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The FSA Spy market buzz – 21 August 2020

Sands Capital in Asia; Federated Hermes reminds on credit; Managers on US election; Ant Financial IPO; Tesla vs Crypto; Wellington’s books; Tips from the Wolf; Free money and much more.

Spy has chatted with a number of people in Hong Kong recently who think, for one reason or another, they may relocate to Singapore. Reading the tea leaves, Spy senses that Singapore is experiencing one of its periodic doubts about the influx of foreign, senior, financial services executives. Ravi Menon, the head of the MAS has even gone so far this week as to say “the MAS will intensify its engagements with the senior management of financial institutions on their workforce profiles and plans to grow the Singaporean core.” This is hardly unique to Singapore, just at the moment. There is nothing like a recession to put the break on global mobility. Luckily for Spy, craft beers seem relatively immune to the cross border slow down.

News reaches Spy that Sands Capital Management, the 100% independent, employee-owned, Arlington-headquartered American asset manager is coming to Asia. The firm is apparently setting up shop in Singapore and has persuaded Mike Gibb to represent the firm and appointed him as managing director. Mike was formerly an executive director at Martin Currie in Singapore (now part of Franklin Templeton / Legg Mason) and head of stewardship and sustainable investment at Fidelity in London.  Sands’ investment style is “concentrated growth” and the firm has a spectacular track record. Spy understands that Mike will be relocating back to Singapore in the fourth quarter from Scotland where he is currently based.

In income obsessed Asia, credit has been sold as enthusiastically as joss paper for the Hungry Ghosts Festival. Whilst credit markets have calmed down, one manager who is staying vigilant is Federated Hermes, who this week quietly reminded investors who will listen that “although distress ratios have fallen, the focus should now turn from issuers that were struggling before the coronavirus crisis emerged to those that might fail to adjust their debt levels for post-coronavirus levels of cash generation. As a result, the default rate is likely to remain relatively high in the months ahead.” It may not only be the ghosts that are hungry as the year grinds on, thinks Spy.

In highly partisan America, making one’s political view known, even if it is rationally reasoned, risks upsetting someone. Nonetheless, as the US election comes ever closer, Spy is spotting more and more managers putting their heads above the parapet. This week it was Schroders: “We anticipate a change in occupancy at the White House although Congress is expected to remain split after the election. This could limit the new President’s room for maneuver on fiscal policy although international trade tensions may ease.” Fidelity has come out and suggested a clean sweep of Democrat control would be best for markets. In contrast, Mark Mobius went on record saying a BidenHarris win would be “disastrous” for markets. 74 days to go.

Hong Kong may feel like it is wading through treacle at the moment; its usual swagger lost in current dreary political squabbles and the Covid malaise. However, if there is one thing likely to get the city’s pulse racing again, it is a juicy IPO. Spy predicts the upcoming, but date as yet unconfirmed, dual listing in Shanghai / Hong Kong of Ant Financial, parent company of Alipay, will give some light relief and money-making enthusiasm to Hong Kongers. Spy would simply love to be a fly on the way in the boardrooms of the investment bankers trying to pin a sensible valuation on the business. A figure as high as $200bn has mentioned. That number is unlikely to deter Hong Kong’s many taxi-driving, stock-trading enthusiasts.

We all have moments that make us go “hmmmm”. Spy had one this week as Tesla rocketed to $2,000 per share. Tesla’s market cap is now $373 billion.  By contrast, the entire cryptocurrency market has a total value of $370 billion. Tesla is up 378% this year and is up a whopping 40% since announcing its 5:1 stock split. Spy could not help but be reminded of this quote by Paul Tudor Jones “Fundamentals might be good for the first third or first 50% or 60% of a move, but the last third of a great bull market is typically a blow-off, where the mania runs wild and prices go parabolic.”

The traditional holiday period of August still has a few days to run. If you are lucky enough to be having an end of season vacation, even if it is merely a “staycation” on Sentosa, you may be looking for a good book or two. Wellington Management’s team have put a list of recommendations out. Spy has not read most of them but he does concur with Philip Fan, an equity research analyst in Hong Kong, and his choice: Upheaval: Turning Points for Nations in Crisis, by Jared Diamond. As Philip puts it, “This book discusses how six nations overcame their own historical crises and attempts to draw lessons for the challenges facing the world today. …The lessons this book offers are especially relevant for building a framework to understand the potential outcomes for developing countries in crisis.” We certainly have enough of those around to warrant some thought.

Jordan Belfort, the original Wolf of Wall Street, was convicted of money laundering in 1999. That was the era stocks were in a full mania and day traders were all the rage. Spy is not surprised to see history rhyme. Belfort has announced that he has teamed up with “a stock market education company”, RagingBull, to teach the ins and outs of trading to amateur stock pickers. Members of the service will have access to Belfort’s “Mind of the Wolf” product, which, no doubt, provides tips on investment sure things…What could possibly go wrong?

As governments around the world grapple with how to wean their citizens off stimulus money, Spy has some bad news for national treasuries. In a survey, that will surprise nobody of even the most moderate intelligence, the citizens want more free cash! An organisation named Civic Science, asked people, “Do you think the federal government should issue a second stimulus payment to qualifying Americans due to the coronavirus pandemic?”  Seventy-three percent said yes, 15% said no and 12% said they don’t know. Perhaps those 12% mean “they don’t know which of my accounts you should send it to?”

Until next week…

Part of the Mark Allen Group.