Spy shared a very jolly couple of craft beers (over Zoom) with a portfolio manager this week who runs a multi asset fund out of Melbourne. He buys bonds, he buys equities, he dabbles in options. He describes himself as “a pragmatic cynic”. “The government bond market is dead”, he told Spy, explaining the huge equity rally we have seen lately. “Govvie yields are now so depressed, we are back to the old acronym, TINA. Yes, there is no alternative to buying equities. We are all being pushed up the risk scale, because you get nothing, or less than nothing, for buying government paper. So, you can jump up and down, tear your hair out and moan the rally makes no sense, or you can close your eyes and enjoy the ride.” Easy to say, very hard to feel enthusiastic.
Spy is blaming Covid and the general lockdown for not reporting a key change in local product selection and management. After all, pretty much everyone else is blaming Covid for most current ills, too. Beanie Fong, the former head of wealth management product at ICBC in Hong Kong has jumped to Citibank. Beanie has taken up a similar role: head of mutual funds and alternate investment for Hong Kong. The change took place a little while ago and Beanie only recently updated her LinkedIn profile to reflect her new role. Spy has no news on who has replaced Beanie at ICBC, although he is endeavouring to do so.
Spy can just imagine the rather heated boardroom discussions that took place over the last few weeks within HSBC and Standard Chartered. The pressure to support Beijing’s security law must have provided the firms with an unpalatable dilemma. In reality, it was a Hobson’s choice, thinks Spy. The option to say nothing and do nothing was not really available at all the moment that former Hong Kong leader CY Leung made his remarks about HSBC and where they make their money. No doubt some very angry activists will be threatening to take their business away, but Spy thinks the reality is, like so much else at the moment, as mentioned above, TINA. There is no alternative. Is anyone serious and with substantial assets really going to bank with a bank in Hong Kong that does not have Beijing’s tacit support and vice versa? Welcome to realpolitik and realbusiness.
For those people concerned that Hong Kong’s status as a financial powerhouse is threatened by political developments of late, China came out swinging for the Fragrant Harbour this week. The China Banking and Insurance Regulatory Commission (CBIRC) said yesterday that “Hong Kong’s role as a global financial hub will be further consolidated in the future.” With as much as 20% of Hong Kong’s GDP now tied to finance, there is a huge amount resting on this claim. Spy would humbly submit to any regulators that they read Niall Ferguson’s, “The Ascent of Money” for a succinct history of financial hubs and what makes them lose their status. Spoiler alert: rule of law and connectivity is fundamental.
Spy has come to the dreary conclusion that regulators would prefer that investing no longer involves any brain power, no thought or analysis. It is a central bank world. Some bright spark at an ETF firm should simply create a central bank asset buying tracker and allow the plebs to invest in that and be done with it. Every time, of late, Spy has heard central bankers say “these programmes are temporary”, he has been reminded of Milton Friedman’s pithy insight, “There is nothing is so permanent as a temporary government program.” One can add central bank asset buying to that ignominious list.
Spy’s colleagues on FSA have been surveying the asset and wealth management industry in Hong Kong and Singapore on when they might be allowed out to attend conferences and events that involve more than a handful of people. 87% of respondents to the survey indicated that they had been given a month from the powers that be that they could attend larger events. For 75% of respondents it was September; 25% were even more optimistic and said they would be attending events from June. Spy, for one, has been missing the conviviality, the networking and the shared ideas generated at events immensely and hopes this survey proves accurate.
The American Chamber of Commerce in Hong Kong surveyed its own members recently on Beijing’s security law, as reported by CNBC. Unsurprisingly, more than half of the 180 firms covered were very concerned about the law. Around 60% of US firms thought the law would harm their business operations, but 70% said their companies “don’t have plans to move capital, assets or business operations out of Hong Kong”. For the moment, Spy assumes that companies don’t have the luxury of moving. The real tragedy in HK is the number of businesses that will simply close down because of Covid and the protests. They won’t be moving assets, because they won’t have much left to move anyway.
Love him or loath him, Elon Musk manages to push some pretty big, sensitive buttons. Yesterday he called for Amazon to be broken up. Seeing the chart below, there are a lot of investors who won’t want that. And a lot of retailers who think they hear a savior.
With job losses accelerating around the world, business failures ratcheting up and economic distress in the real economy picking up, Spy found this cartoon that summed up the current investor mindset rather well:
Spy’s photographers have spotted a brand new campaign in Central Hong Kong from BNP Paribas Asset Management. The French asset management giant continues to focus on sustainability:
Until next week…