With normal life feeling distinctly disrupted in Hong Kong and most people likely to be drinking vitamin tonics instead of craft beer, Spy’s chance for convivial gossip has been limited again this week. The Virus (yes, capital V) which is causing rumours, counter rumours and a touch of panic is wreaking havoc with Spy’s spying. One contact Spy did speak to, a highly experienced asset management executive who is ending a year of sabbatical and hopes to find a suitable role in Asia, moaned about the slowness of the market. Caution rules the day, it seems, for asset managers in the region. Spy can hardly blame them and yet just last year Bloomberg gleefully reported on the 2000 millionaires per day created in Asia. Assuming, in a worst case scenario, that rate of millionaire creation had dropped in half, we are still making 1000 millionaires per day and someone needs to look after that money.
The piece of news that caught Spy’s eye above all this week was the announcement that Grab had acquired Bento – the Singapore headquartered b2b2c robo-adviser. Bento was set up by Chandrima Das, former head of fund selection at Bank of Singapore. Spy has watched Bento from its start up with interest and always suspected that Bento was on to something by NOT trying to build a pure b2c model. As part of the deal, Chandrima will now become head of Grab’s wealth management arm and the business will be renamed Grab Invest. There is a touch of Alibaba about Grab’s ambitions in Southeast Asia. The firm started out as a competitor to Uber in the ride hailing business and has used its ubiquitous app to add other services, rapidly expanding into the wealth management space. Grab already has other financial verticals: Grab Pay, Grab Rewards, Grab Finance and Grab Insure. For any robo-adviser, the single greatest challenge is acquiring customers. With such a low cost fee model, there is not a lot of budget to go around for marketing. Partnerships, in Spy’s opinion, are therefore essential. In the UK, a string of ambitious robo startups have failed in the last few years, the latest being Moola, which announced its closure in mid-January. Hat tip to Chandrima and her team.
Looking at Hang Seng’s list of bestselling funds is usually like the film Groundhog Day – the same strategies are snapped up, week in, week out. They are usually income funds or multi-asset and some have the dubious distinction of having the ability to pay that income out of capital. Spy was surprised and rather excited to see that UBS’s China Opportunity was in the top ten this week. The fund returned 41% in 2019, so it is hardly a shock people have taken notice. However, with all the other negative news running around, Spy raised a happy eyebrow that Hong Kong’s investors were willing to stock up on China equity. That famous Hong Kong risk-taking spirit appears alive and well.
The wealth management industry is notoriously stingy when it comes to attracting clients through promotions. The typical promo asks one to invest hundreds of thousands of dollars and then get a $10 voucher to some overpriced department store in return – usually described as a “red hot offer”. Hang Seng seems to think that clients who invest HK$5m really need a “Blossom of Joy Glamorous High Tea Plate Set”. Spy does struggle to see the relevance of the promo. Spy strongly suspects most clients would have a blossoming of joy if the fund they invested in outperformed and the fees they paid were not daylight robbery – but that is just Spy.
A chart is worth a thousand words, or so the saying goes. This chart below, showing that the combined market cap of Apple and Microsoft, now exceeds the entire German stock market, may not be worth a thousand words but is surely worth pausing for breath, thinks Spy. Most market observers are all too aware of the staggering outperformance of big US tech, but there is surely a touch of the dot.com bubble when stats like these emerge. Deutsche Bank, the poster child for dreadful German performance, got a boost this week when it was revealed Capital Group had bought a 3% stake in the business. If investors are hunting for value, they can surely do worse than taking a peek a Europe’s industrial powerhouse, which has been a tad under the weather.
Are our European friends finally going to learn from Hong Kong and Singapore, wonders Spy? The Euronext and London Stock Exchange are making loud muttering noises about shortening their trading days. Spy has always felt the hour Hong Kong and Singapore’s exchanges take for lunch, combined with a leisurely start, has seemed an eminently sensible way to run a public market. At the very least one could hope the sandwich-at-their-desk warriors could have time for bangers and mash before moving their billions around.
If you were a completely disinterested observer and had these facts to hand: all your stocks markets are at record highs; your economic expansion was the longest in history at 127 months, unemployment was at a 50-year low of 3%; the number of jobs had grown for a record 111 months; rates were less than 2%. Would you, A) hold rates steady, B) raise rates, or, C) cut rates? The market reckons it is C. Spy only has to remember it is an election year for the madness to make sense…
Was this the week that Hong Kong reached Peak madness? Pictures of Hong Kongers stocking up on bundles of loo rolls and clearing shelves in a frenzy after rumours swirled about imminent shortages, is not a good look, thinks Spy. With this condom stand utterly cleared out in the stampede, Spy can only surmise that not all human contact is being shunned in light of the virus, which is a relief of sorts.
Until next week…