The FSA Spy market buzz – 14 June 2019

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What a week for Hong Kong; a move at CBH Asia; Capital Group adds; moves at JP Morgan AM; passive product trouble?; a humbled star manager; brands in various countries; advertising from Jupiter and much more.

“Buy when there’s blood in the streets”, Baron Rothschild apparently advised 19th century hedge fund proto-types after cleaning up in the wake of Napoleon’s defeat at Waterloo. Spy was contemplating this thought while easing down his third Macallan single malt in a well-known bar near the IFC in Central . Fortunately, Hong Kong hasn’t turned into a battlefield quite yet, but spectators – and a few a steely-cold speculators too, no doubt – must be wondering what to make of the scenes on the territory’s streets this week, broadcast on live-feeds and breathlessly updated by journos as if covering a sports fixture. So many issues at stake, not least the integrity of Hong Kong’s rule of law, so crucial for the confidence of financial firms, as well as the city’s exasperated citizens. It’s unlikely that Carrie Lam’s crocodile tears and schoolmarm scolding will dampen the anger and fear. Meanwhile, the world of wannabe Rothschilds continues.

The Spy has learned that Kevin Liem, chief investment officer for CBH Asia in Hong Kong, is leaving the firm. His last day is today. Kevin has long been a supporter of FSA, assisting with our awards judging and providing his views on the industry. It’s not yet known where he is headed. Watch this space.

Spy reported earlier that Jean Tan, the regional head of marketing for Natixis IM in Singapore, has left the firm. Jean is now at Capital Group in the role of marketing director for Singapore & Southeast Asia, Spy understands. Capital Group has also added Heidi Sutton as head of Apac marketing. Heidi, who is based in Singapore, was formerly head of global marketing at First State.

At JP Morgan AM, the lead manager of the Thailand fund, Isaac Thong, will leave his Singapore base and relocate to the firm’s emerging markets and Asia-Pacific Income team in London. Isaac will be heading to the UK in September. Co-manager Chate Benchavitvilai will take over as lead manager. The firm’s Thailand fund is up 53.8% over the last three years.

The news in UK asset management has been whirling around star manager Neil Woodford, who was something like the UK’s Warren Buffet until his recent fall from the throne. After strong redemptions from his flagship equity income fund, he abruptly gated it and spooked clients – a large swathe of retail investors. In these cases, typically the spin artists write the script and emphasize the positive – or put it all in mystifying language: the Spy remembers a manager who once referred to continuous losses in his fund as “adverse variability”! Woodford, however, opted for the straightforward approach in a brief video in which he is clearly humble and contrite while explaining his actions. The Spy welcomes the clear explanation, though the video is not nearly enough to shake off his troubles – many are saying his career could be over.

Tariff tit-for-tat, recession fears linked to US rate cut expectations and slowing global growth seemed to come together in May, sending investors out of ETFs. Yes, last month ETFs globally reported a monthly outflow of $4.05bn in capital – the first down month since January 2014, according to ETFGI. (During this unusual month of outflows, the i-Shares Core S&P 500 ETF, available for sale in Singapore, was the top asset gathering product, pulling in $2.28bn). But a month of outflows are no vindication for active management and those warning on ETF risk: the outflows are in comparison to the previous month. ETFs still have $5.18trn in global assets – higher than the $4.86bn the same time last year.

And speaking of passive products, the Spy noted that out of the 110 SFC-authorised China equity funds in Hong Kong, only two had positive returns for the full year 2018 – both are inverse products that essentially short an index. The CSOP HSCEI (-1x) returned 7.23% while Mirae Asset Horizons HSCEI (-1x) gained 6.95%. The category average? Minus 22.2%. Could these risky, leveraged products, used wisely, be looked at for a bit of short-term tactical hedging in a portfolio? The Spy doesn’t have the stomach for L&I – he would rather have some drinks and watch from the sidelines – but Asian investors seem to have an appetite for big risk/reward.

Think of a country and what brand immediately comes to mind? According to a howmuch.net graphic, which measures brand value (“the value of the image of the brand itself, as represented in the minds of stakeholders”), in the US the top brand is Amazon. In China, it’s ICBC and in Singapore, DBS (congratulations to the DBS marketing team). The graphic gives you a rough idea of how important an industry is to a particular culture – at least currently, as brand value is dynamic. The Spy notes that in Switzerland, the bastion of private banking, the brand with the top value is not UBS but Nestle, which fits right in to the “banks, watches, chocolate” cliche.

Summer advertising is rolling out. In Hong Kong, Jupiter has taken over the trams with a branding campaign:

 

 

CSOP prefers the MTR, where it is promoting its inverse index products:

 

Until next week…

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