Posted inFSA Spy

The FSA Spy market buzz – 29 September 2023

LNG gas is hot, the exhaustion of ESG, Janus Henderson is 89, BNP Paribas wants people to check in, China’s contrarian moment, FSA in KL and Bangkok, Mid-Autumn festival and much more.

In the blink of an eye, it seems the annual Mid-Autumn festival is upon us once again. Spy has indulged in far too many mooncakes this season already and has faint regrets at the industry’s generous deliveries of bountiful flavours that have arrived at the office. In whatever fashion you may be spending the weekend and days ahead, Spy and the entire FSA team wishes our loyal readers a happy and harmonious union with family and friends.

Spy is rather surprised that this strategy has taken so long to arrive. This week, Roundhill Investments has launched the world’s first liquified natural gas-themed ETF. With energy prices rising across the entire complex, this could well have some appeal to thematic investors looking at a way to play the energy market. The manager is expecting $42bn of spending on greenfield LNG projects in 2024. In the last five years, $100bn has been invested in the industry. Currently, LNG accounts for a mere 13% of global gas supply but Roundhill expects that to rise to a healthy 23%. The Roundhill Alerian LNG ETF trades in New York under the ticker, LNGG. The fund provides exposure to leading companies across the LNG value chain including: liquefaction companies, global LNG carriers and ‘regasification’ companies.

Are the regulations surrounding ESG beginning to exhaust those involved in the industry? Spy is beginning to get the impression, from numerous discussions, that the sheer volume of regulation coming from Europe and the US is having a dampener on the people tasked with making asset managers internally sustainable and ESG-coherent in their investment strategies. This fatigue could not come at a worse time. Figures out from consultancy, Scientific Beta, having crunched the data on hundreds of strategies covering nearly $100bn in assets, suggest that contrary to popular opinion, ESG and socially responsible strategies (ETFs) have actually slightly underperformed the market over the last decade. “Real-world’ ESG performance is unremarkable, with no evidence of sustainable ETFs outperforming,” Felix Goltz, research director at Scientific Beta said. “Quite often it’s suggested there should be some outperformance. [People say] ‘they are better businesses, they are going to generate higher returns’. That’s clearly not something we see in the data.”

Spy spotted an advert from Janus Henderson Investors promoting their 89 years in business. From its founding in 1934 to 2023, the asset manager has gone through many twists and turns. Only people who have tried to build a company from scratch might appreciate what an achievement that really is. It is hard to build and survive in a world of brutal competition and shifting tastes. Most companies don’t last a single year and a significant majority don’t last three years. Business schools will tell you that if you last to five, you have a decent chance of being around in another decade.  Spy is happy to doff his hat to a firm that is heading towards a century of employing people and providing investment services to clients around the world.

Contrarians rejoice! A true contrarian opportunity seems to be unfolding in China’s A-share and domestic equity markets. Sentiment towards Chinese stocks feels almost at rock bottom. It is that moment in the cycle when stocks start to trade at deeply attractive valuations, regardless of the political and economic outlook. Will investors with conviction on China’s solid future prospects start to pick up veritable bargains? It is fascinating to note that on the current trajectory, by about 2030, according to Boston Consulting Group, another 80m Chinese people will enter the middle /affluent class, by then making up about 40% of China’s population. That kind of rising buying power should help sway the serious doubters.

Spy rather wondered if he had caught a time machine back in time. There is a story out in Europe that BNP Paribas is going to start tracking employees to make sure they are coming into the office. Staff will be tracked on a sign in / sign out basis to ensure that working from home is coming to an end for the majority of situations. All Spy could think of a was some Dickensian factory with clock in / clock out guardsmen. Whether this is the right way to encourage educated, senior staff to get back into the office, Spy is not 100% sure. A dividing line is definitely opening up across the world on firms who are happy to still have staff still working from home and those who aren’t. Zoom, the videoconferencing company, was in the news of late saying their staff needed to come back, so perhaps the WFH party is well and truly over.

The Fund Selector Asia team will be back in Kuala Lumpur and Bangkok next week as the annual Autumn FSA regional autumn Forums takes place. We look forward to catching up with the fund selector community in those two cities.

Until next week…

Part of the Mark Allen Group.