Posted inFSA Spy

The FSA Spy market buzz – 29 April 2022

Fidelity’s metavervse; Moonfare’s expansion; Acronyms are bad for your wealth; DBS’s results; Schroders ESG self-reflection; China stock doldrums; advertising; and much more.

“The weather may be getting warmer, but the atmosphere is getting gloomier”. That was the stark message from a wealth manager in Hong Kong this week. He was talking about China, but the US’s contraction and Europe’s energy woes suggest we are in for a rocky ride world-wide. “Clients are getting panicky”, this veteran told Spy over a satisfying glass of Chablis in Central, “and, for once, I don’t have soothing words of comfort to offer.” Ouch.

A few weeks ago, HSBC caused quite a stir with its Metaverse fund. Last week Fidelity jumped on the virtual bandwagon and launched its own ETF for the digital future of mankind. The passive, listed in the US, is tracking its own proprietary metaverse index and is available under the ticker, FMET. For those still trying to get their head around the metaverse, Fidelity’s own description might help. “Metaverse is a term used to describe a future state of the internet characterized by a network of both augmented reality and virtual worlds that can be experienced persistently and in a shared environment by large numbers of users.” Spy still can’t help but think he enjoys the real world more and his ‘shared environment’ to be a bar with live music…

Is private equity finally getting more accessible to the man in the street? Admittedly, the man in the street with $60,000 to invest. (That street is probably Orchard Road, muses Spy). Moonfare, the fintech private equity platform that allows consumers to get involved with funds from managers such as KKR, The Carlyle Group, IVP, Khosla Ventures and others, with a relatively low minimum investment, has added another office in Asia. The company, which is headquartered in Berlin, has opened in Singapore, complementing its existing venues in New York, London, Zurich and Hong Kong. This completes its presence in the world’s major finance hubs. The move brings more choice to Singaporean very rich individuals and probably gives a little more competition to private banks in the city, too. No bad thing.

Fancy an acronym in your portfolio? FAANG and BRIC spring to mind. Banks and asset managers certainly want you to. They also want you to believe that this little collection of letters all fit into one homogenous group. Of the course the reality is no such thing. Brazil and India may both be emerging markets but beyond that, what drives them both, is surely as different as chalk and cheese. So, too, investors are finding out that beyond, coincidentally for a time, being high growth stocks, Apple and Netflix could not be more different either – the former has pricing power, the latter certainly does not. So, the next time some slick Wall Street-type offers you an acronym, it might just pay to ask: beyond sounding good, does this really make much of an investment thesis?

DBS had its results out this morning. The stalwart Singaporean bank’s profits dipped a little to $1.8bn for the quarter. The theme from the bank, that caught Spy’s eye, was the fact that its weaker earnings was attributable to a “high base for wealth management and treasury markets activities a year ago”, when “buoyant market sentiment and clear market momentum had driven income from both activities to exceptional levels”. Indeed! And that is going to be the problem for so many wealth managers – unrealistic expectations from clients after a stellar run.

What happens when ESG turns the spotlight on your own company? Schroders has finally decided to scrap its anachronistic share class structure, which had a significant portion of its own shareholders, who held non-voting shares, constantly experiencing those shares trading at a large discount to full voting shares. This falls into the lesser commented “governance” bit of the ESG theme, which expects all shareholders to be treated fairly. Will this trend catch on among the oh-so-right-on tech companies? Don’t hold your breath.

With Chinese stocks in the doldrums, regulators decided to move the deck chairs on the Titanic yesterday. The clearing fee on Chinese stocks was reduced by 50%. That is not going to make the slightest bit of difference, in Spy’s humble opinion. When the issue is fundamentally economic and governance related, slighter cheaper trading will hardly get bears excited. It is going to take some serious contrarians to dip into their pockets and start buying China stocks with the current outlook.

The terrible war in Ukraine rumbles on with all its tragic personal consequences. The EU with all is impotent fury seems to issue excitable sanctions weekly. They may play well in the liberal media and think tanks that dominate the halls of Brussels, but if they were truly working, Spy would expect to see it in Russia’s currency. After an initial dip, the Russian rouble is now trading more strongly against the Euro than it was in May 2020.

Amazon may have been hammered by the market last night, falling 10% after a weaker growth forecast. But, it is worth reminding oneself of what Bezos’s company has achieved. Sales in 1997: $150m, in 2006: $11bn, in 2015: $107bn and this year’s forecast $530bn. Not bad for a garage bookseller.

Should you “sell in May and go away?”. This oft repeated market witticism suggests investors take some time off over the Northern hemisphere summer before resuming investments in the autumn when, presumably, the well-tailored investing crowd is back from their lazy beach holidays looking tanned and healthy. It has always struck Spy that this was a marketing slogan dreamed up by a savvy stockbroker to make a few more trades than being sound investment advice. A little bit like De Beers’s “A diamond is forever”. Except for the inconvenient fact that roughly 50% of American marriages end in divorce.

Spy’s photographers have spotted a new outdoor campaign in Raffles Place in Singapore. This time GSAM is out promoting some core strategies including emerging markets, income and big data:

And in Hong Kong, T Rowe Price is advertising its capabilities:

Until next week…

Part of the Mark Allen Group.