Apollo Asia Fund Q4 Report: Markets expensive, complacency dangerous

The Apollo Asia Fund's NAV rose 4.1% in the fourth quarter, to a new high of US$1,805.72: over the last twelve months it was up 41%.

This has taken valuations right up to the high end of the historic range. At the end of December, our portfolio was on an estimated current-year PE of 16.2. The 'portfolio EPS' for the current year are estimated to be 15% higher than a year ago, but we forecast lower EPS growth for the year ahead. As we noted in the last quarter, past growth in the Fund's NAV has been enhanced by rerating; this could very easily be reversed.

Portfolio turnover for 2012 was as low as it has ever been, at 13%. This is probably too low, given the valuations - we err on the side of sluggishness when it comes to making changes. That has stood us in good stead in the past, but more good ideas would be welcome - so if I can develop a greater degree of enthusiasm for new possibilities than for our current holdings, you may see a higher figure in 2013.

Companies behaving badly: first Unilever and then Holcim announced steep unilateral increases in the royalties charged to their listed Indonesian subsidiaries. Both shares plummeted. At the time, fortunately, we owned neither - but the corporate governance precedents are quite shocking.