May 2021 Fund Updates: Forward Looking Markets

Dear Valued Clients and Partners,

We hope this issue of the newsletter finds you safe and well.

In my previous issues, you might recall me mentioning that we should be cautious in entering the market due to the frothy valuations of the various businesses, particularly those classified in the Tech industry that ran substantially during the COVID-19 period since last year. While some of these companies have dipped recently from their peak, the S&P500 continues its upward march as the other “ traditional” companies continue their recovery. In retrospect, the dip was not a market correction; rather a sector rotation where the investors are betting on post-pandemic recovery plays that will show better business results when the pandemic blows over.

The market is always forward-looking, but is the market too optimistic? Pandemic numbers continue to rise, particularly in many of the developing countries (especially in South Asia). We are seeing mutations and variants emerging that are potentially more infectious and deadlier and we must remain vigilant to ensure that we do not have to undergo another “Circuit Breaker” (or MCO).

During these uncertain times, our team is continuing to refine and evolve our approach to our investment strategy and refining our techniques. These will improve our odds of beating the markets and achieving a positive portfolio return for our investors sustainably. On top of that, we are also exploring having different strategies for multiple portfolios, so that we can be flexible in our investment approach to achieve the best returns. Once we are satisfied with the test results of the portfolios, we intend to roll these products out for our Accredited Investors community through the Variable Capital Company (VCC) structure introduced in Singapore to set up the various portfolios going forward.

We started our fund management company with the objective of generating better returns with our capital than deploying it in other instruments. In a sense, we are similar to a family office, with the majority of the capital managed currently our own Group’s. By investing alongside us, you can be assured that our interests are aligned with our investors and that the returns we generate for ourselves and you are compounding and sustainable. If you are an Accredited Investor and am keen to find out more about our offerings, please drop us an email at

We expect that the changes and updates to our structure will prepare us and set our trajectory for the future growth and development of the team and company in the near to mid-term.

Warm regards,
Clive Tan | CEO
Hidden Champions Capital Management

PS: Starting this issue, we will be publishing our Newsletter during the first week of the odd months because of the general practice of closing financials by month-end for practically all companies.

3 of the Most Interesting Things That We Have Read

Covid 19

Following up from Clive’s section, you must be aware of the situation happening around Asia, especially in India. The second wave of the coronavirus has since grown into a tsunami in India, with them breaking new unwanted records of having the highest daily Covid cases, and recently being the first country to record 400,000 daily Covid cases. India now has the second-highest reported cases, with over 19 million and counting, with over 210,000 deaths.

There are reports that hospitals are being overwhelmed, oxygen supplies have dwindled, vaccination centers have run out of doses, and pharmacies are unable to meet the demand for antivirals. India is reeling with the sheer number of cases straining their country’s resources.

In addition, these problems are compounded with foreign countries having little choice but to implement travel bans and restrictions on them.
The United States of America has issued a Level 4 Travel Advisory, the highest of its kind, warning Americans to “not travel to India or to leave as soon as it is safe to do so.”, and other 25 countries implementing various bans or additional caution on travelers, leading to increased tensions and panic.

With the collapsing health infrastructure and mounting death toll, India’s government is facing a difficult choice. Whilst implementing lockdowns may be the only way to stem the world’s worst outbreak, Prime Minister Narendra Modi is hesitant due to the disastrous impact on the poor, who has already suffered the most during the previous outbreak. These people must go out every day to find something to eat or earn the day’s wages, and any lockdowns would hit them hardest.

As India struggles with the world’s worst outbreak, the indecisiveness and inaction by Prime Minister Narendra Modi’s party is contributing to a growing chorus of blame directed at Prime Minister Narendra Modi over his government’s handling of the pandemic. This is a stark contrast for their party given that back in January, the chances of success looked high for his government’s vaccination drive.
The speed and scale of these events serve to remind us to not be complacent and continue to remain vigilant even if we have received your vaccination. After all, we are all living together in this world and no one is safe until the last person is.

China’s Strong Economic Recovery

However, there is a stark contrast in fortunes just across the border. China’s economy showed strength in the first quarter of the year, with consumer spending rising above expectations, leading to the global economic recovery in 2021.China’s Gross Domestic Product was up 18.3% in the first quarter year on year, in line with the 18.5% predicted in a survey of economists, while retail sales soared 34.2% in March while industrial output growth moderated.While the performance seems substantial, mainly due to the low base caused by the pandemic, credit should not be taken away from China’s recovery from the pandemic, with the economy regaining its lost ground by the end of September.

The latest data released sets China well on course to grow above its annual target of more than 6%, supporting the view that China, together with the U.S.’s estimated growth of 6.2% from economists, will outperform other major nations this year. Despite China being the first major economy to contain the spread of coronavirus and resume growth, having their GDP rising 0.6% in the first 3 months as compared to the previous quarter, economists commented that China’s recovery has not yet plateaued and could be set for further growth.

With these factors, we are cautiously bullish on Chinese equities, especially on their growth post-pandemic.

After Alibaba, Meituan next?

As we look further into China, we noticed that China’s authorities have moved past the pandemic to resume business as per usual, clamping down on local companies that may have run afoul of their regulations.
After the big hoo-ha with Jack Ma and Ant Financial, Chinese regulators have continued their crackdown on their internet giants, employing the same curbs such as stricter compliance when listing abroad and curbs on information monopolies and gathering of personal data on 13 companies including Tencent, ByteDance,, Meituan and Didi with fast-growing financial divisions.
The crackdown is not without its merits, and their latest action has seen them launch an investigation into food-delivery behemoth Meituan. Founded by the 42-year-old billionaire Mr. Wang Xing, Meituan has been criticized by rivals and merchants for allegedly forcing them into exclusive agreements, and has previously been found guilty of unfair competition in at least two legal cases this year.


In Asia, we can see that the recovery from COVID 19 differs. At one end of the spectrum, India is struggling to contain the tsunami of infections from the second wave, but yet at the other end, we have China that seemingly has contained the coronavirus so well that they are able to focus on issues such as anti-monopolistic practices! We have got to give it to the swift actions and response of the Chinese, for being brave enough to implement strong but harsh measures to come out of the pandemic faster, hence being able to start their recovery compared to their Asia peers. The resilience and commitment shown have led us to continue to be cautiously optimistic of the China market and the companies, and we believe that investing in China over the next 10 years will produce extraordinary results.

Richard Sim Zhipeng | CFA, CA
Investment Manager
Hidden Champions Capital Management

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