Posted inFSA Spy

The FSA Spy market buzz – 25 November 2016

Fees in HK and Singapore; Change at Capital; UBS’s outlook; Anti-establishment worries at Columbia Threadneedle; Naughty banks; Blockchain in France; advertising from UOB and much more.

Spy is beginning to think he has turned American. He has had countless conversations with people of all stripes over the US election and then found himself at a Thanksgiving dinner in Hong Kong this week; that great American tradition of alcoholic excess, roasted turkey and acknowledgement of one’s gratitude for life in general. Among a list of private things to be grateful for, Spy told the assembled crowd he was grateful for madness. The madness of crowds, to paraphrase Charles Mackay, that makes financial markets so infinitely enjoyable. The ever-changing, evanescent themes at which the world throws money with glee, only to take it away just as swiftly, are sure to keep the most ardent investor on his or her toes. So, be grateful for the industry we are in, but just don’t wish for a calm or certain life – it is not going to happen, unless you happen to be the turkey ‘pardoned’ by President Obama on Wednesday.

News reaches Spy that Phoenney Wang who has been helping Capital Group with their marketing in Singapore is relocating back to the United States. Capital Group has been expanding its retail and wholesale marketing in Asia over the last few years. Of note is a distribution agreement with HSBC Retail Bank in Hong Kong. Capital is apparently hunting for a replacement and is also looking to hire someone to assist with PR.

Fees. Let’s talk about Fees. There seems to be a real conversation going on with both Singapore and Hong Kong regulators about fund distribution fees and their transparency in both centres, thinks Spy. Hong Kong, in particular, has already shown in the insurance space that it is prepared to kill a few sacred cows when it ditched indemnity commission last year, shocking everyone in the industry at the time. It appears a more tempered approach is being taken for funds to avoid excluding poorer demographics from advice.  Where is this all going? Over the long term it should lead to a fund distribution model that looks similar to the UK – i.e. a significantly greater role for discretionary mandates. We are not even close to being there yet –ask UBS, – but it is coming.

We are at that time of year when the economists and strategists at the great and good gaze into their crystal balls and make predictions for the year ahead. Last week Spy reported on Goldman Sachs, this week UBS has shared their views. UBS’s CIO of wealth management, Mark Hafele, is conscious of the trade-offs policy makers will be forced to make, writing:

“Here are some simple thought experiments: faced with a lack of growth, will a central bank that has already distorted the local bond market choose to stop, or start buying equities? Or, faced with rising overseas competition, will voters stick with the status quo, or turn to protectionism?…The behaviour of central banks since the financial crisis suggests that growth, employment, and near-term support for the economy have a higher priority than concerns about potential longer-term consequences of their actions.”

UBS therefore remains positive on US equites, thinks more of the same from China, constructive on higher-yielding emerging market debt and is wary of inflation.

There is always something to worry about, knows Spy. Columbia Threadneedle’s CIO Mark Burgess reckons that the chance of another anti-establishment election result in Europe in the next year is reasonably high. His concern is about the effect on banks, and it should probably be ours, too, thinks Spy. He reckons the Dutch voting to exit the euro would be a challenge for the banks but if France were to vote to leave, say, after a Marine Le Pen presidential victory, it would be a “catastrophe”. For his money, Burgess reckons the top trade of 2017 will be Japanese stocks and his least favourite market is European equities.

Naughty naughty naughty: ANZ and Macquarie have been caught out engaging in “cartel behaviour” over Malaysian ringgit trading in Singapore. They may have to pay as much as $15m in fines. Just when the public was beginning to think that banks had learned their 2008 lessons, skeletons keep falling out of the proverbial cupboard.

Spy found this observation by Nikolaj Schmidt, the chief international economist at T Rowe Price, on his blog extremely insightful, “One interesting feature of the rise of the anti-establishment movement is that none of the parties have explicit policies to address the mis-distribution of resources that is at the heart of their supporters’ frustrations. The anti-immigration, anti-globalization policies they promote instead appear to be a proxy for what is really a demand for a redistribution of wealth.” Spot on!

M&G’s Jasmeet Chadha has picked up something extremely interesting on the firm’s Equities Forum this week. “In France, the government is developing a legal framework that would allow funds to be distributed using blockchain technology.” Spy has heard ‘blockchain’ mentioned as frequently as ‘cold beer’ of late – it seems this nascent technology that underpins Bitcoin may finally be entering the mainstream asset management industry and will almost certainly help to bring down costs if used effectively. Watch this space, or should that be, spaces?

Spy’s quote of the week comes from John Bogle, founder of Vanguard, the index giant, “It’s amazing how difficult it is for a man to understand something if he’s paid a small fortune not to understand it.” He no doubt said that in context of finance but it seems a universal maxim to Spy. Proof: go and find the oil driller who ‘understands’ climate change or the vitamin salesperson who ‘understands’ the benefits of fresh veg and a good walk…

Spy found himself part of the zeitgeist last week in the least favourable manner. You may have read about fake news being a problem with Google and Facebook, some even blaming the internet giants for swinging the election. Well, Spy fell victim to a false story last week, too. He reported, based on a usually very reliable source, that Amelie Remond at Aberdeen was moving to Axa IM. Whilst emphasised at the time clearly as a rumour, it turned out be flat wrong. Amelie is going nowhere and Spy is embarrassed and apologetic. If you suddenly discover an industry colleague has disappeared, that is simply Spy dealing Chicago-style with erroneous sources…

Spy’s photographers in Singapore have spotted UOB AM pushing four of their fund offerings in Raffles Place. Apparently they want you to enjoy “potential income”. In Spy’s experience, people enjoy real income a whole lot more…



Pimco in Singapore is encouraging people to sleep easy at night. In the tropics, that would be considerably easier with air-conditioning at home too, notes Spy.



Until next week….

Part of the Mark Allen Group.