Posted inFSA Spy

The FSA Spy market buzz – 8 April 2022

Nikko is hiring; Doggie ETF; BNY Mellon’s defence ESG; Hilton Hotels bets big on Asia; Golden inflows; Inflation varieties; Bond fund glory; Mortgage rate hell; and much more.

Spy will confess to cracking a bottle of Laurent Perrier champagne at the news that our glorious leader, Carrie Lam, is standing down. When the history books of this era are written, Ms Lam is unlikely to escape some harsh criticism indeed. But, it is difficult to see how it will be any better under her likely successor, former policeman and Beijing’s favourite, John Lee. One British-born Chinese wealth manager Spy spoke to this week said, “I am sure things will be different, and I am moving back to the UK.”

Another week, another ESG opportunity. This time it is Japanese asset manager, Nikko, that is looking for an ESG analyst / specialist. The role is based in the firm’s Asia hub, Singapore, and has a broad remit. The candidate will be working across a spectrum: dealing with clients, research, thought leadership and much more. The role is specifically for someone with Asian experience and who is already familiar with ESG ratings and rankings. As usual it is a “competitive salary” package. Although not required, Japanese and Mandarin, plus a CFA qualification, would come in handy according to the job description.

There used to be an advert in the UK, “A pet is for life, not just for Christmas.” With the rise of pet ownership during the pandemic, it would seem a similar mantra is required for our era, too. Spy spotted a new ETF that has launched across Europe targeting the pet industry. If your enthusiasm for Fido, Coco, Rover and Rex bubbles over, this thematic might just have, er, legs.  The Rize Pet Care UCITS ETF is available in London, Frankfurt and Milan. Apparently pet ownership is expected to rise by 14% over the next 10 years according to Morgan Stanley. By 2030, in the US, people are expected to spend nearly $2,000 per annum on each of their furry friends. The ETF all sounds well and good, but can it fetch a ball?

Spy might just take a little bow. A few weeks ago, he mused that it might not be long before defence companies start being included in ESG screens due to Russia’s invasion of Ukraine. Euan Monroe, the chief executive officer of Newton Investment Management, a fully owned division of BNY Mellon IM, came out this week in favour of exactly that. He was quoted by Financial News as saying, “ESG funds should be able to invest in defence companies, because national security is part of a “common good” and responsible shareholders are needed to hold weapons manufacturers to account. Defence companies should be part of the sustainable remit.” Confusing times indeed for ESG managers with pacifist instincts.

With restrictions on travel in and out of Hong Kong distorting out local perspective on travel, Spy was deeply encouraged to read a story about Hilton Hotels expanding in the region. The US hotel group is planning to open two hotels every single week of this year in Asia Pacific. The company points out that in the US, with 300 million people, it currently has about 5000 hotels. However, there are four billion people in Asia Pacific and the group only has 523 hotels, to date. That is a huge amount of catching up to do and a massive vote of confidence in the region.

The “barbarous relic” simply won’t die, despite bitcoin’s modern allure. According to Blackrock, purchases of gold exchange traded products (ETPs) hit an all-time record in March. Global net inflows into gold ETPs rose fivefold month-on-month to $11.3bn in March, eclipsing the previous peak of $9.4bn in July 2020. The surge in buying helped push the gold price to jump almost back to its all-time high near $2100 an ounce. It has sold off a little since then, but clearly the gold bugs remain steadfast in their belief.

We have had inflation, some disinflation, a touch of deflation, the horrors of stagflation and now have another ‘flation to worry about. According to the European Central Bank, we can now expect “slowflation”. Apparently, it means “having positive GDP growth, while losing momentum and concurrently experiencing inflation.” Spy can translate that for you: you are getting poorer and the central bank is unlikely to help you much.

With the US bond market having a torrid time, it is currently down 9.2% from its peak in August 2020, you might think all US bond funds are getting crushed. Spy tips his hat to Manulife’s Special Opportunities Fund which is up a very healthy 13.3% in the last twelve months. Fidelity’s US High Yield Fund has managed 8% in the last year. It just goes to show, someone is always finding a way, no matter how volatile the market it is.

You may have heard the exciting, or terrifying news, depending on your home ownership status, that the long run US mortgage rate has risen to a whopping 4.72%. That million-dollar condo in Florida is now costing you nearly $50,000 a year just to keep the banking wolves at bay. Spy was not surprised, therefore, to see this chart. Searches on Google Trends for “Housing Bubble”. The wisdom of crowds, and all that.

Talking of housing, if you have been planning to buy a home in Canada to escape Hong Kong’s seemingly endless isolation from the world, you might be too late. Canada has just announced a ban on foreigners buying property in the country for two years to try and cool its own housing bubble. Apparently, if it is your only and primary home, you can still buy one, but for all those speculators, Canada is not currently as sweet as its famous maple syrup.

Peter Thiel, the billionaire investor and co-founder of PayPal, claims that a finance gerontocracy of Warren Buffett, of Berkshire Hathaway, Jamie Dimon of JP Morgan Chase and Larry Fink of Blackrock, is keeping bitcoin from reaching $100,000. Well, perhaps, but Spy would also point out that bitcoin relies on an ever-greater number of people buying more coins. It might just be that investors who love crypto already have as much as they need.

Until next week…

Part of the Mark Allen Group.