Posted inFSA Spy

The FSA Spy market buzz – 6 August 2021

Blackrock on China; JP Morgan’s private Bitcoin; State Street shuns Americans; SPAC madness; Howard Marks’s warnings; Making predictions; Advertising from Fidelity and Lion Global; and much more.

It is the silly season: August. While most people try to sneak off for a well-earned break at this time of the year and turn off their computers, Covid restrictions are still keeping most people in Hong Kong at home. Meanwhile, American politicians are going to make a spectacle of themselves this month as they argue about the US debt ceiling of $28trn dollars, pretending to each side they won’t make a deal to borrow gargantuan amounts of money they never expect to repay anyway.

As for Spy, he will be watching the final few days of the most unloved and unlucky, but actually quite brilliant, Olympics Games, with a trusty craft beer or two and forgetting about crazy markets. Cheers.

If you were hoping that China’s regulatory crackdown, that caused some serious volatility in China this week, might be a one-off, Blackrock does not agree with you, laments Spy. In a research note, their analysts remarked, “We believe the regulatory clampdown will likely go on for years, yet its intensity will fluctuate. China’s leadership sees regulatory tightening in sectors such as tutoring and technology as necessary to rein in the industries that have been rapidly growing and lightly regulated, which has led to concerns about control of data, inequality, and the rising costs of education, housing and healthcare, in our view.” For what it is worth, the world’s largest investor remains, “tactically neutral on China stocks”. Spy is not 100% sure what truly means, but it sounds cautious, rather than bullish.

The true believers of Bitcoin must be offering nightly prayers and devotions to Jamie Dimon, the JP Morgan Chase CEO, reckons Spy. Coinbase has reported that JP Morgan Private Bank has, this week, started offering a private, in-house Bitcoin fund to its clients. Considering the bank’s initial stance on crypto (“Won’t touch it with a barge pole”), this represents one of Wall Street’s biggest about-turns and adds all-important credibility to the nascent asset class. The fund is apparently being offered in conjunction with NYDIG, which is a division of New York-based, Stone Ridge Asset Management. (SRAM is awfully shy — its website gives away nothing.)

A few weeks ago, ignored by most people, something happened that, once again confirmed the bifurcating world we live in, despite its inherent digital and physical interconnectedness, notes Spy. State Street Global Advisors, an American asset management firm, quietly amended its prospectus stating that the units of its Tracker Fund of Hong Kong ETF “will not be offered or sold in the US or to any US person.” Of course, the fund is listed on the HKEX. Time was, flashing an American passport opened almost any door and almost any global opportunity. It seems, since the introduction of Facta, expats overseen by Uncle Sam, are finding doors increasingly closed outside of America.

What has gone up 118 times in just 8 years? Money raised by SPACs is the answer. Despite the recent drop in hype, during 2021 so far, SPACs in the US have raised more than $118bn in investor cash to drop on any exciting ideas they can dream up over coffee or beers (or a line of cocaine for that matter). In 2013, it was just $1bn. This will not end well, reckons Spy.

Singapore’s OCBC is eying expansion in China’s wealth management space as competition intensifies in the industry. Helen Wong, the bank’s CEO, said this week, as the bank revealed its quarterly results, that she expects the bank to keep on investing in China’s Greater Bay Area and form partnerships with Chinese banks for wealth management services. China’s upcoming cross border investment plan, Wealth Connect, is expected to facilitate more than $60bn in annual flows and OCBC wants to be part of that. And so it goes, thinks Spy.

The big cash out is coming. RobinHood’s insiders are now able to monetise their extraordinary gains since the trading platform’s IPO. The shares crashed nearly 30% yesterday on the news that early investors can now sell 98 million shares. After a regulatory filing confirming the sale eligibility, Robinhood closed at $51 last night. That is still $12 above its $38 debut on the 29July. Spy has to marvel at the extraordinary value-creation ability of American businessmen. This week, RobinHood and UBS had the same market cap, about $59bn. UBS was founded in 1862 in Winterthur, Switzerland, has about 71,500 staff and makes about $13bn profit each year. Robinhood was founded in 2013, has an app, has about 1,300 staff, 18m customers, an annual turnover of just under $1bn and  squeaked a tiny profit in 2020 of just $7.4m. Spy knows which stock he would prefer in his pension.

What if you spoke, and absolutely nobody listened. This week Howard Marks, the founder of Oaktree Capital, told Bloomberg that: “We are in an everything bubble”.  Spy and countless others have been saying basically the same thing for months. Last night the S&P 500 and Nasdaq 100 closed at record highs and more-or-less told every fundamental analyst, “I don’t care what you think, I am going higher.”

Spy’s favourite quote of the week from an anonymous Twitter warrior: “Making predictions is way easier than making money. Every time.” This is probably why Spy is a hack and not a money manager.

Spy’s eagle-eyed photographers have been out looking for new asset management adverts. In Singapore, Fidelity has a retail campaign out to promote multi-asset, hoping everyone wants a bit of balance.

Also running in Singapore, Lion Global and OCBC Securities are promoting their Chinese Leaders ETF which invests in eighty of China’s top stocks.

Until next week…

P.S. Spy wishes all his Singaporean readers a very Happy National Day on Monday.

Part of the Mark Allen Group.