This week Spy has had a lot of moaning come across his desk and ears this week. If it is not friends moving to Singapore moaning about the cost of the COE and local rents, it has been a portfolio manager lamenting the lack of performance in small-cap stocks, while large caps (still) get all the fun. Couple that with terror in Israel, China’s property conglomerate woes and there is a whole lot more to worry about this weekend. Spy for one, is happy it is Friday – time for large glass, or two, of Chianti.
With the news out this week that industry veteran, Donald Rice, after four decades in the industry and who headed Julius Baer’s alternatives and strategic solutions specialists team is retiring, the private bank has released some details on his successors. William Fong and Jason Ng will take on the roles as co-heads of the alternatives and strategic solutions specialists team, effective 1 November. William is based in Hong Kong and has over 25 years of private equity industry experience, first at Lazard Asia Private Equity and Investor Growth Capital Asia and then as an investment specialist with Julius Baer for the past 10 years. Jason is based in Singapore and has over 15 years of private equity and corporate finance related industry experience, first as an investment banker at Evercore and Credit Suisse and then as an investment specialist with Julius Baer since 2017. Spy and the FSA team, wishes Donald a happy and fulfilling retirement.
China continues to dominate the global industry for production of solar panels, notes Spy. For those keen to play China’s green industries, Krane Shares have a new thematic equity ETF investing China’s clean tech industries, KraneShares MSCI China Clean Technology. The ETF, with ticker KGRN, which is listed in New York and several European markets, including London in a UCITs format, tracks the MSCI China IMI Environment 10/40 Index. That index screens for companies deriving at least 50% of their revenue from environmentally beneficial services and products across four sub-themes: alternative energy, pollution prevention, sustainable water and energy efficiency. It is not just solar where China is doing well. In electric vehicles, China’s market is also the now the largest globally, with more than four million EVs sold in 2022. That is five times the quantity sold in the US in the same year.
Has Donald Trump, or at least his lawyer, said something useful about the investment world this week, wonders Spy? “There are many ways to value assets and all are accurate even if they give different results” said the ex-president’s lawyer Christopher Kise in his rebuttal of claims that the former US President deliberately inflated his property values. Spy might quibble with the word ‘accurate’, ‘valid’, might have been a better one. However, anyone who has ever sat in a private equity or venture capital presentation might have been nodding at Kise’s line. Valuations are often an art and not a science. Ultimately, something is worth what someone else is willing to pay for it but in the illiquid market, until that buyer puts a cheque down, have a good suck of that thumb. That is what everyone else is doing.
With another war raging in the Middle East and defence stocks rising, some perverse data is coming out of the ESG sector. Take this fact: nearly 800 ‘green’ funds in the UK and Europe have holdings, worth approximately £4.2bn, in the aerospace and defence sector according to data from Morningstar. Where does that green line start and finish? Perhaps it is not for Spy to say but that data it will surely surprise many.
How do you manage to lose $213bn in less than 60 days? One way would be to invest in an inflated electric vehicle maker that has only just listed on stock market. VinFast, the Vietnamese EV firm controlled by Pham Nhat Vuong, listed on 15 August via a SPAC (remember those?) and saw its shares rally to a peak valuation of $230bn in a just a few weeks. It has subsequently lost more than 92% of value in just 30 days, tumbling back to a merely $17bn market cap. A mere 0.3% of its shares were sold in the listing, meaning the float was ridiculously small. More to the point, the firm sells very few cars overall, most of them to its sister company, a taxi firm. How anyone thought this investment was a good idea, is beyond Spy.
Spy loves an exciting new market term. This week, Janus Henderson put out a piece describing, “bond bear steepening”. It certainly sounds like an angry beast; the phrase sends a little shiver down Spy’s back. According to JH, “The term is used to define a situation in which yields on longer term bonds rise more than the rise in yield on shorter dated bonds.” Don’t be surprised if one hears that phrase a lot more in presentations in the next few months.
Final thought for the week: The interest expense on US public debt rose to $883bn over the past year, a new record high. If it continues to increase at the current pace it will soon be the largest line item in the Federal budget, surpassing social security. That sounds sustainable, doesn’t it?
Until next week…
