JOM SILKKITIE ASIA EQUITY INVESTMENT FUND Monthly Report September 2018 JOM Silkkitie Asia Equity Investment Fund s NAV was 225.71 at the end of September so the performance during the month stood at -5.39%. Since fund inception (31st July 2009) the NAV has increased by +125.71%, thus the annual performance has been +9.29%. Most of our focus markets dropped in EUR terms during the month. However, small and mid-caps declined by a much larger magnitude. MSCI Asia ex Japan (EUR) returned -1.77%, MSCI Asia ex Japan Small cap (EUR) returned -4.31% and MSCI Indonesia Small Cap -3.37%. Individual indices in EUR terms returned as follows: India s SENSEX declined by -8.58%, Indonesia JCI by -1.32%, China H-shares +1.45%, Philippines PCOMP -8.12%, Vietnam VNINDEX +2.49% and Pakistan KSE100-2.07%. While Asia s structural growth story has remained in place, the trade war and rising USD worries have caused investors to avoid Asia, and that has especially hit the small caps and smaller markets. In the past we have seen these kinds of turbulent risk avoidance periods, which in the end have turned out to be good entry points for longterm investors. Trade war thoughts and market forces in our focus markets JOM SILKKITIE, NET ASSET VALUE (28 September 2018) 225.71 Fund size 33.26 meur Number of fund units 147 359.3581 Inception date 31.7.2009 Last month s performance -5,39% Performance since inception +125.71% Annualised performance since inception +9.29% Accumulated management fee* 0.90% Accumulated performance fee* 0.00% Accumulated custodian fee* 0.11% Net investment position (prior to subscriptions on 31.8.2018) 93.8% Volatility** 13.6% Portfolio turnover 261.7% Some market commentators are saying that the US trade war rhetoric and actions are geopolitical in nature as the US wants to slow down China s (and Asia s) inevitable path to claiming the spot as the world s largest economy. In this respect the US actions against China may be long-term by nature. However, others are stating that the US trade war actions will slow down considerably around the US mid-term elections in early November, as the Republicans wish to win votes by offering means to resolve the crisis. In addition, as Mr Trump is the man of deals, he wishes to score some points before the elections. Therefore we may see light at the end of the trade war tunnel within the next few weeks and months. We bought Hongkong-listed WH Group into the portfolio. The company is one of the largest meat producers in China and the US. It pays a 4.9% dividend, its PE is x8.8 for 2018, while the ROE is 15.4%. Name: JOM Silkkitie Fund (UCITS) Portfolio Manager: Juuso Mykkänen Custodian: SEB. Helsinki branch Benchmark index: No official index Profit sharing: The Fund has only accumulating units Fund rules last confirmed: 7.7.2017 OVERVIEW OF THE FUND Inception date: 31.7.2009 ISIN-code: FI4000003470 Bloomberg-ticker: JOMSILK FH Fund target group: Demanding investors who understand the potential of Asian equity markets in the long run. Minimum subscription: 5 000 Subscription account: IBAN: FI81 3301 0001 1297 17 BIC: ESSEFIHXXXX Management fee: 1.2% p.a. Subscription fee: 1.5% - 0% Redemption fee: 1% (min. 20 ) Performance fee: 10% on the return exceeding the hurdle rate of 5%. (pls see Fund prospectus for details) Pastperformanceis no guaranteeforfuturereturns.the Fundvalue mayincrease or decrease, andtheinvestor mayincurlosses whenredeeming his shares. MSCI AC Asia ex-japan (EUR) is a price index, which takes dividends into account. Further details on JOM Silkkitie Investment Fund may be foundin thekeyinvestorinformation document,fundprospectus andfundrules,which areavailable by requestfromjom Fund ManagementLtd, or on the website www.jom.fi. *For the fiscal period since 1.1.2018, % of fund average net assets. **Based on daily returns during 12 months. Detailed formulasavailablefromthefundmanagement Company.
JOM SILKKITIE ASIA EQUITY INVESTMENT FUND Monthly Report September 2018 Jakarta Composite Index JCI Equities by Investment Themes Financial & Property 28 % FUND CORRELATION (12M, DAILY) WITH SOME EQUITY INDICES (EUR) Philippine composite Index PCOMP Infra 10 % Green & Clean 4 % Consumers 58 % HK China H shares HSCEI MSCI Asia ex-japan Topix MSCI World S&P 500 Bloomberg Europe 500 Index Indonesia Philippines China Asia Japan World US Europe 0.54 0.28 0.59 0.41 0.38 0.17 0.05 0.27 FUND PERFORMANCE MONTHLY (%) Equities Geographical Break-down Vietnam 15 % Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year 2009 - - - - - - - -2.74 +7.49 +1.52 +0.40 +7.07 +14.08 2010 +3.55-0.05 +9.66 +4.00-8.12 +0.74 +7.55 +2.46 +13.95 +2.45 +2.73 +6.39 +53.60 2011-8.11-1.34 +2.81 +3.17-2.47-0.62 +7.75-10.15-14.07 +5.83-4.11 +4.73-17.59 2012 +8.75 +4.07 +2.35 +1.85-4.68-2.26 +2.58-5.49 +0.90 +4.59 +5.35 +2.51 +21.44 2013 +6.18 +6.82 +3.25-0.51 +10.17-11.08-1.57-6.91 +2.00 +3.54-1.15 +2.88 +12.31 2014 +2.31 +7.46 +0.14 +2.94 +2.21-1.48 +7.98 +3.98-1.25-0.58-0.33-4.53 +19.72 2015 +6.02 +3.20 +5.89 +2.38 +3.81-8.69-3.22-16.41-2.44 +15.52-1.36-0.51 +0.61 2016-9.61 +0.65 +5.97 +1.25 +1.71 +8.58 +7.75 +1.84-1.66 +0.30-3.26 +1.38 +14.44 2017-0.55 +4.73 +1.51-0.13-0.67-0.93-4.23-0.73-0.40 +1.62-2.73 +0.30-2.46 2018 +1.54 +0.55-5.46 +2.03 +4.85-9.28-4.14 +0.32-5.39-14.77 India 6 % Philippines 13 % Pakistan 7 % China 37 % Indonesia 22 % JOM SILKKITIE NAV VS. THE REGIONAL EQUITY MARKET INDEX 320 300 280 260 240 220 200 180 160 140 120 100 80 31.7.2009 31.5.2011 30.3.2013 28.1.2015 28.11.2016 28.9.2018 + 60 % + 40 % + 40.60 % + 14.08 % + 20 % + 9.25 % + 0 % -20 % FUND PERFORMANCE BI-ANNUALLY (%) - 6.80 % - 11.58 % MSCI AC Asia ex-japan (Total return, EUR) JOM Silkkitie + 14.13 % + 14.13 % + 10.48 % + 9.92 % + 4.90 % - 1.59 % + 12.45 % - 10.52 % + 7.80 % + 6.16 % + 3.90 % - 6.13 % - 9.02 % - 6.32 % Pastperformanceis no guaranteeforfuturereturns.the Fundvalue mayincrease or decrease, andtheinvestor mayincurlosses whenredeeming his shares. MSCIACAsiaex-Japan (EUR) isapriceindex, whichtakes dividendsintoaccount. FurtherdetailsonJOM SilkkitieAsiaEquity InvestmentFund maybe foundin thekeyinvestorinformationdocument,fundprospectusandfundrules,whichareavailableby requestfromjomfundmanagement Ltd,or onthewebsitewww.jom.fi.
JOM SILKKITIE ASIA EQUITY INVESTMENT FUND Central banks hiking rates in September Central banks continued to lift interest rates. The Fed hiked rates by 25bps to a level of 2-2.25%. Also, the monthly reduction of the Fed s balance sheet will increase by 10bnUSD to 50bnUSD in October, and they will keep the reduction at this level until the balance sheet is at their desired level. Indonesia s central bank, BI, also lifted rates by 25bps to 5.75%. This was solely due to external pressure on IDR, as the BI wishes to be ahead of the curve. Inflation, however, has remained low at only +2.88% YoY level in September. In the Philippines, however, the Bangco Sentral ng Pilipinas (BSP), lifted rates by 50bps to 4.5% mainly due to higher inflation (6.4% YoY in August), which has been pushed up by higher fuel and food prices the domestic demand in the Philippines has been very robust as the infrastructure building boom is accelerating and the consumer demand is strong. The much needed building of infrastructure in the both South East Asian countries, along with the large and growing consuming class, have resulted in widening current account deficits, which has made their currencies very vulnerable in such global EMstress situations that we currently are going through. Despite the recent negative CAD numbers from these countries, infrastructure building will continue in both economies for much longer, as it has been overlooked for too many years after the Asian financial crisis of the late 90 s. Top right: Current account deficits in our focus countries are still very mild compared to the real problem countries such as Argentina, Turkey etc, where also the inflation numbers are running in double digits. Bottom right: Budget deficit in Indonesia can be at maximum 3% of the GDP according to the local legislation, while in the Philippines there is a self imposed 3% cap on budget deficit. Sources: Bloomberg
1.2.2010 1.7.2010 1.12.2010 1.5.2011 1.10.2011 1.3.2012 1.8.2012 1.1.2013 1.6.2013 1.11.2013 1.4.2014 1.9.2014 1.2.2015 1.7.2015 1.12.2015 1.5.2016 1.10.2016 1.3.2017 1.8.2017 1.1.2018 1.6.2018 JOM SILKKITIE ASIA EQUITY INVESTMENT FUND Top right: Public infrastructure investments have become the driving forces in the Philippines construction space. As the infra is improving, property developers will also benefit. Top left: Infra/GDP rising steadily in the Philippines. This will benefit the country as a whole as it is becoming more attractive to tourists, FDI money etc. Sources: Unicapital Securities Bottom right: Rarely do we see interest rates and inflation going the opposite directions. Indonesia s inflation was only 2.88% YoY in September. Source: Bloomberg 9 8 7 6 5 4 3 2 Inflation and interest rates in Indonesia 2010 - today Inflation Interest rate
JOM SILKKITIE ASIA EQUITY INVESTMENT FUND Top right: Credit to private sector at healthy levels in emerging Asia (India, Indonesia, Philippines). Plenty of structural growth ahead in the financial sector for these countries. Source: Bloomberg Top left: Small Caps have underperformed since 2017, however, historically they tend to outperform their larger peers. Source: CLSA Bottom right: Philippines goverment debt to GDP at very low level of 43%. Thus, the country can afford to invest increasingly in infra. Source: Trading Economics
JOM KOMODO INDONESIA EQUITY INVESTMENT FUND Monthly Report September 2018 JOM Komodo Indonesia Equity Investment Fund s NAV was 144.99 at the end of September, as it decreased by -3.48% during the month. Since fund inception (15 th May 2012) the NAV has increased by +44.99%, thus the annual performance has been +6.00%. 180 160 140 120 100 80 60 40 JOM KOMODO NAV VS. INDONESIA EQUITY INDICES 15.5.2012 7.6.2013 30.6.2014 23.7.2015 14.8.2016 6.9.2017 29.9.2018 Consumer, Cyclical 29% JAKARTA COMPOSITE Index (EUR) S&P Indonesia SmallCap Price (EUR) JOM Komodo Osakkeet sijoitusteemojen mukaan Basic Materials; 13% Technology; 4% Communications; 7% Energy; 2% Industrial 20% Financial 21% Consumer, Non-cyclical 5% JOM KOMODO, NET ASSET VALUE (28 September 2018) 144,99 Size of the fund 13.00 meur Number of fund units 89 686.1665 Inception date 15.5.2012 Last month s performance -3.48% Performance since inception +44.99% Annualised performance since inception +6.00% Accumulated management fee* 1.12% Accumulated performance fee* 0.00% Accumulated custodian fee* 0.21% Net investment position (prior to subscriptions on 28.9.2018) 95.2% Volatility** 15.0% Portfolio turnover 228.40% Fund s correlation to JCI-Index (12m) 0.66 Name: JOM Komodo Fund (UCITS) Portfolio Manager: Juuso Mykkänen Custodian: SEB. Helsinki branch Benchmark index: No official index Profit sharing: The Fund has only accumulating units Fund rules last confirmed: 7.7.2017 FUND OVERVIEW Inception date: 15.5.2012 ISIN-code: FI4000043401 Fund target group: Demanding investors who understand the potential of Asian equity markets in the long run. Minimum subscription: 5 000 Subscription account: IBAN: FI75 3301 0001 1363 24 BIC: ESSEFIHXXX Management fee: 1.5% p.a. Subscription fee: 1.5% - 0% Redemption fee: 2% (min. 20 ) Performance fee: 10% on the return exceeding the hurdle rate of 5%. (pls see Fund prospectus for details) Past performance is no guarantee for future returns. The Fund value may increase or decrease, and the investor may incur losses when redeeming his shares. Jakarta Composite Index (EUR) and MV Indonesia SmallCap Index (EUR) are price indices, which take dividends into account. Further details on JOM Komodo Investment Fund may be found in the key investor information document, fund prospectus and fund rules, which areavailable by request from JOM Fund Management Ltd, or on the website www.jom.fi. *For the fiscal period since 1.1.2018, % of fund average netassets. **Will be calculated based on daily returns during 12 months. after the fund has sufficient track history. Detailed formulas availablefrom the Fund Management Company.
JOM KOMODO INDONESIA EQUITY INVESTMENT FUND Monthly Report September 2018 While Indonesia s currency, the rupiah, has been weakening and the stock market has been volatile, the country s business confidence has been reaching the highest levels since 2009. The government s infra push/improvements in recent years are now starting to take effect in the form of the corporates increased confidence in the economy. This should be good for the investment cycle going forward, as the capacity utilization rates are also at high levels. FUND PERFORMANCE MONTHLY (%) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year 2012 - - - - -6.29 +0.42 +3.62-8.02 +3.01 +0.71 +7.63-4.57-4.34 2013 +6.05 +17.64 +13.43 +1.54 +11.52-11.79-8.95-20.95-0.95 +7.28-13.95-3.40-10.13 2014 +9.68 +15.86 +10.77-1.42 +3.20-6.05 +10.24 +8.15-2.09 +2.30 +5.50 +2.61 +73.92 2015 +2.45 +0.04 +2.24-8.35 +1.42-6.30 +0.26-16.99-8.01 +21.09-1.75-0.47-17.26 2016-1.69 +3.01 +5.87 +0.63-0.86 +8.49 +9.63 +4.12-3.45 +7.33-6.93 +2.44 +30.86 2017-0.30 +5.05-0.38 +1.37 +0.73-2.46-4.74-1.73 +1.37 +3.63-4.47-1.28-3.63 2018 +5.21 +0.16-1.45 +1.09 +3.50-6.29-1.32-4.18-3.48-7.07 Above: Credit cycle growth in Indonesia climbed above 12% YoY in August after a surprise hike to above 10% YoY in July as we highlighted in the August report. This trend is viewed as a very positive. Top left: Business Confidence at nearly all time highs. Bottom left: Capacity utilisation above 78%. Sources: Trading Economics Pastperformanceis no guaranteeforfuturereturns.the Fundvalue mayincrease or decrease, andtheinvestor mayincurlosses whenredeeming his shares.jakartacompositeindex(eur) andmv IndonesiaSmallCapIndex(EUR)arepriceindices,whichtakedividendsintoaccount.Furtherdetailson JOM Komodo Investment Fund may be found in the key investor information document, fund prospectus and fund rules, which are available by requestfromjomfundmanagement Ltd,oronthewebsitewww.jom.fi.