Apollo Asia Fund: the manager's report for 1Q2009

March saw a fast and furious rally in Asian & global indices: the rise in our shares has been much more subdued. Globally, I see this as a rally in an ongoing bear market, with the economic crisis having many further stages to run. Asian equities seem attractive, for the long run. I would not be surprised to see the bear regain global dominance and take Asian shares with it, but have never claimed any ability in market timing, and am comfortable having the fund almost fully invested. The accompanying 2-year chart of the Asia-ex-Japan index puts the rally in context (calls of 'a new bull market' may be over-excited), and shows that the regional markets overall marked time during the four months of most appalling news flow, rather than hitting new lows like the US, UK, Europe and Japan. Although the region's export dependence has made it highly vulnerable in the short term, with double digit falls in GDP forecast for some countries and regions, its relative structural flexibility and fiscal / banking strength should make it a safer long-term haven.

Politics is the most obvious wildcard which could upset this prediction. Much of Asia currently looks politically complex, but we see no clear trends to cause a change to our asset allocation. The profligacy of western politicians seems to present more immediate dangers. From this distance, the tensions of monetary without political union in Europe look tricky.

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We seek companies of Buffett-style quality with good growth prospects at a reasonable price: we now have an abundance of plausible candidates from which to choose, and ideas to pursue.