Posted inFSA Spy

The FSA Spy market buzz – 19 Feb 16

Changes at Neuberger Berman; UBS on ETFs; Hang Seng’s customers love risk; DBS loses a crown; Is Maybank confused?; Who wants to be a Singaporean stockbroker? and much more.

Spy found himself being harassed by a misguided bartender in Wanchai this week. He was being encouraged to drink a rum called “Ron De Jeremy Reserva”. Spy, being a grizzled man of the world, knows that Mr Jeremy has led an even seedier life than a high yield bond salesman.  With advertising, association with a celebrity can be a good thing: Standard Life and tennis superstar Andy Murray: Good. Aged, revolting adult movie star and premium rum: Bad.

Spy hears that Mark Serocold, head of private bank sales at Neuberger Berman in Hong Kong, is relocating back to London. After five years in the Fragrant Harbour, Mark is taking on a UK intermediary sales role. Vincent Lim, Mark’s counterpart in Singapore is taking on his duties, in addition to his own and will probably be seen more frequently in Hong Kong thinks Spy.

Specialist UK fund manager, Castlestone Management has hired Matt Denness to be regional  manager in Southeast Asia, notes Spy. Matt, based in Malaysia, represented Hansard International for a decade. Matt will be promoting Castlestone’s emerging market, precious metals and equity income funds.

UBS AM had 35 Asia hires last year across nearly all departments, said Rene Buehlmann, head of Asia-Pacific, who by the way is now celebrating 25 years — at the same firm. (UBS offered him a job way back when he was a young soccer player on the Swiss national team). In 2016, his firm plans to launch Hong Kong-domiciled ETFs, though he doesn’t think the passive products will catch on fast with retail investors. “I think more and more they’ll have a place in discretionary portfolios.” His trend words for this volatile year: “smart beta” and “unconstrained”.

“People outside China think the economy is either booming or collapsing, said Bin Shi, who manages the UBS China Opportunity Fund (which won a Platinum award in the FSA Fund Awards). China is not collapsing, he said. It’s carrying on as usual while transitioning to a new economy. “People from the West tend to think transitions happen in orderly steps. One-two-three,” he said. “In Asia, change is not linear. China might go from zero to 3. It can be a challenge for us to explain that to Western investors.”

Are Hang Seng’s customers put off by recent volatility? It seems not, according to their top ten bestselling fund list of Q1 2016: not a single one is an ultra low-risk fund. Half the funds are rated High Risk (4/5) or Very High Risk (5/5).  The top two bestsellers: Allianz European Equity Dividend Class Am Dis and Amundi HK – Balanced Fund Class Classic USD – Distribution.  Three of the top 10 invest in Greater China and not a single one of the funds is positive year-to-date.

Spy notes wryly that DBS Bank has long promoted itself as “Southeast Asia’s largest bank” and was traditionally SE Asia’s most valuable, too. With 280 branches, it certainly has deep and broad reach. One area that it can’t boast any longer is market cap. DBS hit a five-year high share price of S$21.09 last year, but has been hammered steadily since. It is now trading down approximately 30% from that high at S$13.64 as of this morning, giving it a market cap of $24.1bn (S$34bn). That share price fall has meant that Indonesian giant, PT Bank Central Asia has eclipsed it with a $24.2bn (327trn IDR) market cap. 

Maybank seems to be sending mixed messages, according to a correspondent. Anyone visiting Maybanks’s website in Singapore and chooses to visit their Unit Trust page is confronted with an advert, not for a fund of any description, but rather a structured product. Does this signal a lack of commitment to funds or an oversight of the marketing department, wonders Spy?

Spy has always suspected that asset management is often a herd following mentality. A manager comes up with a new idea, and, before you know it, the competition is launching something awfully similar. What about 2016? All Spy is hearing is, ‘We are not sure what to bring to market!’ One long time fund sales person confided to Spy with a lament, “We are in no-man’s land. We are not sure what to promote at the moment.” For Spy’s money, for what it is worth (and there is not much of that), quality income that is sourced from a diverse range of securities sounds about right. Asian investors love income and Hong Kong and Singapore’s property markets are looking more than a bit dodgy. It might persuade condo-loving speculators to try something new.

If fund sales people are feeling a tad gloomy with early year volatility, spare a thought for Singaporean stockbrokers. Trading volumes on the Singapore exchange are truly abysmal and interest is drier than day-old fried rice. One experienced stock broker told Spy, “If you have been in this industry less than 10 years, you will be out of the game soon.”  Singapore may have been the private banking market winner over the last five years but Hong Kong and Stock Connect are streets ahead in stock trading activity.

It is club that is growing members nicely, observes Spy, except nobody really wants to be a part of it. I am talking about the negative central bank rate club. Denmark (-0.65%), Sweden (-1.1%), ECB (-0.3%), Switzerland (-0.75%) and Japan (-0.1%) can all have a drink at the bar and discuss pillaging of depositors’ money. Spy will make a prediction: if this carries on much longer, you will see a new type of bank emerge where depositors can place physical cash for storage – like a giant bank-sized safety deposit box; the modern equivalent of a very large mattress. Sound crazy? So did negative Japanese rates a year ago!

Spy’s photographers have spotted the BMO AM tram trundling around Hong Kong promoting their new ETFs launched earlier this week:


Until next week…


Part of the Mark Allen Group.