The FSA Spy market buzz – 8 July 16

By FSA Spy

Added 8th July 2016

Cazenove gets a new head; T. Rowe Price adds; Citibank’s non-deal; UBS allocations; CSAM a rising giant; Property lemmings; Brexit excuses and much more

The FSA Spy market buzz – 8 July 16

Spy, like the British Raj who wisely decamped to Shimla from Delhi in the Himalayan foothills each summer, has this week escaped the sultry heat of Hong Kong by staying at an absent Taipan’s house on The Peak. Being elevated has given Spy a greater sense of perspective of the market and the tumultuous events rocking the world the last few weeks, and, vitally, allowed him to indulge in some very fine bottles of Cheval-Blanc Bordeaux which have been gathering dust in his generous host’s cellar. Similar to typhoon Nepartak bearing down on Taiwan, markets have been threatening chaos in Brexit’s wake. Will the storms hit?  At the time of writing the meteorological signs don’t look good and neither do the wails of the market commentariat. On this occasion, Spy has more faith in the weatherman than doom-laden economists...

Spy gathers that Cazenove Wealth Management in Singapore has installed a new head of wealth management in the guise of Simon Lints. Simon, formerly of Credit Suisse and an alumnus of UBS too, has a rich pedigree for the role. His LinkedIn profile includes the disarmingly honest “socialising” under the activities and societies section. Sounds perfect for wealth management, Simon.

T. Rowe Price have been boosting their retail marketing function and Spy can now report that Elsie Chan has added to her team in Hong Kong. Marietta Olivari has joined her from T. Rowe’s Sydney office, to handle Hong Kong and Singapore retail marketing. Expect to see the blue and white ram in more places soon.

Spy notes that UBS’s wealth management CIO has been prognosticating on where to allocate in light of Britain’s two fingers up gesture to the European Commission. Within its European tactical asset allocation, they like “energy, healthcare and technology” and perhaps, with some self-preservation in mind, they are merely “neutral in financials” in contrast to the majority of brokers who are downright negative in light of Brexit. Something that did catch Spy’s eye, however, was the following line from UBS’s ‘deeper dive’ comment this week: “And in Asia, which feels off the radar, with all eyes on Europe now, the story remains one of stabilisation, with pockets of strength emerging.” With so much political news dominating, perhaps Asia is quietly finding a floor while the rest of the world has apoplexies over Trump, Blair, Cameron and Brexit?

Citibank is doing its best to offer an enticing non-deal to its wealthy investors from July 1st for the rest of the year. Spy noted that in Singapore the wealth management giant wants investors to plonk down $2m of new money and in return they will provide a $6,000 hard cash rebate for your troubles.  But, what does the fine print say? Only that the investor needs to invest in any “unit trust, bond, or structured note with a minimum net sales charge of two (2) percent” Mmm, last time Spy checked, 2% on $2m is $40,000. Only one winner here, thinks Spy.

Credit Suisse sold the majority of its asset management business to Aberdeen Asset Management in 2008, while retaining a 25% stake in the Scottish fund manager at the time. Spy has watched as CS has been steadily building up its asset management business all over again (including in Asia), an endeavour in which it appears to be having some considerable success. AUM has now reached $314bn and the division now has 2,300 staff. 2008 must seem a long way off and the scale of the business must surely scare any independent asset manager trying to get product on the CS Wealth Management shelf.

Much has been made this week of the property fund “gatings” by some of the UK’s leading property managers such as M&G, Standard Life Investments, Aviva Investors, Henderson and others, due to a rush for sales by institutional and retail investors.  Spy scratches his head in frustration at the investor lemmings. 1) Professional investors should know that property is not a very liquid asset class and a rush for the exits was bound to do this. 2) Have the investors not noticed that UK interest rates have plummeted in the wake of Brexit, which is absolutely great for property investors who get a relatively higher yield and lower gearing costs. Yes, the pound is off but it will probably bounce back once everyone realises that Brexit is not quite the divorce the voters might have been thinking it was.

If you hear anyone complaining that returns are hard to come by this week, ask them to stop looking only at the Hang Seng, S&P 500 and FTSE 100 and take a peek at these nice little funds available in Hong Kong instead: Aberdeen Global Brazil Equity S2 USD up 49.4% YTD, Invesco Nippon Small/Mid Cap Equity A JPY up 36.8% YTD, Pictet Russian Equities P EUR up 28.6% YTD. What do they have in common? Not much, but then wealth managers are meant to be searching day and night for the best returns…If it was easy, everyone would be doing it.

Spy, from his grand mansion on The Peak is making a confident prediction, quaffing the Bordeaux: expect Brexit to be used as an excuse for every drop of underperformance under the sun for the next six months. CEOs, wealth managers, CIOs, portfolio managers, fund sales people and analysts will be trotting out the line: “everything was going so well until Brexit pulled the rug, but nobody could have foreseen that”. Don’t be surprised if your local noodle shop in Wanchai blames Brexit for the poor quality of the roast duck too. Nothing like a black swan event to give some nice cover.

Until next week, Spy says, “relax, have a glass of something cold and don’t let the politicians ruin your weekend”.

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