Posted inFSA Spy

The FSA Spy market buzz –2 September 2022

Morgan Stanley’s ETFs, Marketnode’s distributed pilot, Silly marketing lines, Chinese equity misery, Dead cats and their bounces, Milton Friedman’s warning, Wisdom from Jones and much more.
Market Spy

Spy met up with a delightful asset management salesperson in Hong Kong this week to exchange mooncakes, espresso and gossip. It did not take long for conversation to turn to the city’s new bar rule that requires us all to take a rapid antigen tests (RAT) to gather in a group. The sheer absurdity, of both of us travelling on a jam-packed MTR for 20 minutes, with hundreds of fellow citizens in close proximity, was not lost on either of us. Thailand has just announced a raft of measures to attract high income earners who want to live in the Land of Smiles. There must be thousands of Hong Kongers who could be sorely tempted.

Here we go again. (Spy can almost sing it.) Morgan Stanley is coming back to the ETF market in 2023 after an absence of about 20 years or so. The Wall Street giant is due to launch four new ETFs in the US in the socially responsible investment or ESG space. They are based on indexes provided by Calvert Research and Management. Calvert is a division of Eaton Vance, which Morgan Stanley acquired in 2020. One of the strategies, the Calvert US Large-Cap Diversity Equity and Inclusion Index ETF caught Spy’s eye. This is the first time he has come across an explicit “diversity” themed strategy. Spy has yet to see any evidence that diversity in and of itself is a driver of alpha returns. But he could be much mistaken.

The crypto market may be running out of “greater fools” to keep on buying its worthless tokens, but the real action is in the underlying blockchain itself. This week, Marketnode has announced Fundnode in Singapore, that is designed “to improve fund settlement efficiency” and will be “an industry-wide investment funds utility built using distributed ledger technology”. The company claims, “Fundnode will begin by streamlining fund processes, facilitating simplified subscription, redemption, and record-keeping workflows for funds offered to retail investors” The company has an impressive group involved in the pilot: DBS, OCBC Bank, Phillip Securities, Navigator Investments, UOB Kay Hian and UOB, asset managers Abrdn, Fullerton Fund Management, Mandiri Investment, Schroders Investment Management and UOB Asset Management. The solution, launching in 2023, is promising greater efficiency at lower costs. What is not to like?

In the wealth management space, Spy has seen many naming conventions over the years to try and differentiate a company from one another. Financial advisers became wealth managers, who became external asset managers, who become multi-family offices and so on. Spy has spotted that Blauwpark Partners, a Singapore-based wealth manager, now describes itself with a logical impossibility of being: a ‘single-family office for multiple families’, with a focus on private equity, impact investment. Just say it out loud: a single-family office for multiple families. Spy’s brain has almost popped. Still, whatever works in marketing, as the saying goes.

How do we spell ‘misery’? C-h-i-n-e-s-e P-r-o-p-e-r-t-y M-a-r-k-e-t, the wit replies. Spy would argue that the Chinese equity market itself is pretty awful, too. Spy analysed Morningstar’s list of Chinese equity A-shares funds, of which there are 91 of them available in Hong Kong. That includes all share classes variations. Of these a whopping 89 are negative over the last year and not a single fund is up year-to-date. For those contrarian investors who like to buy when sentiment and prices are low, now may be the time to dip into the wallet.

Some people were convinced in July that they heard the cat meowing as US markets bounced. But, was it in fact as dead as a doornail and that meowing sound was nothing more than hope, or the wind? The markets have been selling off brutally in the last few weeks as investors get more and more nervous about rising rates. If you are one of those, Spy has some bad news. A sharp sell-off often follows when the S&P 500 trades below its 200-day moving average for an extended period, typically about six months. In 2000, we had about six months before the market crashed. In 2008, we had about six months before the bottom fell out. In 2022: we’ve traded under the 200-day MA for six of the past seven months. For the first time since January 2013, the S&P 500 has not been within 5% of its all-time high for 90 days. And, Central Banks are just warming up their rate hikes. 

Bad news out of Credit Suisse. A publication in Switzerland reckons 4,000 job cuts are on their way. Good news, if one can find it? Looks like Asia is going to be spared most of the cutting, with Switzerland bearing the brunt.

It was the economist Milton Friedman who coined the phrase, “Nothing is so permanent as a temporary government program.” Spy is beginning to think we might add to that adage. “No inflation is so permanent, as that forecast to be transitory.” The finger pointing is getting going: Ukraine, Covid, cimate change…but for Spy’s two pennies, lockdown and money printing are the real culprits. Policy errors, across the world, on a grand and disastrous scale.

Hats off to London’s daily freebie finance rag, City A.M. They put this front page out last week. Spy is still chuckling.

Spy’s quote of the week comes from hedge fund manager, Paul Tudor Jones, “There is no training, classroom or otherwise, that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market.”

Until next week…

Part of the Mark Allen Group.