Posted inFSA Spy

The FSA Spy market buzz – 18 March 2022

AB acquires; UBS is hiring; Hang Seng’s changing bestseller; BNP goes for hydrogen; Standard Chartered’s focus list; Deals are down but not out; Kapuściński’s Russian classic; advertising and much more.

Spy almost fell off his chair. Our stubborn leader, Carrie Lam, has acknowledged that people’s patience with living in the Hermit Kingdom of Hong Kong is wearing thin and public tolerance “is fading.” With expatriates leaving in droves, Hong Kong’s status as a global financial hub has been seriously threatened with the zero-tolerance approach. It has been galling to see sporting events in Europe for months with thousands of spectators, mask-less train riders in London, quarantine restrictions being dropped from Australia to San Francisco, while Hong Kong has been expected to remain in semi-permanent lock down. Hopefully, sanity will prevail soon and Hong Kong can regain its dynamic mojo. It sure needs it.

Another week, another merger. Deal-making may be slowing down globally, but Spy is not seeing that trend in asset and wealth management. Yesterday, Alliance Bernstein announced that it was acquiring CarVal Investors. CarVal focusses on private alternative investments and currently has about $14.3bn in assets under management. CarVal’s expertise is in credit, especially in distressed debt situations. The deal is costing AB $750m in cash and the owners have the possibility to earn more if certain targets are met. The acquisition will add 190 new staff to the AB team with no announced job losses whatsoever. The firm has an office in Singapore to serve the Asia region and will be rebranded to AB CarVal Investors, in due course.

If you are keen on macro and deciphering opportunities from the big events and trends that drive the world, UBS may just have the perfect role for you. The Swiss bank is hiring a Global Asset Allocation Analyst  who will be situated in the CIO, Hong Kong office. The role includes conducting investment analysis across different asset classes, building and maintaining financial and quant models to evaluate historical information and generate projections, convert financial, macroeconomic and quant knowledge into possible investment options, supporting investment recommendations for tactical and mid-term trades in equities, forex, and commodities, and other duties.

What are people buying in these rather volatile times? Spy took a peek at Hang Seng’s list of fund bestsellers to see if the pecking order had changed much in the last year. The biggest shift is that China has fallen dramatically out of favour. Not so long ago, China would made up at least three of the top ten, if Spy’s memory serves him well. Allianz’s European Equity gets the nod, as does Blackrock’s Systematic Global Equity; JP Morgan AM has three funds including Asia Equity Dividend. You can find the full list here.

Whilst lithium, as a power source, has garnered so much media attention because of Tesla’s motoring success, many die-hard engineers believe that hydrogen is the real long-term future of green energy. This week BNP Paribas Asset Management joined that party with the launch of the Easy ECPI Global ESG Hydrogen Economy UCITS ETF in Paris on the Euronext. This allows investors to target fuel cell producers, electrolysis developers and related green energy providers. The fund will only hold forty different stocks and will be rebalanced every six months. The fund has an expense ratio of 0.30%.

Are comparisons getting harder? After a few stellar years of returns, one-year fund comparisons are beginning to look a lot more challenging. Spy took a look at Standard Chartered’s Focus Fund list and noted that out of 295 funds, merely 69 are positive over a one-year period.  That means only 24% of the funds are currently positive (and some of those are almost flat, to be fair) with 76% of them now under water. Investors have had a great run and they can hardly complain about a period of weakness, but if Spy knows one thing, consumers have short memories and high demands. Incidentally, the best performer is AB’s American Growth, up 16% from a year ago. The worst is UBS’s China Opportunity, which is down 41%.

Is the investment banking boom over? Dealogic reports that mergers and acquisitions activity is down by a whopping 32% in 2022 in comparison with 2021 at this stage of the year. The total deals have still meant a cumulative value of $801bn so far this year which is hardly to be sneezed at. Some bankers have blamed Ukraine, but Spy would proffer a more prosaic reason: valuations have been stretched to breaking point and buyers may just be getting nervous. Watch those private equity portfolios like a hawk!

With the horrors unfolding in Ukraine, Spy is grateful to a regular reader who directed him to Ryszard Kapuściński’s classic, Imperium. It is an utterly engaging account of Soviet Russia from before the second world war through to its collapse in 1989. For those wanting to get under the skin of the Russian imperial mindset, a more engaging account can hardly be found. “War is everywhere. Villages are burning; people are taking shelter from air raids in ditches and in forests…” That is on the opening page. Kapuściński’s was describing Poland in 1939, but it could be Ukraine 2022. And that is the banal and tragic situation we find ourselves in (again).

With the US Federal Reserve raising interest rates and turning more hawkish by the day, this picture has been doing the rounds and still elicits a chuckle. The Fed hikes…

Spy’s photographers spotted a new campaign out in the consumer media from Abrdn: Growth and Income – where has Spy heard that one before? Still, Spy loves the image and has a craving to get into the countryside immediately.

Until next week…

Part of the Mark Allen Group.