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The FSA Spy market buzz – 20 March 2020

Change at JP Morgan Asset Management; Xen Technologies hires; Investment grade hell; Vegetarianism bear market; Jack Bogle’s wisdom; Stock market suspension; advertising and much more.

There is an old saying, “It is a recession when your friend loses his job. It is a depression when you lose yours.” Spy rather feels that the West treated the virus in a similar manner. When it first reared its head in China, the West shrugged but now that it is affecting its own countries and cities, it is a full blown Crisis, with a capital C. Spy thinks the real shock coming for the West is a dawning understanding that its rather unruly, perhaps ‘undisciplined’ is a better word, populations, will make controlling the disease that much harder. In Asia, citizens are conditioned that the needs of society sit above those of self and, in general, are thus more accepting of temporary restrictions on personal liberty during a national emergency. China is clearly getting going again after its dramatic intervention which slowed life for hundreds of millions of people. Europe and America may be in for a much longer haul if the initial reaction is anything to go by. This morning California locked down. Spy can just imagine sunshine state luvvies saying, ‘That surely does not apply to yoga classes’. Therein lies the problem.

News has reached Spy of a big change at JP Morgan Asset Management in Singapore. Steven Billiet, the Singapore CEO, is stepping down from the firm after more than 6 years in the role. Previously, Steven held various CEO roles with ING Investment Management. Spy has heard unconfirmed rumours that Steven is due to join a large French firm. JPMAM veteran, Andrew Creber, will take on Steven’s regulated responsibilities on an interim basis according to a firm spokeswoman. A successor to Steven is expected to be announced in due course. Spy understands the recruitment process is underway. JPMAM has had a good year with its US Growth Fund which is up more than 22% over the last 12 months despite the vicious sell off.

Growing Singapore-based alternatives platform Xen Technologies has added to its team, notes Spy. Alistair Ding, formerly the head of distribution for Southeast Asia at Value Partners, has taken on the role of chief commercial officer. Xen is a platform to access private equity opportunities and hedge funds. The firm was founded by Katrina Cokeng and Manish Sansi. Xen claims it is bringing PE and hedge funds to a wider range of people at a far lower cost. Xen itself is backed by a range of institutional private equity investors.

If last week was rather crazy in financial markets, this week got even crazier thinks, Spy. It is easy to focus on the equity markets which have seen extreme volatility. But the really scary action has taken place in the bond market. Investment grade spreads have widened dramatically. In fact, according to Bank of America, this is the fastest doubling of spreads ever – it has taken merely 19 days. In 2008, by contrast, euro IG corporate bonds spreads took 45 days to double. It is no wonder there are now calls for central banks to directly buy commercial paper. Spy imagines the market wouldn’t like to report its risk models have not been quite as accurate as claimed. Spy will be watching those end-of-month bond funds’ performance reports with interest. There are going to be some very ugly pictures, for sure.

Do you remember the hunt for yield? Investors have been seeking yield everywhere and taking greater and greater risks to find it. One advantage of this sell off is that yield is much easier to find, notes Spy. Singapore’s REIT market is looking a veritable bargain, for example. In the funds space, these are some indicated yields as of this morning: Allianz’s Dynamic Asian High Yield Bond (RMB): 9.31%, Eastspring’s Asian High Yield (AUD): 8.12% and Fidelity’s Asian High Yield (SGD): 8.00%. All these figures are from Fundsupermart’s FSM One. The hunt for yield may be over. Now the hunt begins for a reliable yield…

Is vegetarianism only for a bull market, wonders Spy? Stock market darling and alternative meat producer, Beyond Meat, is now down 79% from its peak last July. With all those ‘preppers’ out there, perhaps they are back to buying Spam or, in Asia, bak kwa? When one’s portfolio is down 35% reaching for a salad or veggie-burger or does not seem like much comfort, it would seem.

Jack Bogle, the founder of Vanguard, was a punchy, witty man. When volatility hit, he had this to say,  “My rule — and it’s good only about 99% of the time, so I have to be careful here — when these crises come along, the best rule you can possible follow is not ‘Don’t stand there, do something,’ but ‘Don’t do something, stand there!’ Spy is not sure if this always applies, but it applies often enough.

Apparently a large number of British asset managers asked the new head of the Bank of England, Andrew Bailey, to suspend London Stock Exchange trading for two weeks in light of the virus. Well, Spy would hope these foolish CEOs take a look at what happened in the Philippines. Recently, President Duterte ordered the market closed, which it did, only for it to fall 24% upon opening again. It seems the real virus infecting much of the investing world is a pathetic affliction named ‘Interventionitis’ which is virulent when things turn stormy. Don’t even get Spy started about US airlines asking for a bailout. Free markets? Those are only for good times.

With China and America playing a really silly game of tit-for-tat expulsion of journalists, Spy is wondering if he needs to be more circumspect in his commentary, lest he find himself removed from Hong Kong? Luckily, so far, it seems no journalist has been removed for excessive whisky consumption. Spy may be lucky for a while yet.

Whilst there remains little advertising for asset management in Hong Kong, Spy’s team did spot this tram with a Manulife IM ad. They are promoting their Enhanced Distribution Retirement Investment.



Until next week…


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