Investing in high growth Asian frontier economies., Asia Frontier Capital

Scott Osheroff

Investing in high growth Asian frontier economies.

Asia Frontier Capital

Asia Frontier Capital Ltd. is a pioneering fund management company based in Hong Kong that specializes in investing in high growth Asian frontier economies by managing the AFC Asia Frontier Fund , AFC Iraq Fund and the AFC Vietnam Fund.

The AFC Asia Frontier Fund invests in public equities of Asian frontier countries that are seeing increasing consumption due to favorable demographic trends, rising incomes and high GDP growth. The fund invests in listed equities of companies that have their principal business activities in Bangladesh, Bhutan, Cambodia, Iraq, Laos, Maldives, Mongolia, Myanmar (Burma), Nepal, Pakistan, Papua New Guinea, Sri Lanka and Vietnam. The AFC Asia Frontier Fund is positioned to take advantage of the continuing economic shifts in these countries and offers high returns combined with significant diversification opportunities. This fund is directed by the founder and CEO of Asia Frontier Capital, Thomas Hugger, who has been investing in frontier markets across Asia and Africa for more than 20 years.

The AFC Iraq Fund was launched on the 26th June 2015 and aims to achieve long-term capital appreciation for investors by capturing value and growth potential in the post conflict high-growth & resource rich Iraq market. The fund emphasises long term investment horizon to truly capture the opportunity in Iraq. The fund's investable universe consists of locally listed companies that have their principal business activities in Iraq as well as foreign listed companies that have the majority of the business in Iraq as a whole including the prosperous Kurdish Region of Iraq (KRI). The AFC Iraq Fund offers access to investments in post conflict recovery potential of Iraq, including the KRI, and/or stability in its territory. The AFC Iraq Fund is managed by Asia Frontier Capital (Iraq) Limited, Cayman Islands under the executive leadership team of Thomas Hugger (CEO & Fund Manager) and Ahmed Tabaqchali (CIO) who have more than 47 years of investment experience as well as an extensive background covering global, emerging, frontier and MENA markets.

The AFC Vietnam Fund invests exclusively in listed Vietnamese equities to capture value in growth companies with a focus on the small to medium size companies. This market segment offers a unique investment opportunity as the valuation gap between large- and small-cap stocks in Vietnam is presently much wider than in comparable neighboring markets and the valuations are significantly depressed versus their regional peers. The fund adopts a fundamental-quantitative approach and employs an in-house earnings model to identify attractive companies where we see high growth opportunities. In conjunction with targeting the maximum upside potential the portfolio has been structured to mitigate corporate government and liquidity risks. The fund invests in a diversified portfolio of 70-90 attractively valued companies to carefully control concentration risk.  This approach allows the fund to sell, or buy, positions without having a significant market impact. The fund is directed under the executive leadership of Thomas Hugger and Andreas Vogelsanger who have more than 50 years combined experience managing investments in frontier markets, Asia and around the world.

For more information about the fund, management team and investment strategy please contact us at info@asiafrontiercapital.com.

Thematic (Sector/Industry)

<p>Though 2017 has started on an uncertain note surrounding the policies of the new US President, our conviction in the long-term story of Asian frontier markets is not diminished as these countries have very favourable demographics backed by rising disposable incomes, are going through political reform, and are benefitting from increased foreign investment due to lower wages relative to China. Further, companies in the Asian frontier markets are still relatively under-researched relative to larger emerging markets and therefore offer convincing long term opportunities.</p>

Though 2017 has started on an uncertain note surrounding the policies of the new US President, our conviction in the long-term story of Asian frontier markets is not diminished as these countries have very favourable demographics backed by rising disposable incomes, are going through political reform, and are benefitting from increased foreign investment due to lower wages relative to China. Further, companies in the Asian frontier markets are still relatively under-researched relative to larger emerging markets and therefore offer convincing long term opportunities.

AFC Asia Frontier Fund – 2016 Review and 2017 Outlook

Economist, Centennial Asia Advisors

Jason Tan

Economist

Centennial Asia Advisors

At Centennial Asia Advisors, we tell it like it is. We have no vested interests, no need for a China wall, and no reason to skew our outlook any other way. With over 30 years experience covering Asia’s political economy, you can be sure our conclusions and analyses are based on the unadulterated facts. Through years of fine-tuning our research methodologies, we deliver a quality of macroeconomic analysis few other houses can match.

Centennial Asia Advisors is an independent research and advisory firm that works with governments, multilateral institutions, financial firms and leading MNCs.

Economic Policy and Strategic Advisors

Macroeconomics

<p><strong>Destabilising capital flows push central banks into defensive mode:</strong></p><ul>
<li>
<strong>Bank Negara intervened in Nov 16 to restrict the non-deliverable forwards (NDF) market. </strong>BNM’s moves to restrict the NDF market have created uncertainty among portfolio investors, inclining them to sharply reduce their allocation of funds to Malaysia.</li>
<li>
<strong>The PBOC has undertaken a slew of measures to stem outflows</strong>, including placing higher scrutiny on citizen’s conversion quotas and stricter requirements for banks reporting…</li>
</ul>

Destabilising capital flows push central banks into defensive mode:

Bank Negara intervened in Nov 16 to restrict the non-deliverable forwards (NDF) market. BNM’s moves to restrict the NDF market have created uncertainty among portfolio investors, inclining them to sharply reduce their allocation of funds to Malaysia.

The PBOC has undertaken a slew of measures to stem outflows, including placing higher scrutiny on citizen’s conversion quotas and stricter requirements for banks reporting…


Asian Central Banks: Rising Regulatory Risks for Investors

Doing bespoke work since 2002....., Custom Products Group

Patrick Hansen

Doing bespoke work since 2002.....

Custom Products Group

Custom Products was started 14 years ago at Lehman Brothers by current co-founder Patrick Hansen, CFA. After 3 years at Lehman, Patrick moved the team to Macquarie Securities where Simon Rigney (co-founder) joined. 3 years ago we took Custom Products independent. 

Our core strength can be summed up three words. 1- Customization - we have very little off the shelf products and most work is done on a one on one bespoke basis. 2- Speed - We pride ourselves in our ability to get requests back to the client very quickly. 3- Confidentiality - We do not redistribute. There is no grace period where we wait a week and then mass blast. Any request stops with that client.

<p>Here is the Asian ex-Japan Hated by the Street screen. The goal of the Hated by the Street screen is to identify names where the stock price has been beaten up and the analysts have given up. However, the valuations have gotten to levels worth looking at. We measure the Street's Love / Hate of a stock by calculating the % of BUY recommendations to total recommendations. Below we have screened for names in Asia ex-Japan with</p><div class="sk-insight-content__block"><ol><li>% of BUY Recommendations below 30%.</li><li>PBR is currently 20% below the 7-year historical median PBR</li><li>Current PBR is less than 2x.</li><li>1-year price performance is below negative 10%.</li><li>More than 5 Analysts currently cover the name. </li></ol></div>

Here is the Asian ex-Japan Hated by the Street screen. The goal of the Hated by the Street screen is to identify names where the stock price has been beaten up and the analysts have given up. However, the valuations have gotten to levels worth looking at. We measure the Street's Love / Hate of a stock by calculating the % of BUY recommendations to total recommendations. Below we have screened for names in Asia ex-Japan with% of BUY Recommendations below 30%.PBR is currently 20% below the 7-year historical median PBRCurrent PBR is less than 2x.1-year price performance is below negative 10%.More than 5 Analysts currently cover the name. 

Deep Value and Hated by the Street in Asia....

Asia Economist and CEO, Centennial Asia Advisors

Manu Bhaskaran

Asia Economist and CEO

<p>In light of the global scenarios sketched out in the forked insight, we analyse the implications of these global drivers and domestic forces on Asia in Tables 1-3 below.</p><p><strong>Table 1: Large economies - China, India and Indonesia</strong></p><table class="table table-striped">
<thead>
<tr>
<td rowspan="2"><strong>DRIVER</strong></td>
</tr>
<tr>
<td style="text-align: center;"><strong>China</strong></td>
<td style="text-align: center;"><h2>India</h2></td>
<td style="text-align: center;"><h2>Indonesia</h2></td>
</tr>
</thead>
<tbody>
<tr><td colspan="4"><p style="text-align: center;"><strong>GLOBAL DRIVERS</strong></p></td></tr>
<tr>
<td><h2>G3 recovery - global demand to rise</h2></td>
<td><p><strong>High gearing</strong>: China will be an outsized winner helped by its large world export share and its competitiveness.</p></td>
<td><p><strong>Low gearing</strong>: India will benefit less than its Asian peers given its low export share.</p></td>
<td><p>…</p></td>
</tr>
</tbody>
</table>

In light of the global scenarios sketched out in the forked insight, we analyse the implications of these global drivers and domestic forces on Asia in Tables 1-3 below.Table 1: Large economies - China, India and Indonesia


DRIVER


China
India
Indonesia



GLOBAL DRIVERS

G3 recovery - global demand to rise
High gearing: China will be an outsized winner helped by its large world export share and its competitiveness.
Low gearing: India will benefit less than its Asian peers given its low export share.
…




Asia in 2017: Scenarios and Forecasts (Part II)

Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

REAL-Economics.com

<p><strong>During China's trade recession, its trade surplus widened between May 2014 and August 2016 -- hurting trading partners, as China's imports contracted</strong>. ASEAN was the biggest sufferer, as its bilateral trade surplus with China (prior to 3Q 2012) swung to a massive deficit of US$92.8bn in the year to October 2015 (and a bilateral deficit of US$72.2bn in the 12 months to November 2016). India has had a steadily-widening bilateral trade deficit with China, but its trend didn't change with fluctuations in China's imports. </p><p><strong>Taiwan has by far the largest bilateral trade surplus with China</strong> (US$115.9bn in 2013, US$106bn in 2014, US$99.9bn in 2015) followed closely by South Korea ($91.8bn in 2013, US$90bn in 2014, US$73.1bn in 2015). Korea has suffered notably more than Taiwan from China's trade recession. This year too, Taiwan's bilateral trade surplus with China bottomed at US$94.6bn in the 12 months to July 2016, but widened to US$98.5bn in the 12 months to November 2016 -- while Korea's bilateral trade surplus with China continued to shrink to US$64.3bn in the 12 months to November 2016. <strong>As long as China can sustain its import recovery (which began in August 2016), the biggest winners will be Taiwan and ASEAN, whose bilateral trade balances with China will improve</strong>. When China's import recovery (driven by the renewed strength of China's FAI and credit since August 2016) runs out of steam by mid-2017 (squeezed by the combination of higher US interest rates and barriers to China's exports, which will reduce the need for imports), ASEAN's gains will peter out, although Taiwan will be less affected bilaterally. </p><p>Given China's massive bilateral trade surplus with the US (US$320bn in the 12 months to October 2016), <strong>the incoming Trump Administration and the bipartisan Schumer-Lindsey team in the Senate are likely to label China a "currency manipulator" in 1Q 2017 </strong>and impose punitive tariffs on China's imports. <strong>Vietnam will remain the biggest winner from the trade diverted from China</strong>. (We expect that the US corporate tax code will be altered to tax imported expenses only from the next fiscal year, starting October 2017). Initially, US imports are likely to strengthen as infrastructure spending and the prospect of corporate tax cuts boosts private investment -- and helps bolster US imports (aided also by the strong dollar). <strong>The other winners</strong> (apart from Vietnam) <strong>are likely to be Malaysia, India, Thailand and Singapore</strong> (in that order). Taiwan could benefit too if its companies succeed in moving their assembly operations from China to Vietnam/India (as many are doing). India and Vietnam have steadily gained US market share over the past decade (from low bases), while Malaysia, Thailand and Singapore have gradually regained (in the past 2 years) some of the market share they lost in the US since the AFC of 1998-2000. These trends of rising market shares in the US for India and ASEAN are likely to accelerate when China's imports are subjected to new tariffs in 1H 2017. </p>

During China's trade recession, its trade surplus widened between May 2014 and August 2016 -- hurting trading partners, as China's imports contracted. ASEAN was the biggest sufferer, as its bilateral trade surplus with China (prior to 3Q 2012) swung to a massive deficit of US$92.8bn in the year to October 2015 (and a bilateral deficit of US$72.2bn in the 12 months to November 2016). India has had a steadily-widening bilateral trade deficit with China, but its trend didn't change with fluctuations in China's imports. Taiwan has by far the largest bilateral trade surplus with China (US$115.9bn in 2013, US$106bn in 2014, US$99.9bn in 2015) followed closely by South Korea ($91.8bn in 2013, US$90bn in 2014, US$73.1bn in 2015). Korea has suffered notably more than Taiwan from China's trade recession. This year too, Taiwan's bilateral trade surplus with China bottomed at US$94.6bn in the 12 months to July 2016, but widened to US$98.5bn in the 12 months to November 2016 -- while Korea's bilateral trade surplus with China continued to shrink to US$64.3bn in the 12 months to November 2016. As long as China can sustain its import recovery (which began in August 2016), the biggest winners will be Taiwan and ASEAN, whose bilateral trade balances with China will improve. When China's import recovery (driven by the renewed strength of China's FAI and credit since August 2016) runs out of steam by mid-2017 (squeezed by the combination of higher US interest rates and barriers to China's exports, which will reduce the need for imports), ASEAN's gains will peter out, although Taiwan will be less affected bilaterally. Given China's massive bilateral trade surplus with the US (US$320bn in the 12 months to October 2016), the incoming Trump Administration and the bipartisan Schumer-Lindsey team in the Senate are likely to label China a "currency manipulator" in 1Q 2017 and impose punitive tariffs on China's imports. Vietnam will remain the biggest winner from the trade diverted from China. (We expect that the US corporate tax code will be altered to tax imported expenses only from the next fiscal year, starting October 2017). Initially, US imports are likely to strengthen as infrastructure spending and the prospect of corporate tax cuts boosts private investment -- and helps bolster US imports (aided also by the strong dollar). The other winners (apart from Vietnam) are likely to be Malaysia, India, Thailand and Singapore (in that order). Taiwan could benefit too if its companies succeed in moving their assembly operations from China to Vietnam/India (as many are doing). India and Vietnam have steadily gained US market share over the past decade (from low bases), while Malaysia, Thailand and Singapore have gradually regained (in the past 2 years) some of the market share they lost in the US since the AFC of 1998-2000. These trends of rising market shares in the US for India and ASEAN are likely to accelerate when China's imports are subjected to new tariffs in 1H 2017. 

Globalizing China's Imbalances, Part III: Trade Recession and Its Sufferers

Vietnam

VinaCapital Vietnam Opportunity Fund Limited is a close-ended investment company incorporated in the Cayman Islands. The aim of the Company is to achieve medium to longer-term capital appreciation and providing an attractive level of income. The Company invests in listed and unlisted companies, debt, assets and other investment opportunities in Vietnam and surrounding Asian countries.

VinaCapital Vietnam Opportunity Fund (VOF LN)

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VinaCapital Vietnam Opportunity Fund (VOF LN)

AFC Asia Frontier Fund – 2016 Review and 2017 Outlook

Though 2017 has started on an uncertain note surrounding the policies of the new US President, our conviction in the long-term story of Asian...

Asia Frontier Capital

Asian Central Banks: Rising Regulatory Risks for Investors

Destabilising capital flows push central banks into defensive mode: Bank Negara intervened in Nov 16 to restrict the non-deliverable forwards...

Jason Tan

Deep Value and Hated by the Street in Asia....

Here is the Asian ex-Japan Hated by the Street screen. The goal of the Hated by the Street screen is to identify names where the stock price has...

Custom Products Group

Asia in 2017: Scenarios and Forecasts (Part II)

In light of the global scenarios sketched out in the forked insight, we analyse the implications of these global drivers and domestic forces on...

Manu Bhaskaran

Globalizing China's Imbalances, Part III: Trade Recession and Its Sufferers

During China's trade recession, its trade surplus widened between May 2014 and August 2016 -- hurting trading partners, as China's imports...

Prasenjit K. Basu

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)