Spy finds himself back in Hong Kong after the Christmas break Downunder, filled with enthusiastic anticipation for 2017. Rather than having a ‘dry January’ like some of his healthy and misguided colleagues, Spy opened a fine bottle of Chris Ringland’s Shiraz “Evil Incarnate” from the Barossa Valley (if you don’t know it, look it up, simply splendid) to contemplate the year ahead. What fun we have in store: The Orange One’s inauguration on the 20th, French and Dutch elections later in the year, Boris, Teresa and Co triggering Brexit and that does not even cover Asia. Closer to home we have the trial of Donald Tsang keeping every tycoon in town on the edge of their seat, Mr Duterte acting like Rambo and a new king coming to the throne in Thailand. And that is just the politics. Get out the popcorn! Spy has a number of predictions, for what they are worth…more details below.
The most startling news of the new year must be China’s increased crack down on currency transfers out of the country (don’t mention Capital Flight, despite the $689bn that left last year, according to Bloomberg Intelligence). SAFE has added some draconian new rules on what the average citizen can spend their $50,000 annual foreign exchange allowance on. Rule 1) no more foreign property purchases and rule number 2) no buying of foreign securities and insurance. That won’t have much effect, will it? Like the multi-headed hydra of Greek myth, Bitcoin has re-emerged into the limelight and soared beyond $1,000 a coin. Why? Well apparently some Chinese people think it might be a good idea to get some untraceable, easily transferrable, totally digital money. Funny, that. Spy predicts that the challenge of the new rule for wealth managers here in Hong Kong could be significant.
Spy had a delightful letter from HSBC over the holidays asking about the origins of his paltry sums of money and where he was domiciled and registered for tax as they had to let Her Majesty’s Revenue Service know. Oh yes, ladies and gentleman – the dreaded CRS, or common reporting standards, have kicked in for banks. Just when you thought hiding a few billion nicked from 1MDB was getting harder (as Falcon and BSI discovered), it seems even a paltry few thousand dollars hiding in the proverbial offshore mattress are now looking vulnerable. Remember Switzerland, Singapore, Hong Kong, Malaysia, China, Indonesia, Brunei, Japan, Australia and New Zealand are all on board. The new rule of money? If you don’t want it double taxed, go and live next to it – no matter what your banker tells you.
What if you had lived as long as Mozart, but only ever experienced one type of bond market, i.e. one that goes up? If July 8th 2016 was the peak of the global bond market (and the low in yields) and many truly sophisticated people think it might be, then the 35-year bull market since 1981 is over. That is a thought so scary it makes Spy want to open another bottle of “Evil Incarnate”. There are literally thousands of asset managers, advisors and portfolio managers who have only ever experienced generally rising bond prices. If your portfolio manager is in his seventies, have a chat with him, he probably experienced the bond rout of the 1970s and has some wisdom to impart…
Aberdeen Asset Management has caught Spy’s eye with their new A to Z of Economics, published this week. In typical Aberdeen style it is pithy and witty. Literature lovers should be happy enough to see Adam Smith and Mark Twain referenced. If you own a Louis Vuitton bag or a Baum and Mercier watch, have a look at the entry for V. Yes, hang your head in shame…
Spy spotted an interesting fact from Standard Life Investments in its Letter from China, should anyone think that China’s current weakness hides opportunity. Magdalene Miller, fund manager for China equities, writes, “The Chinese domestic tourism market is estimated to have grown by 10% annually on average over the last decade, according to data from the EU SME Centre. Outside the home market, mainland Chinese tourists are estimated to spend $255bn overseas by 2025, up from $137bn in 2015, according to research by Oxford Economics and Visa. Anyone hoping that Brexit would make London quieter is destined to be disappointed, thinks Spy.
A thank you to Capital Group and their fund manager Carl Kawaja for giving Spy a reason to smile. In a report looking at the outlook for 2017, they have pointed out that globally, extreme poverty has fallen to record lows. As recently as 1981, more than 40% of people lived in extreme poverty. That is now down to as few as 3% of humans on the planet. It bodes well for human beings and for global growth, thinks Spy.
Schroders is looking at 2017 with a rather sceptical eye and deservedly so. Andrew Williams writes, “we take as our starting point an article in The Economist that puts forward the not wholly startling argument that broker share analysis can be notoriously optimistic. Neatly entitled ‘Discounting the bull’, it quotes FactSet data showing 49% of firms in the S&P 500 index are rated as ‘buys’, 45% as ‘holds’ and just 6% as ‘sells’. Over the past year, it adds, 30% of S&P 500 businesses yielded negative returns” Rather speaks for itself, doesn’t it.
If you are wondering why your clients ‘just don’t get’ that new fund you were proposing to them, Spy has some bad news. That old putdown, “You have an attention span of a goldfish” apparently no longer carries much weight as these days the average human’s attention span is now alarmingly less than that of a goldfish. Last year Microsoft conducted a survey during which researchers surveyed 2,000 participants in Canada and studied the brain activity of 112 others using electroencephalograms. The results showed the average human attention span has fallen from 13 seconds back in 2000 to currently a mere eight seconds. Goldfish, meanwhile, are believed to have an attention span of nine seconds. Explain, repeat, explain.
Finally, Spy’s own predictions for the year of 2017:
- · The ASEAN fund passport scheme is delayed, yet again, and is implemented only in part by Japan, Australia and Thailand.
- · UBS decides that Credit Suisse is stealing too much of their lunch and quietly eases up on its mandate push and reverts to a stronger fund and product focus.
- · Citibank on-boards a significant range of new funds in response to the rather weak year it had in fund sales in 2016.
- · A dozen IFAs in Hong Kong and Singapore rebrand themselves as multi-family offices to hide from a past that was spent flogging unsuitable insurance products.
- · Several asset management firms who “only do institutional business” deign to come down to the wealth management world and suddenly decide that private banks are worth their effort.
- · The year of active ETFs – expect active ETFs to get more profile and even a few of them will raise some money – but just not in Asia.
Until next week…
