Apollo Investment Management

The New Malaysia
Apollo Asia Fund: the manager's report for 2Q18

Apollo Asia Fund's NAV fell 4.1% in the second quarter, to US$2,219.38. This is down 4.6% year-to-date and 0.5% over twelve months; it is 5.8% below the high set in January.

Geographical breakdown
by listing; 30 Jun 18
% of assets
Hong Kong
23 
India
Indonesia
Japan
10 
Malaysia
Singapore
Thailand
11 
Vietnam
16 
Other
11 
Net cash & receivables
11 
 
100 

The last three months have brought little relief for the long-suffering minorities caught in the Vard saga, now coming up to a third general meeting. We have written about this case, and about regulatory tweaks to achieve better investor protection, on dedicated pages.

The greatest positive surprise of the quarter was the Malaysian election result, achieved in the face of intimidation, obstruction, rigging and gerrymandering which had previously seemed overwhelming. An extraordinary coalition united former enemies to avert the slide towards failed state, and Pakatan Harapan (the Alliance of Hope) swept to victory. After some nail-biting moments, a peaceful transition was achieved. Malaysians around the world, after decades of embarrassing headlines, enjoyed the congratulations and compliments. Kofi Annan wrote to Maria Chin Abdullah, a giant of the Bersih movement (the Coalition for Clean and Fair Elections), congratulating her deservedly on her election as an MP and on her 'role in preparing the ground for this historic transition in Malaysia... This Malaysian election has sent a signal of hope across the world, to the many other countries where politics have been hijacked by entrenched corrupt ruling parties, that peaceful democratic change is possible.'

Malaysia's new government started decisively, the unlikely coalition is so far functioning reasonably smoothly, excellent ministerial and executive / advisory appointments have been made, and some of the most overpriced mega-projects have been paused for evaluation. Journalists can report again, cartoonists can draw, activists can travel, banned news sites can be read without IT knowledge, and we can all speak more freely. There is keen awareness of the challenges ahead. Other political transitions in the region have proven disappointing; decades of mismanagement and of division-mongering have to be overcome; the financial consequences of those decades have yet to be evaluated; and the country has to find some core competences to wean itself from its serial resource windfalls and reliance on foreign labour. Some people are nervous of change; others worry about the reactions. Nevertheless, two months on, optimism reigns in Malaysia - and I share it.

The new government is seeking policy input at many levels. It seems to be backing away from the socially and ecologically disastrous policy of encouraging construction as a driver of GDP. I hope it will be more open to advice from people like Professor Bill Laurance from Australia, who has been warning of China's 'infrastructure tsunami', and issued a 'clarion call for greater caution' on the Belt and Road Initiative... 'environmentally, the riskiest venture ever undertaken'. I agree (and also hope that it will be more cautious about the smaller but highly destructive landslide-risk projects near my house). I look forward to hearing the new policy initiatives of the many impressive technocrats now in office, and of good people newly empowered. Here's to The New Malaysia!

Claire Barnes, 9 July 2018


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