Posted inFSA Spy

The FSA Spy market buzz – 19 May 2023

HSBC Private Bank is hiring, an AI ETF comes to market, Nasdaq rally, top performing funds, venture capital woes, Dimon’s ironic short ban, Alibaba’s cloud is freed and much more.

In one of the less surprising moves of the week, the US government seems to be inching towards a debt ceiling solution and markets rather like it. As Spy predicted in last week’s column, a solution will be found because TINA. There is no alternative for the Americans and even the crazy ideologues who huff and puff about defaulting would not let it happen. Still, it gives Bloomberg talking heads, hedge fund managers, columnists and politicians something to argue about excitedly. The dust will settle soon enough and then we can all start worrying about something far more problematic: rising interest rates.

HSBC Private Bank is hiring, hears Spy. George Lam needs some more help in the fund solutions team in Singapore. The role includes, among other things: engaging in marketing activities to high-net-worth clients and relationship managers as well as following the performance of discretionary programmes and funds closely in order to articulate these properly to clients and relationship managers and play a key role in tailor making investment proposals for high-net-worth clients. Qualifications in finance and a CFA are, apparently, rather useful. Anyone interested can find our more here.

Well, that did not take long. An ETF is already out that is focusing on generative AI. It’s ticker? CHAT of course. The Roundhill Generative AI & Technology ETF launched yesterday in New York on ARCA. The ETF is an actively-managed strategy and is investing across the value chain of AI generative technology. While, in Spy’s opinion, AI has been an overused term for a while, generative AI is more specific. Currently the strategy provides exposure to 29 different stocks. Roundhill is predicting that generative AI could soon be a $120bn annual business. Perhaps, a tad amusingly, it is good old-fashioned humans making the investment decisions.

How bad are things? No too bad, according to Nasdaq. The Nasdaq 100 Index closed at a 13-month high yesterday, up 33% from its low in October last year. Hard to keep a good index down, it seems. That number is impressive, however the best performing funds have outstripped that run substantially. Spy had a look at the top three performing funds on Morningstar in Hong Kong. ChinaAMC’s New Horizon A Share Fund is up 48% over the last year. Janus Henderson’s Horizon Biotechnology Fund is up 56%. In first place, JP Morgan Asset Management’s Multi Income Fund is up a whopping 97%. Hat tip to those managers navigating choppy waters.

One area not having the best run is venture capital. According to research out from Pitchbook, for the first time in more than a decade, returns for venture funds were negative for three consecutive quarters last year. Investors have finally begun to mark down start-ups that had ballooned in value. A touch of realism has arrived in the private market. For what it is worth, Spy reckons this is nothing more than a breather. Huge value is being created in companies you have never heard of, right now.

Oh, the irony! JP Morgan’s leonine CEO, Jamie Dimon, told US regulators that they should consider a ban on the short selling of bank stocks. Spy is not exactly sure why Dimon thinks banks are so special they should not be subject to market forces. Naturally, that got a few hedge fund managers riled. Why, they asked, should sceptical voices be quelled? Expecting a firm’s share price to fall is not the same as expecting the firm to go bust. After all, JP Morgan is perfectly happy to run and market the JP Morgan Opportunistic Equity Long Short Fund, which just happens to hold short positions in, err, financial stocks.

It has been speculated often enough that AWS is Amazon’s best asset. In Asia, we are all going to get the chance to find out if that is similar for Alibaba. The Chinese giant has announced it is spinning off its Cloud Intelligence Group business in the next 12 months and going for an IPO. The firm is currently unbundling itself into six different businesses, but Spy would imagine the cloud business will attract the most attention from fund managers. Watch this space.

Spy was amused to read that the Asian Development Bank’s chief economist, Albert Park, has called on China to focus less on state enterprise and let the private market do its thing. “If you just try to use brute force, spend your investment in a few companies that are not really facing a lot of competitive pressure, those policies, usually they often don’t yield much return for your money,” As sound as that advice is, good luck with that, Albert.

The FSA team has been back in Manila this week as we hosted the FSA Investment Forum Philippines, again after a few years of Covid-induced absence. PIMCO, PGIM and Baillie Gifford were on stage sharing thoughts and ideas. The mood on the ground was enthusiastic, even a touch buoyant. Perhaps it was simply the pleasure of being able to meet face to face.

Warren Buffet may get most of the quote kudos, but his partner Charlie Munger has some of the best lines. Asked, how one does well, “If you’re just not crazy, you have an advantage over 95% of the population.” And on stupidity, “Dumb is forever.”  Hard to disagree.

Until next week…

Part of the Mark Allen Group.