Posted inFSA Spy

The FSA Spy market buzz – 13 August 2021

Fidelity hires; SonicShares’s boat; ESG and active; S&P 500’s winning run; M&G on China; HKEX and identities; AMC tickets vs shares; Bitcoin uses; and much more.

Spy had one too many glasses of Jack Daniel’s and Coke this week with a young(ish) fund salesperson in Hong Kong. He confessed quietly that he had applied for several fintech roles. Spy asked the young, jovial fellow, why the switch? “I have tried to pass my CFA exams three times and have failed them,” he confessed. “I don’t think I am going to get promoted in asset management without them, so I had better change, now.” This got Spy thinking: is asset management going down the route the banks went in the 1990s: everyone had to have an MBA (and by implication, think exactly alike?). Spy thinks it is going to be a Very Sad Day, if it comes to pass, that such a highly technical qualification, will be the base requirement for career progress in our industry.  Perhaps asset management should remember Steve Job’s quote, “Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes … the ones who see things differently — they’re not fond of rules, and they have no respect for the status quo.”

Downunder, Fidelity International has made a key ESG hire, notes Spy. The global manager has appointed Daniela Jaramillo as director, sustainable investing, based in Melbourne. In this newly created role, “Daniela will work with Fidelity’s investment team to help further integrate sustainability considerations into the firm’s investment process.” Reporting to Jenn-Hui Tan, global head of stewardship and sustainable investing in Singapore, Jaramillo will  also act as a spokesperson for Fidelity and represent the firm’s sustainable investing capabilities in Australia and New Zealand.

Spy has been missing creatively named ETF tickers (UFO, HACK, CRUZ, DTOX, etc), with recent ones providing incomprehensible or truly dull acronyms (QJUN, WGRO, IBDW). Along comes BOAT, by SonicShares, to save the day. The recently launched passive, Global Shipping ETF, is tapping into demand for the shipping industry as lease rates soar and ships are, once again, in hot demand. Spy can just imagine the ad campaign, channelling the classic Jaws film, “We are going to need a bigger BOAT!” For the truly tactical part of one’s portfolio, surely.

Is ESG going to be the saviour of the active portion of the asset management industry? Perhaps data out of the UK is the, er, green leaf of spring in darkest active winter? In July, passive sales fell 90% from their long-run average according to Calstone (a data gatherer) and the vast majority of money instead went into active ESG-orientated funds. Perhaps investors are waking up to the fact that you need real people, with real analysis, looking at real companies to find out which ones are actually following sustainable business models?

On Wednesday, the S&P 500 had its 46th close of the year at its all-time high (ATH). It did not take long for that to be surpassed; yesterday the index closed for the 47th time this year at its ATH and we still have four-and-half-months of the year to go. 2021, so far, has recorded the joint 8th number of ATHs, achieved during a single year for the index, since 1929. In 2016, the benchmark achieved 62 ATHs but that is dwarfed by the best year ever, 1995, when the index managed an astounding 77 ATHs.

At the moment, the geopolitical regulatory cold war between China and the US is targeting banks, especially those operating in Hong Kong. The global multinationals are really caught between a Chinese rock and an American hard place. As mutually exclusive sanctions laws get enacted, banks must surely be wondering where to hide (apart from putting their heads in the sand.) For now, asset management companies must be crossing their fingers that they, too, do not get included in the chilly regulations maelstrom. As the saying goes, business doesn’t mind rules too much, as long as it knows what those rules are.

It may seem astonishing to Singaporean, French or German investors that in Hong Kong, one is still able to buy and sell shares on the local stock exchange without providing your real name. In an age when one can barely buy a coffee without handing out an ID card, HKEX disclosure rules seem an extraordinary anomaly. The party, however, may soon be up. In the second half of 2022, the SFC has said that financial institutions will be required to provide proof of their clients’ real identity for trades on HKEX. For those of us who have a libertine streak, Spy included, this is yet another sign that Hong Kong’s joyous anarchic spirit is being eroded, conforming to global ID norms with all its attendant dullness.

The commentaries on China’s recent regulatory crackdown keep coming. This week, M&G had its say. Spy appreciated the M&G team’s insight that the new rules demonstrate “…the ability of China in particular to execute on those changes at a rapid pace.(Emphasis is Spy’s). With all the browbeating in Western commentary about China’s sudden crackdown, the convoluted, tedious, partisan, bickering pace of political change in the West, at times of national crisis (pandemic, climate change, ageing populations – pick your favourite one), are a profound source of local frustration, too.

It’s August, so Spy will indulge in a little meme stock bashing. AMC, the cinema chain that has had one rollercoaster ride in the last few years, racked up a noteworthy stat in the last quarter. It sold only 22m cinema tickets, but it managed to sell 63 million of its own shares. When you are selling more of your own shares, than your own product, by a factor of nearly 3:1, surely Reddit investors must worry a tad. Don’t bet on it though.

Spy’s favourite quote of the week, “We wouldn’t need crypto: if we could trust central banks, if we could trust governments and if we could trust people. Since we can’t, we need plan ₿.”

Until next week…

Part of the Mark Allen Group.