Airlie Quarterly Update - January 2024

Airlie Funds Management

January 2024

Emma Fisher provides her perspective on how the Australian equity market played out in 2023 and the outlook for the year ahead. Emma also discusses movements within the portfolio and the approach to position sizing.

Funds operated by this manager:

Airlie Australian Share Fund

Important Information: This material has been delivered to you by Magellan Asset Management Limited ABN 31 120 593 946 AFS Licence No. 304 301 trading as Airlie Funds Management ('Airlie') and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation.  This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should obtain and consider the relevant Product Disclosure Statement ('PDS') and Target Market Determination ('TMD') and consider obtaining professional investment advice tailored to your specific circumstances before making a decision about whether to acquire, or continue to hold, the relevant financial product. A copy of the relevant PDS and TMD relating to an Airlie financial product or service may be obtained by calling +61 2 9235 4760 or by visiting www.airliefundsmanagement.com.au.

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Hedge Clippings | 25 January 2024

Among the various dates and events either celebrated or lamented around this time of the year there is one that may not make the headlines given tomorrow's anniversary of the landing of Captain Arthur Philip taking first place.

Today, the 25th of January, is the fourth anniversary of the first reported case of COVID-19 in Australia. Co-incidentally this week Scott Morrison also announced his retirement from federal politics. Whatever else one thought about him, his initial handling of the pandemic was swift and decisive (some will argue possibly divisive as well!). He won't go down in history as one of our more successful Prime Ministers, but Australia's record of 920 deaths per million of population position it at 108 in world rankings for COVID deaths, and 39th in cases per million which allows for debate from both sides of the "who liked Scomo" debating team.

Interestingly, when researching the above statistics, China was way down the bottom of the list at number 221 out of 229 countries, with just 4 deaths per million from COVID, which seems about as reliable and credible as their economic reporting.

China is facing multiple headwinds: Inflation is -0.3% YoY and PPI is -2.7% indicating low consumer demand. The property market is "soft" at best - some would call it a disaster, - and the collapse of the Zhongzhi Enterprise Group, a wealth manager which was regarded as one of China's largest shadow banks, owing RMB 220-260 billion (USD 36bn) and stating that it is "severely insolvent" won't help consumer confidence.

On the trade front, China's trade with the US fell 11.6% in 2023, while trade with Russia increased by 26%. Meanwhile, it has yet to be seen what effect the shipping problems in the Gulf of Aden, and the longer voyage around the Cape of Good Hope will have on China's trade with Europe.

Having driven global growth for the past two decades or more, and exported deflation over the same period, China's change of fortunes have yet to play out on the world's economies.

Turning to US politics, it seems a re-run of the 2020 Trump-Biden election battle is now almost a certainty, provided each reach Tuesday November 5th (Melbourne Cup) deadline unscathed - Trump from the various legal challenges he's facing, and Biden from his advancing age. As we noted last week, in a country with a population of over 330 million, it's amazing neither party can come up with an alternative.

One interesting view we heard this week is that each candidate provides the best reason to vote for the other: Trump has a strong following among his supporters, but is polarising to say the least. Not only will his presence entice many democrats to actually vote, but there's a risk that some disaffected republicans will also turn out to vote - but against him.

That could also cut both ways - there has to be genuine concern about Biden's age and abilities given the prospect of an 86 year old being in the White House at the end of his second term.

Meanwhile, enjoy Australia's national holiday - whatever you want to call it, and however you want to spend it.

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Funds operated by this manager:

Glenmore Australian Equities Fund