The FSA Spy market buzz – 25 January 2019

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Changes at Bea Union; CA Indosuez is hiring; UBS shutdown costs; Jack Ma on Europe; New funds on FSM One; OCBC Wealth woes; Chinese ratings agencies, advertising and much more.

The FSA Spy market buzz - 06 April 2018

Spy was rather relieved his ticket to Davos never arrived as his domestic-commander-in-chief insisted on the annual Lunar New Year spring clean this week. It would have caused much domestic acrimony if Spy had had to fly to the snowy peaks of Switzerland to discuss global policy, leaving this dreary annual task to his more intelligent and attractive other half. Spy strongly suspects that it is not just his apartment that is going to be cleaned this Lunar New Year – many banks and wealth managers are going to be “cleaning out” funds from focus lists that have disappointed thus far. Spy’s advice to fund gatekeepers before they whip out the broom: remember, it is often the worst performers of the previous year that bounce back the following year whilst reverting to the mean, as things are want to do.

News reaches Spy that there have been some changes at Bea Union. Ivy Ching, the head of marketing and communications has stepped down from the firm. Andrea Yuen, who was her deputy, has also left the business. Spy has no news on where the pair are moving to. Like many asset managers, Bea Union has had a tough year with performance suffering across the board. However, their Hong Kong Dollar Bond Fund has managed to stay in positive territory over the past year.

A little bird whispered in Spy’s ear that CA Indosuez in Hong Kong will shortly have a new fund analyst based in Hong Kong. The private bank has recently offered someone a position and they are expected to join before the end of February. Spy will update his loyal readers as soon as the individual is confirmed.

How much is President Trump’s partial shutdown of the government costing? Senior economist at UBS Global Wealth Management, Brian Rose, claimed this week it was now about $1bn dollars a day. Spy is not too sure what costs the US government more: spending so much it can’t live without perpetual borrowing or stopping pay to workers with money it does not have anyway. These are peculiar times indeed and it does give Spy some sympathy towards the tin-hatted, bunker-loving, conspiracy-enjoying investors who love gold coins…cold hard metal that owes nobody nothing.

Everybody loves Jack Ma (well everybody except Alistair Thompson at First State Investments, perhaps). Why do they love the Chinese entrepreneur? Well, his success for one thing but Spy suspects it is also because he is unafraid to speak his mind. This week Jack was at it again telling the crowd at Davos “Alibaba prefers Africa over Europe, as the latter is ‘too anxious’ about data and privacy protections.” This may bring joy to the top management at Google and Facebook, who will be nodding furiously and rather glad they did not have to say it themselves.

Spy has been perusing FSM One for new funds that have been listed on their platform this year. Noticeable new additions come from Indian fund giant, UTI. The group’s balanced, dynamic and fixed income funds have all made their debut this New Year. Schroders has also added its Global Credit Income fund.  It was not the new funds that caught Spy’s eye, however. It was how the platform’s selection has grown over the last few years. How many choices are FSM One customers faced with now? According to Spy’s count, it is now 1,350 funds including all variety of share classes. FSM One is largely a retail platform in Singapore and currently does not include many of the accredited funds available to private bank customers. No wonder it is so hard to get end clients to take notice.

Talking of FSM One, Spy noticed a further fascinating thing. The platform has 43 “recommended” funds available. Of those, 29 are in the 8/9/10 ‘high risk’ rating. Nothing tells us more about the perceived underlying risk appetites of investors in the region. If Spy was looking at something similar in, say, Sweden, one can bet it would be a majority of funds that were categorised as low or medium risk rather than the racy choices recommended by FSM One’s team.

Spy has often pointed out that banks in the region find it hard to make “sell” recommendations on equities. Any equities.  Investors in China have to contend with ratings agencies who find it equally difficult to cast aspersions, or at the least publicly doubt credit worthiness appropriately. In China, 37.7% of rated bond issuers were AA+ and not a single issuer is rated as junk, according to this article on Wolf Street.

Spy’s comment: If you want to buy a bond fund that is heavily exposed to Chinese debt, perhaps ask the manager whether it uses Chinese ratings agencies or their Western counterparts. Not that Western agencies are anywhere near perfect, but at least they do have a dose of scepticism.

There are many high yield funds available from dozens of asset managers. Looking at asset management firms themselves, it strikes Spy that their own shares are offering some extraordinary yields at the moment, too. Either we are going to have dividend cuts or there are some real bargains out there. Perpetual Ltd (Australia) 11.42%, Alliance Bernstein 9.20%, Standard Life Aberdeen 9.43%, Man Group 6.22%, Invesco 6.39%. Janus Henderson 6.56%. Buy their fund or their own equity? Decisions, decisions.

Even with the rather positive start we have had to the year, OCBC’s wealth management customers have had a rather dismal run with the bank’s focus funds. By Spy’s reckoning, out of its listed 16 “top” funds or focus funds, only one is listed as positive over the last year. Ouch.

Similar to BNY Mellon IM, HSBC has made a rather subtle change to its logo. HSBC has dropped the serif font in favour of a sans-serif font and moved the letters to the right of the motif to make the logo more “contemporary” – apparently.  If you did not spot the change, Spy would recommend not feeling to bad; Spy guesses 99.999999% of all consumers won’t either.

 

 

P.S. Spy smiled wryly at this cartoon (below) that appeared in the SCMP in Hong Kong this week. Spy would imagine more than a few people in the industry may give a nod.

 

 

Until next week…

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