Spy felt like an agony uncle this week. Over a very sober caffè latte, he chatted to a young Chinese-American fund analyst whose folks live in San Francisco. His travel frustrations, along, with anyone else with American or European ties in Hong Kong, seem to be reaching boiling point. “Why, if we are double vaccinated can’t we travel without quarantine”, my young friend wailed. Spy and everyone else in Hong Kong, can only look on with envy as Singapore heads towards a quarantine-free travel corridor with the United States, possibly as early as December. Never has Hong Kong felt so cut off from the rest of the world and yet, as with so many other things in the last few years, Hong Kong’s government remains steadfastly implacable. How does Spy say “Speak to the hand” in Cantonese?
First, we had data, then we had Big Data (those capital letters told us all how serious it was) and now, inevitably, we have Big Data Refiners, notes Spy. This week ProShares have put out an ETF, you guessed it: Big Data Refiners ETF. The firm claims that in 2020, 64 zettabytes (six trillion gigabytes – in case you wondered) of data was generated across the globe. The world can’t keep up with all the data it produces, but there are now companies trying very hard to help other companies sift through their information and turn it into something useful. Thus, ProShares reckons, we need a thematic strategy that capitalises on the mounds of data and how to process it effectively. The top holdings include Datadog, Dynatrace, Elastic and Teradata – firms, Spy confesses, he had never heard of. But then, that may be exactly the point, isn’t it?
Publicity is two-edged sword, as Cathie Wood of Ark fame is finding out. Her outsized success on the way up lead to interviews, headlines, gushing articles and flows galore. In the last month, investors got weary, however, and have been pulling out money at pace. Her lead fund, Ark Innovation ETF (distributed in Asia by Nikko AM) had more than $900m yanked from it. Ark’s assets plunged 13% in September. Compounding this wobble, it seems an astute analyst, Neil Campling of Mirabaud Securities, who correctly identified the Wirecard fraud, is making waves saying Ark is a strong sell. Just because he called Wirecard correctly does not mean he is right on Ark, but it does make one wonder.
Spy’s memory may be a little fuzzy, but if he is correct, in Disney’s animated 1940 classic, Fantasia – The Sorcerer’s Apprentice, Mickey Mouse loses control of his buckets of water and soon finds himself deluged. Mickey and the music get more and more frantic as the water flows and flows. Investors in China’s Fantasia must feel they are in a similar situation as the property company missed a $206m bond payment. Yield hungry fund investors across Asia have been sold huge amounts of Chinese property debt over the last decade. Spy can’t help but feel that in a Fantasia remake, Mickey Mouse’s buckets might just have the words Evergrande, Hengda, Jumbo Fortune and Fantasia etched on their sides. At the end of the original film Mickey gets everything under control with the help of his sorcerer boss and catastrophe is avoided. Investors must be hoping the Chinese government achieves something similar this time round, reckons Spy.
Is this time ever different? Neuberger Berman, for once, seems to think so. The asset manager has put out a good report outlining why investors should not sanguinely buy central bank claims of inflation transience – and this time, the inflation beast may be here to stay with painful consequences for investors. The article makes four key points: energy prices, China no longer exporting disinflation, politicised central banks, and a rearrangement of supply chains. Take this stat with your espresso: “Shipping a 40-foot container from Asia to the US costs around $20,000, versus $2,000 pre-pandemic.” Shipping costs may well come down in due course, but Spy can’t imagine them dropping 90% in under a year.
Some Western commentary on China has been rather hysterical and particularly poorly informed of late (is it ever not?). After China’s crack down on certain capitalistic excesses over the last six months, we have had wild claims that it is no longer possible to invest in the world’s number two economy. Along comes some very clearsighted thinking from local Hong Kong-based manager, Stonehorn Global Partners. Their Aussie-born CEO, Sam Lecornu, writes, presciently in Spy’s opinion, “Capitalism…that mechanism that has created so much wealth and lifted 850 million people out of extreme poverty since 1981 – capitalism, with a Chinese twist – will also endure. With Chinese GDP more than 60 times larger since opening up, it defies logic that China would dispense with a system that has served it so well.” Well said, Sam.
The Bitcoin haters must be having a very bad week. Bitcoin has rallied more than 35% in under ten days, confounding critics. While sceptics hunt around for reasons why Bitcoin should not be rallying, JP Morgan says it is all rather simple: (1) Institutional investors are buying as an inflation hedge instead of traditional hedge, gold; (2) The US has said, unlike China, it has no intention of banning crypto; and (3) The Lightning Network and second layer payments solutions have started to work in El Salvador, the only country to accept Bitcoin as legal tender. Spy has no idea whether the bulls are right on Bitcoin’s $1m target but it is proving remarkably resilient in the face of relentless authority pressure. That must count for something.
Spy’s quote of the week is from Michael Batnick. “I don’t mean this in an insulting way. We’re all children at heart. ‘Hey look what I’ve got’ is what drives everything.” Nailed it.
Spy’s photographers have spotted more advertising out. This week, Eastspring has a new campaign focusing on parenting. No specific strategy, just a reminder of one’s responsibilities.
Until next week…
P.S. As predicted the US avoided the debt-ceiling crunch. So much drama and wasted energy.
