Posted inFSA Spy

The FSA Spy market buzz – 13 January 2017

Resignation at Sun Life; Gross watching 10 year; Hang Seng loves bonds; Fund selector observations; StanChart and OCBC’s conviction lists; Lombard Odier on hedge funds; Matthews Asia speaks reason and much more.

Over roasted Peking duck and half a bottle of put-hairs-on-the-soles-of-your-feet Moutai Baitú, Spy discovered something alarming about his personal wealth advisor, which bodes ill for Spy’s modest scrap of savings. Said wealth manager was born in 1957, thus making him a fire rooster in the Chinese zodiac. As every Chinese astrologer will tell you, the year of one’s birth sign is the most unlucky year in the entire 12-year zodiac cycle. And, apparently, in the year of your sign, fortune in all aspects of your life will not be very good. Spy’s immediate thought was to sack the fellow, but sense has prevailed. He has done such an awful job of managing Spy’s money so far, perhaps this impending year of bad luck will be the ultimate contrarian trade and he will surprise to the upside? Spy can but hope that publishing this on Friday 13th does not jinx it!

News has reached Spy that has raised an eyebrow. Apparently Jason Dehni, the CEO of Sun Life in HK, has resigned after only seven months in the role, according to Sun Life staff. The announcement was made to staff yesterday. Jason joined Sun Life in May 2016 from Manulife. Sun Life has been building out a high net worth operation on top of its mass market offering and MPF solutions. Although Dehni’s replacement is not known to Spy, it is supposedly an internal one. Does this herald a change in direction? Time will tell, thinks Spy.

Apparently Janus’s Bill Gross is watching a key bond market level far more closely than the higher profile Dow 20,000. In a note to clients he said, “And this is my only forecast for the 10-year in 2017. If 2.60% is broken on the upside—if yields move higher than 2.60%—a secular bear bond market has begun. Watch the 2.6% level. Much more important than Dow 20,000. Much more important than $60-a-barrel oil. Much more important that the dollar/euro parity at 1.00. It is the key to interest rate levels and perhaps stock price levels in 2017.” It closed at 2.36 last night, observes Spy.

Bill Gross may have concerns about bonds being near their secular cycle peak, but that does not seem to have bothered Hang Seng Bank’s fund selection team in HK much of late. Of the new funds added to their fund platform between October 28th 2016 and January 5th 2017, only one is not a bond fund. BlackRock, Allianz GI, Fidelity, Legg Mason and First State all have newly-listed bonds funds with Hang Seng. AB is the stand out with their emerging markets multi-asset fund, although Spy is rather convinced that fund holds a few bonds too!

Spy spoke to two fund selectors from Swiss private banks in Asia this week and it was interesting to hear their views. One commented on the fading potential of Swiss banks to attract mainland high net worth clients, at least for now. “Chinese authorities are so concerned about the falling RMB vs the USD, they are tightening the screws even further on money leaving the country”, he told Spy. The authorities’ latest move is apparently persuading Chinese banks to advise clients to buy yuan and sell US dollars and ensuring research analysts “don’t voice negative opinions on the falling RMB”. “But getting Japanese clients is tougher,” he said. “We do get interest from the Japanese, but it is easier to get money out of China than it is out of Japan.”

Another fund selector said his high net worth (non-mainland) Chinese clients are not particularly unnerved about a Trump presidency because he will operate on a logic system well known to clients. “Trump is a businessman,” he explained, “and he made his money in real estate. Many clients believe they’ll understand him better than they would a politician so they are not real nervous.” The bleeding heart liberal commentariat would do well to take this view quite seriously.

Spy has to tip his hat to Dany Dupasquier and the fund selection team at Standard Chartered Bank in Singapore. It is clear that they had a good year on their funds select list in 2016. Of 180 on the priority conviction list at the end of the year, 145 came in positively 2016, or 80% of them. Their best three picks were: AB’s Global High Yield Portfolio, up more than 16%, followed by BlackRock’s USD High Yield Bond up more than 13% and finally Eastspring’s Japan Dynamic up more than 12%.  However, if Spy’s interpretation of the data is correct, SC was just pipped by OCBC, which managed to have 81% of funds come home positively. Ryan Sim and the OCBC team managed to find funds with some truly spectacular returns within that list. They backed Blackrock’s World Mining Fund which rallied more than 45% and First State’s Global Resources was up a very healthy 35%.  Spy will drink to that.

Lombard Odier is extending an olive branch to a truly unloved sector of the market: hedge funds, notes Spy. In a recent research note, LO writes,  “The investing environment has been challenging for the hedge fund industry.” No kidding. “At this point, however, we believe that the increasingly apparent limits of monetary policy and concurrent shift toward fiscal stimulus should create a volatile environment with more directional opportunities. Macroeconomic policy and political dispersion between regions and countries is on the rise. Hedge fund managers, particularly in the macro segment, should benefit in 2017.” We have had so many false dawns for hedgies in the last six years, the real question is if anyone will heed this, no doubt, sensible call. Spy doubts it very much indeed.

On the stump, Donald Trump has said about China tariffs, (and yes, you can do the accent as you read this) “I would do a tax. And the tax, let me tell you what the tax should be … the tax should be 45 percent.” While all and sundry fret about this rhetoric over China/US trade, Andy Rothman of Matthews Asia, on his Sinology blog, makes a very reasoned observation. He writes, “In my view, Trump is very unlikely to implement a 45% across-the-board tariff on imports from China” After all, “since China joined the WTO in 2001, US exports to China are up by more than 600%, while US exports to the rest of the world are up by only 80%, and China is now the third largest market for US goods exports.” Spot on, thinks Spy. It is called ‘trade’ for a reason and it is awfully hard to trade with yourself.

AB, fresh from celebrating 50 years and ringing the bell to open the NYSE this week, has some new advertising in Hong Kong. Spy does wonder whether their compliance is out of control. It seems the ad is nearly half disclaimer.



Amundi has an exclusive deal with Standard Chartered and seems to be explaining their risk strategy with a crash helmet on the cheetah.



Until next week…

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