The FSA market buzz – 19 July 2019

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BNY Mellon IM and Harvest lose, BNP Paribas AM hires; Nordea AM’s inflows; Stock exchanges; CFA no shows; Microsoft results; Gold funds; JP Morgan’s summer reading list and much more.

Spy has been enjoying a flurry of artisanal gins and tonics (Try Bloom, with its distinctive honeysuckle tint, if you can get hold of it) with asset managers and private bankers this week. Thoughts have already been turning to what funds, sectors and asset classes will be promoted in the second half. Spy is rather surprised by how often fixed maturity products are still coming up. The market seems caught in a cautious stasis and flight to safety. Spy would not mind this much, if only it wasn’t so thuddingly dull. Still, it is hard not sympathise when 21 out of 31 Central Banks’ monitored by Spy, most recent decision was to cut their local interest rate – South Africa being the most recent. Rates look to be tumbling and people are desperately locking in yields where they can.

News reaches Spy that BNY Mellon Investment Management has lost its head of marketing in Asia Pacific. Freda Amir, based in Hong Kong, has stepped down from the role she has held since July 2017. Freda previously had marketing roles with Fidelity, Blackrock and Aviva Investors. Spy has no news on where Freda is moving to or who is replacing her. BNY Mellon IM has had success in the last year with its Long Term Global Equity Fund which us up 9%.

In another move, Joyce Lui, VP for marketing and business development for Harvest, is leaving the firm. It is not yet known where she is headed, but the Spy understands she will stay in the financial industry in Hong Kong. Joyce has been with Harvest for four years.

BNP Paribas Asset Management continues to demonstrate commitment to both sustainability and thematic investing with two new hires announced this week. The French asset manager has hired Ulrik Fugmann and Edward Lees, who will manage a global long-short sustainability-themed strategy focusing on companies operating within the energy, materials, agriculture and industrials markets. BNP’s Parvest Brazil Classic Equity Fund is up a whopping 32% this year. In Spy’s experience persuading fund selectors in Asia to get excited about Latam funds is about as difficult and effective as shaving with a cheese grater.

Spy gives a hat tip to Nordea Asset Management who published their quarterly results this week. The Scandinavian manager had net inflows of €2.8bn in what can only be described as a challenging market. According to the company, 81% of its portfolios outperformed their benchmarks over the past three years to the end of June. Spy has not come across many active asset managers who can say that of late. Despite the good news on performance and net flows, the asset manager reported an 8% decline in profits for the year. Tough school.

Spy has for some years wondered whether running local stock markets is worth the hassle. Like national airlines, stock market operating companies, often appear to be a source of national pride rather than efficient ways to allocate and raise capital. Many suffer from low liquidity and thin volumes. Singapore has struggled for years and now Goldman Sachs has pointed out that even regional giant Hong Kong Exchanges & Clearing is suffering a trading volume slump. The firm has put a “sell” recommendation on the operator in contrast to 18 other brokers who still think the business is buy. A pleasure to see a contrarian call.

John Maynard Keynes, the legendary British economist, is regularly misquoted as saying that ‘gold is a barbarous relic’ when in fact it was the gold standard he described in that manner. This week, gold has been reminding absolutely everyone why it refuses to become a relic and is certainly far from barbarous. As central banks across the world engage in the most active form of currency depreciation as they can, gold has rocketed up, playing its long term role of preserving a store of value. Gold funds, unsurprisingly, are on a tear. Investec’s Global Gold Fund is up 28.7% over the last 6 months, Franklin’s Gold and Precious Metals Fund is up 31.4% and Schroder’s Global Gold is leading the pack up 32.6%. Outspoken hedge fund manager Ray Dalio has been adding fuel to the fire this week calling for much higher gold prices. Spy would not bet against him on this occasion.

In the Asia-Pacific financial world, where studying for hard exams seems as common as congee for breakfast, Spy has come across the most extraordinary range of people who hold the CFA charter. The notoriously difficult qualification is worn as a badge of honour by those brainy enough to make the grade. The CFA Institute has revealed this week that 55,000 of the 250,000 students due to sit the exams in June did not bother to pitch up. There are suggestions that the Institute may make the exams more “accessible” to bring down the number of no shows. Spy can imagine those who have already qualified will quail in horror at any suggestion of dumbing down. Lesser mortals can always go and get an MBA…

Spy can remember the time a few years ago when Microsoft’s doubters thought the business had become so dull and lacking in innovation it was a has-been. How times change! With yesterday’s results, Seattle’s non-coffee behemoth has given investors another reason to keep it the world’s most valuable company. Quarterly revenue is up 12% to $33.7bn with profits up a staggering 49%. Funds across the spectrum will be trying to find any excuse to add the software giant to their portfolios, reckons Spy.

Spy’s inbox received a flurry of emails this week about his observation last Friday that robo-advisers have not made much of an impact in Asia. Spy’s critics asked your humble author to turn his eyes north of Hong Kong and look at China where Ant Financial is accumulating wealth assets at a phenomenal pace. Fair enough responds, Spy, a point well made.

For those still dashing away for their summer holidays, Spy recommends the always thoughtful JP Morgan Private Bank summer reading list.

The list has now been published for 20 consecutive years and always contains some gems to tickle the brain. Spy is half way through “Out of the Gobi” by Weijian Shan and, thus far, can thoroughly recommend it too.

Until next week…

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