Posted inFSA Spy

The FSA Spy market buzz – 3 February 2023

Alta hires, defiance is not so defiant, when three is better than one, Matthews is converting, China’s IPO revolution is coming, Kylie Minogue and Big Tech, rates and so much more.

Well, it has taken a while, but it does seem that Hong Kong is finally going all out to attract tourists, visitors and business people back to the city. Chief Executive, John Lee’s plan to give away 700,000 airline tickets for people to fly to Hong Kong again after a three-year lockdown is most welcome. Still, the real issue is whether people will trust the government to not lock us all down again at the first whiff of trouble. Singapore has clearly benefitted so much from being more open and pragmatic in the last few years; Hong Kong has a long way to go to rebuild its dynamic reputation. Freebie flight tickets won’t be enough, thinks Spy.

News reaches Spy that Yi Fei Li has returned to the asset management industry after a hiatus. Yi Fei, who was previously with BlackRock in Singapore for more than 12 years, has joined Alta. She has the role of global head of institutional sales. According to the firm, “Alta, formerly known as Fundnel, is southeast Asia’s largest digital marketplace for alternative investments. Alta gives investors direct access to invest and trade in a wide range of curated alternative assets, from direct investment into early to late-stage private companies, PE/VC funds, asset-backed securities of luxury assets, real estate and more. Since 2016, Alta has completed over 1,000 transactions valued in excess of US$600m and has created access for investors to invest in over US$22bn worth of mandated opportunities globally.”

Sometimes it turns out your brand name is simply aspirational, reckons Spy. Defiance ETFs has not been able to defy market reality and has made the decision to close its NFT-focussed strategy. The Defiance Digital Revolution ETF, which only arrived on the market in December 2021, is closing at the end of February. Spy is really not that surprised – after all it did not take people long to realise that buying a non-fungible token of some piece of artwork was unlikely to match the value or provide the emotional resonance of real swirls of paint hanging on the wall. The ETF had crashed 76% last year as the crypto winter took its toll. Even the 40% jump in Bitcoin in January is not enough to convince Defiance to keep the strategy going.

The asset management industry can’t seem to help itself. We have had several firms appoint co-chief executives, an oxymoron in Spy’s mind. Inevitably, sooner or later, someone exits and the firm is back to just one chief executive. Now Spy learns that Bridgewater has appointed not just a second, but in fact a third, chief investment officer. Karen Karniol-Tambour has been appointed to join Bob Prince and Greg Jensen as yet another CIO of the company. It reminds Spy of the old book, “Everyone must have prizes”.

Last year, Spy wrote a few comments noting the trend for converting mutual funds to ETFs. That trend seems well entrenched, indeed. The latest firm to go down that route is Matthews Asia. The California-headquartered manager has announced that its Korea Fund is converting to an ETF. The strategy will remain an active one and the company expects that all assets will convert across to the new format. Pricing for the revised structure has not been announced yet. Matthews already has four ETFs in the market and the firm is on record as saying it expects to launch more in 2023.

China continues its capital markets revolution. This time the IPO market is being shaken up. Shanghai and Shenzhen are adopting the registration-based system for IPOs, which gives investors a bigger say in the value of a company at listing and will make the IPO system a whole lot more transparent. Stock exchanges and IPO sponsors will have greater responsibility to provide more accurate disclosures. Good news indeed. China’s stock markets are currently worth about $12.7trn.

Twenty years ago, Aussie pop icon Kylie Minogue released a track named Slow. This could have been the theme tune for Big Tech this week as the slowdown in earnings became all too apparent. The earnings have been a bit of a shocker.

Tesla: slowest growth since 2020

Amazon: third slowest growth in the company’s history

Microsoft: slowest growth since 2017

Netflix: slowest growth in company history

Google: third slowest growth in company history

Facebook: second slowest growth in company history

Apple: slowest growth since 2016

A bright spot for Apple is that it now has 2 billion active devices using its services. Sadly for Amazon, it increasingly looks like a bunch of money-losing businesses propped up by a great web services company. Activist investors must be licking their lips.

Spy is expecting the market gyrations to continue as central banks dance around their rate outlooks. Every economist’s favourite parlour game is now back: have interest rates peaked? Much ink will be spilled on this vital topic. Jerome Powell, Fed Chair, was a touch dovish in his press conference this week, which sent stocks soaring. The punch bowl may be taken away again very soon if the non-farm payrolls report this evening shows a very tight labour market.

And talking of central banks, Spy was intrigued to note that central banks are buying gold at the fastest rate in half a century. Now why should the oldest and best inflation hedge known to mankind suddenly be in massive demand?

Until next week…

Part of the Mark Allen Group.