The FSA Spy market buzz – 08 November 2019

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Manulife AM hires; Singapore getting Hong Kong cash; Bubble in stability; Disruption; ESG blunders; Market highs and lows; advertising from Eastspring and much more.

Spy had a drink with a short-seller this week whose nerves were more shredded than his breakfast wheat. He grappled with his phone agitatedly as a large position in a retailer moved steadily against him. The company in question had announced, the day before, terrible results and a horrible future forecast. Naturally, he had sold with glee. The company’s shares then promptly rallied 6%. The only things going down that afternoon were the cold beers and the short-seller’s heart. With a change in the trade war weather, Spy can’t help but think that the short, defensive plays are looking like a truly miserable home right now.

A few weeks ago, Spy reported that Willa Lau had stepped down from her comms role at AB. Spy has now confirmed where Willa has moved to: Manulife AM in Hong Kong. Manulife AM has had success in the last twelve months with is China Segregated Fund which is up 21%.

It is obvious to all but the most blind observers that money continues to flow from Hong Kong to Singapore. The Singapore government, quite sensibly, downplays the benefit of taking cash from their northern counterpart, preferring to comment, if at all, that regional stability would be better for all. Spy is hard pressed to disagree. Exact numbers are hard to come by although Goldman Sachs publicly estimated $4bn a few weeks back and it is almost certainly a lot higher now. A few billion here, a few billion there and pretty soon we are talking about real money.

Timing is everything. For asset managers who ventured early into China, the only route was a JV, many of which have not lived up to expectations if Spy’s private conversations are anything to go by. There must a be a few rueful asset management executives who see China’s announcement this week that “all restrictions, on the business scope of foreign banks, securities companies, fund managers and other financial institutions operating in China” have been lifted.  Spy expects to see more announcements of JV buyouts over the next year.

Every now and then a portfolio manager uses a line which cuts through the clutter. This week Spy heard a PM from T Rowe Price say, “There is a bubble in stability.” He was talking about the trillions invested in zero or negative yielding debt of governments or corporates, or indeed the huge money that has flowed into equities with rock solid fundamentals, regardless of the price – yes, Nestlé, I am looking at you. The PM, rather passionately, argued that the bubble may be coming to an end as people realise the world is not on the brink of disaster and why should investors pay to lend the German government money? Good point.

Scouring the blogs or “insight” columns of asset managers, Spy has lost count of the times in the last year he has seen articles published with term “disruption” in the title. Asset managers are seeing disruption everywhere, talking about disruption, trying to invest in disruption. There is no little irony, for Spy, in that case, that one of the largest areas of disruption is in fact happening in asset management itself as the passives steamroller continues to flatten stodgy active managers. Pressure on fees and performance is taking its toll. In the US last year, for example, McKinsey reckons industry AUM grew 7% but fees only 1%. Even Spy can see that is not stellar performance.

Do you work for an asset or wealth manager trying to get into the ESG / Ethical / Green theme without detailed and ruthless due diligence? Spy has a salutary tale for you, covered by the Sunday Times in the UK. Fidelity International has been forced to close a portion of its UK website that recommended socially responsible funds because, in reality, many simply did not meet that criteria in their entirety – i.e. some funds had an alcoholic drink or defence company in their portfolios. Whilst Spy thinks the Sunday Times has been a bit over the top in its description of “mis-selling” (and Spy likes the products of alcoholic drink companies), increased scrutiny in the Greta Thunberg era is going to make it much harder to make broader investment claims without being ruthlessly accurate. Marketers and sales people beware.

With US markets at record highs, cheered on by the Tweetmaster-in-chief, it is often easy to forget how far away other markets are from their own record highs. On 12 October 2007 Shanghai’s Composite Index hit a record high of 5903.26. Yesterday, the index closed at 2993.98, practically at half the level it was 12 years ago. The Nikkei 225 is just over half where it was 30 years ago. The Cac 40 in France is about 15% below its high in September 2000, 19 years ago. Contrast that with the US. In the last decade, as of the 1st of November, the S&P 500 has hit new highs on 223 separate occasions and 16 times in 2019 alone. One can level a lot of criticism as US markets, but performance is not one of them.

Spy’s photographers spotted a new tram in Hong Kong with some branding for Natixis Investment Management:



Meanwhile, a taxi was seen roaming the streets of Singapore boosting Eastspring’s income solutions:



Until next week…

P.S. Spy failed miserably to predict South Africa’s Rugby World Cup win. His only consolation being the fact that so many others did too.






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