On May 20th of this year, the army in Thailand declared martial law, at the same time denying that what it was doing constituted a coup. Two days later, when the military imposed a 10 PM curfew, it also conceded, “okay, yes, this is a coup.”
That was just a part of the extremely volatile political environment in the region this spring. Another part: China’s intense bilateral dispute with Vietnam over territorial claims. By the middle of June, at least, the parties were back on speaking terms.
The forms part of the backdrop of the latest GFIA Research Insights.
GFIA says that most of the Asia Pacific managers it tracks generated substantial returns above the relevant index in May 2014. Especially successful managers include New Harbour Asia, NT Asia Discovery, and Albizia ASEAN. In the case of Albizia AEAN in particular, its holdings in Thailand benefited from the coup.
The long-biased firms did best in Asia, their event-driven peers … not so much. Athos Asia had what GFIA describes as a “decent month” at 0.7%, which GFIA attributes to its exposure to Australia, a continent that has seen “significant renewed deal activities” and concomitantly with that, compelling opportunities.
Pengana Asia Special Events ended the month flat, losing on a single “Hong Kong M&A event” everything it had gained elsewhere.
|GREATER CHINA||May 2014||YTD 2014||2013|
|Shanghai SE Composite||0.5%||-4.6%||-3.8%|
|AsiaHedge Chinese Long/Short Equity||0.7%||-3.7%||16.8%|
Source: GFIA Research Insights June 2014
Looking now at Greater China, you can see that the index numbers were bullish for May, very much so in contrast to the lousy numbers (excepting for Taiwan) for the year to date.
The report attributes this general bullishness to several factors, including market expectations of a Required Reserve Ratio cut by Beijing. The People’s Bank of China had cut RRR for some banks in April, but added others – mainly rural and smaller banks – in another reduction announced in mid-June. The report also cited the “recovery of China’s exports and the related value chain.”
In this context, managers underperformed. In fact, the cautious turtles went unrewarded for now, while the ambitious/optimistic hares did better. Acru+ China posted just 0.04% up in May. Its managers are playing a cautious game, expecting that the market will be “locked in a trading range before the macro picture and policies become clearer.”
Pinpoint China (0.6%) did somewhat better, and is somewhat more optimistic. Its managers see China’s economy bottoming out in the fall.
Quam China Focus Segregated Portfolio, which had come into May after two consecutive negative months, turned things around with a 2% performance on the upside. Their portfolio contains a lot of technology, media, and telecomm assets.
Greenwoods Asset Management’s Golden China Fund is up, and back into the black after two months in red terrain. Golden China, too, has a lot of TMT, along with assets in the Tourism and Energy sectors. It was up 2.1% in May.
Pure Heart Natural Selection and Open Door China Absolute Fund are two funds taking a defensive approach to the current environment. Their returns were both positive, though low, for May (0.4% and 0.7% respectively). Open Door “is keeping a high cash position to be deployed opportunistically during trust defaults which are expected to surface as the number of trusts maturing reaches a peak in May and June.” So we may learn more about the success of that defensive position later this month when June’s numbers come in.
|Emerging Markets||May 2014||YTD 2014||2013|
|MSCI FM Central & Eastern Europe & CIS||2.3%||0.0%||7.6%|
|Eurekahedge Eastern Europe & Russia||0.1%||-5.1%||-1.8%|
|MSCI Arabian Markets ex SA||3.5%||17.1%||14.9%|
|MSCI FM Africa||4.6%||0.4%||25.9%|
|JSE Africa All Shares||3.7%||7.8%||-4.8%|
|Global Indices Single Manager African||1.8%||6.1%||13.5%|
Source: GFIA Research Insights June 2014
Russia had a good month in May 2014. Indeed, this was its best single month in more than two years. In part, this came about because tensions within and over neighboring Ukraine lessened somewhat in May.
Kazimir Russia Growth outperformed Micex by a wide margin, its focus on the consumer and information technology sectors paying off.
Nigeria was the top performing country in Africa, and Duet Africa Opportunities had a good month, up 2.2%.