The FSA Spy market buzz – 17 February 2017

Spy is feeling more confused than a drunk chameleon in a bag of Skittles, as the saying goes. 2017 was meant to be a year of impending financial disaster as Trump and Brexit wreaked havoc. Instead, the broader market rally feels like it is warming up and heading for the open road. The traditionally somnolent Straits Times Index in Singapore has woken up and rallied more than 9% this year, and a total of 23.68% in the last year. Meanwhile, the Hang Seng here in Hong Kong, also up 9% for the year, is even more lively, rocketing up 32.24% since a year ago. Perhaps Spy should turn to an expert for some advice on the market outlook? The question is: which expert, and what advice…Ah, there’s the rub. More on that below.

News reaches Spy that Sun Life Financial has promoted Jeremy Young to chief marketing officer for Asia. Based in Hong Kong, he will oversee Sun Life’s marketing, brand and the development of its client insights program for the region. Jeremy joined Sun Life Hong Kong as vice president of partnership distribution in 2008, and was most recently CMO for Hong Kong. Prior to that he held senior roles at AIA and Sovereign.

It has caught Spy’s attention that Axa Life in Singapore has lost its expatriate business development head, Nick Glover. Nick has been lured to growing wealth manager, St James’s Place. The FTSE 100 wealth manager has been expanding in Asia of late. Spy understands that Nick has joined as partnership development manager.

Hang Seng Bank in Hong Kong has a group of select funds which is updated quarterly by Belle Liang and her team. Spy was tempted to take out his popcorn when surveying the list this week. Unusually, in Spy’s experience, the select list includes some single country European funds. The Barings German Growth Trust is included, as is the Invesco UK Equity Fund. Spy could not help but think of these selections as a Brexit battle in fund form. Who is winning so far? The Baring German Growth Trust is up 3.56% year-to-date while Invesco’s fund is up 1.12%. Round one to the Germans and the “Remainers”. Still, a year is a long time in fund management and even longer in politics. 

An excellent post by Ben Whitmore of Jupiter caught Spy’s eye this week. He repeats Ezra Klein’s salient and witty quote that “The only function of economic forecasting is to make astrology look respectable”. Ben then asks a vital question: “With access to computing power unthinkable even a few years ago, surely our ability to predict the future has improved?” Sadly, not. As he writes, “Unfortunately the evidence suggests we are as bad as ever. For example, in 2005 an American academic, Phillip Tetlock, published a book, Expert Political Judgment, in which he presents the results of a 20-year study tracking the predictions of 284 political or economic forecasters. In all, Tetlock checked the accuracy of over 80,000 predictions and found that they only marginally beat predictions made by assigning equal probabilities to all outcomes. Or, as Tetlock himself put it, the experts’ predictions were not significantly better than those that could have been made by a “mindless, dart-throwing chimp”. Beware experts bearing predictions, says Spy.

With recent consolidation taking place in the Asian wealth management industry, Spy has been looking at which firms have the largest wealth management AUMs in Asia. Private banks dominate the AUM rankings. Some data is widely available through company results and others are hard to come by and is based on best estimates and private conversations. For what it is worth, here is Spy’s current top 10, excluding domestic Chinese players. With more than a trillion dollars in PB AUM, it is not surprising so many asset managers want to come to the region:

*These may include asset management assets which if excluded would push them down the ranking.

Bear in mind that this is merely the private bank AUM. HSBC, for example, has more than $145bn in its wealth platform in Asia according to a press release last October. OCBC claims more than $200bn in wealth assets if Great Eastern, Lion Global and OCBC retail clients are included. Spy is working on a wider list of private wealth managers across Asia and will expand on this in future editions.  What this cursory list highlights is just how much wealth Asia has generated in the last 40 years.

Spy has just spotted an ETF that is highly unlikely to make it to Singapore’s market any time soon. It has the snappy name of “The Emerging AgroSphere ETF”. That sounds innocuous enough, until one reads the small print of its filing with the SEC. The fund is investing in that scourge of Singapore’s executioner, marijuana. Medical marijuana and its supply chain, to be exact. Apparently, “The fund will not invest in any companies that are focused on serving the non-medical marijuana market in the United States, Canada or any other country unless and until such time as the production and sale of non-medical marijuana becomes legal in the United States, Canada or such other country, respectively.” Based on the entire world’s rather fraught history with this plant, Spy would suggest you look at the fund but don’t inhale this one.  

Speaking of ETFs, Spy has heard whispers that Nikko Asset Management will be bringing a new lower cost, income generating ETF to the Singapore market in March. This will be Nikko’s first ETF outside of Japan. The exact securities within the fund are not known to Spy. However, as it seems that everyone in Asia is interested (obsessed) with income, Spy has little doubt this new vehicle will have its fair share of admirers on day one.

Spy watched Trump’s car crash of a press conference last night when he barely managed a coherent sentence in 75 minutes. His off-piste discussion on uranium was scarier than The Ring. Coupled with Kim Jong-un, allegedly executing his half-brother in Malaysia via a poison pen, Spy really does wonder what is going on in the world?  Spy is not too surprised gold is rising.

Until next week…