Posted inFSA Spy

The FSA Spy market buzz – 21 January 2022

Ship ahoy; BNY Mellon IM’s blockchain; Animoca’s millions, Permabear growls; RWC rebrands; Blackrock’s West Virginia squabble; Huawei’s PE ambitions; Advertising and much more.

Sitting in Hong Kong, as The Year of Tiger looms, Spy noted it was not a good week to be a hamster. The dystopian pet-execution ruling by the Hong Kong Government this week has reached almost farcical levels. As if we didn’t have enough problems already! But, it wasn’t hamsters or tigers that got Spy’s drinking companion animated this week, it was debt. Spy caught up, over too many Jack Daniel’s, with a multi-asset portfolio manager who works for a London-based hedge fund. He was positively ranting and raving about what is going on in the debt markets. Not so long nearly ago, nearly $18trn dollars of global debt yielded negatively and that has halved to just $9trn. Even German yields have turned positive as the inflation beast beats its roaring heart. The Nasdaq’s recent fall may be getting retail headlines, but in the institutional world there is only one story in town.

Does the launch of an ETF signal the interim top of a sector’s performance, wonders Spy? US Global Investors has just launched the Global Sea to Sky Cargo ETF which is supposedly designed to benefit from global shipping, by air or sea. Long-time investors will know that the global shipping sector is prone to massive booms and then spectacular busts as capacity is ramped up. The average global price to ship a 40-foot container across the world was $9,300 in December 2021, three times higher than a month before. Some shipping companies must be making a short-term fortune, for sure. However, will those strong prices and profits hold? Spy sincerely doubts it, but then what does he know?

It seems rather apt to be worrying about a thematic ETF. As further evidence this may not be the best way to play the markets, Spy came across the following chart from The Daily Shot, which was rather alarming for thematic enthusiasts. It is getting rather ugly out there.

BNY Mellon Investment Management has managed to successfully register the first blockchain fund for retail investors in Singapore. BNY has been playing in this space for a while in its home market of the US and will now expand the footprint of the fund to the Lion City. Spy has long suspected that blockchain itself is a far broader way to play the digital market than guessing with crypto or which NFT will hit the jackpot. It is a bit like investing in shovel companies during a gold rush. Everyone needs a shovel, not everyone finds gold. This might be especially true on a day when bitcoin has suddenly swooned back below $40,000.

Spy has no idea what is actually included in the BNY IM blockchain fund, but here in Hong Kong, it would seem one more company has become eligible for inclusion. Animoca Brands, an Australian-incorporated, but Hong Kong run, blockchain gaming company has just raised $359m in funding, giving the relatively young start-up firm a $5.8bn valuation, as investors fall over themselves to invest in companies that might benefit from the metaverse. What does Animoca actually offer gamers? One of their hits is “Base One, a space station simulator with hardcore survival and RPG mechanics” among others.

If a perma-bear shouts “crash” in the forest, does anybody care? This week Jeremy Grantham of GMO made headlines when he said we are in for a 50% crash in US stocks and everybody should run for the exits, now! Mr. Grantham has turned apocalyptic, notes Spy, and gets some background support from a Nasdaq that is suddenly down 10% year to date. Certainly, the rumbles of doom have been getting louder and bell-weathers of the recent bull market, such as the Ark Innovation Fund, tumbling 52% from its high, must give us pause for thought. Grantham sees bubbles in real estate, common stock, in fact almost everything. If he is right, hold on to your hats.

A new year new branding it would seem. RWC, the British boutique active manager, has decided to change its name to Redwheel. The London headquartered company, with offices in Singapore, has a shiny new website up and running. Spy has become used to the trend of companies shortening their names to acronyms left, right and centre, and of course Aberdeen decided to drop most of its vowels in a simplification exercise to abrdn. Thus, a company expanding its name for once, is rather contrarian.

Spy is rather convinced that Larry Fink will not be humming the John Denver classic, “Country Roads”, this week. West Virginia State Treasury has just dropped Blackrock from its investment partners because of the firm’s overt net-zero stance. Whilst Fink is unlikely to lose much sleep over the paltry few billion involved, what was fascinating to Spy was the overall subtext. Most investors are demanding greater ESG responsibility and now, out of the blue, the wind, in some quarters is blowing the other way. Spy is sure local politics is at play in this case, but would not be surprised to see more of this come along this year.

As the political battle over next generation mobile networks around the world has become explosive, Huawei, has felt more than its fair share of the heat. The controversial Chinese telco company has now registered one of its divisions, Hubble Technology Venture Capital, as a fully-fledged venture capital / private equity manager. Hubble has apparently invested in more than forty companies. So, a case of more PE than 5G?

With markets tumbling and Microsoft buying Activision Blizzard, Spy has heard rumours the giant is about to put out a new game: Margin Call of Duty.

Spy’s photographers have spotted a new campaign out for consumers in Singapore by Pinebridge. The manager, like just about every other manager, is pushing its green credentials.

Until next week…

P.S. Spy wishes all his readers Gong Hei Fat Choy – may the Year of the Tiger be a prosperous and happy one.

Part of Mark Allen.