerging markets, in liquid investments, real assets investments, and customised wealth management structuring for our affiliate’s regulated wealth management clients in Singapore.
Milltrust is regulated by the Financial Conduct Authority of the United Kingdom and our affiliate East India Capital Management is regulated by the Monetary Authority of Singapore. The Group is owned and managed by an experienced team that has been investing institutional capital for more than two decades. Milltrust’s investment solutions are specifically adapted for sovereign wealth funds, pension funds, banks, insurance companies, corporates, family offices and charitable endowments, which make up the majority of the firm’s clients. | | +44 (0)20 8123 8369