The FSA Spy market buzz - 22 July 2016

By FSA Spy

Added 22nd July 2016

Aviva Investors changing guard; CTBC Private Bank hires; Brexit vs emerging markets; Spy at odds with Franklin Templeton; UOB states the obvious and much more.

The FSA Spy market buzz - 22 July 2016

Spy could not resist an invitation to Sevva on top of the Prince's Building by a well-heeled broker this week. She assured me she was paying (well, her expense account was paying) and thus Spy found himself knee deep in Sevva’s signature cocktail, Hong Kong Fog. It felt apt as absolutely nobody has any idea what is going on in financial markets, least of all Spy. Apparently Brexit was going to be disaster and the world is slowing down, but the FTSE has been on fire and the Dow has hit eight record high days in a row, with only Thursday spoiling the party. Conflicting and foggy reports indeed...

Spy has confirmation of the rumour that Kevin Talbot, CEO and CIO of Aviva Investors Asia-Pacific, is retiring from the firm. Kevin has been CEO since June 2014, but joined in 2010. Kevin, an Australian, is leaving Singapore and going back downunder at the end of August. London-based Mike Craston will assume the role of CEO for Asia-Pacific and the Americas, supported by Richard Herberth in Singapore, head of client services in the region who is now general manager.

Spy has also heard that Jia Hao Sng is moving on from Maybank in Singapore. Jia Hao, part of the discretionary team at Maybank Private Wealth Management, is moving to CTBC Private Bank in August. He will be taking up a role in their sales and advisory department, focusing on funds and discretionary portfolio management.

Most commentators that Spy has been listening to or reading about seem to think Brexit is a net positive for emerging markets, including Asia. The general idea being that uncertainty in Europe and the UK is making EM assets, on a relative basis, more attractive. This is borne out by a survey carried out by FSA’s sister publication, Expert Investor, which says most European asset allocators are positive on EM and expect to boost investments. For example, UBP Private Bank, in its July equity asset allocation report stated “the Committee rotated geographically, reducing exposure to Europe in favour of emerging markets.” Let’s hope the money managers are right because the chatterati appear quite gloomy about local conditions across Asia – just ask a Hong Kong property developer, Singapore shipping broker or Malaysian palm oil trader for their views.

Another Brexit-related item that Spy heard about: Daniel Murray, chief economist and head of global research at EFGAM, who has an integral role in investment decisions, flew to Singapore last week to calm clients. His message, crudely summarised by Spy (an economist’s explanation has all those damn nuances): No systemic risk, the bad stuff will be contained in the UK, long-term no one knows but it is unlikely to be terrible. Spy sometimes wonders if Brexit could turn out to be a non-event.

Spy notes that Herbert Suen, long time fund selection head at Barclays Wealth in Hong Kong, has taken on the role of principal at private equity giant Blackstone. Barclays Wealth was acquired by OCBC in April for $320m and industry sources had been telling Spy they expected a change for Herbet, as OCBC controls fund and product selection primarily in Singapore with the help of Mercer.

Spy is always looking for the outlier and it comes from a source much closer to home. UOB Asset Management, one of Singapore’s home grown players, appears to be bucking the trend. It continues to favour developed markets in its latest report on general EM, albeit they are neutral on Asia-ex Japan itself. Something that raised Spy’s eyebrow was UOB AM’s comment, “We continue to allocate capital to high-quality and sustainable growth companies that are reasonably priced.” As opposed to allocating money to low quality, expensive companies with unsustainable growth? Perhaps UOB also likes to buy low and sell high…

Spy is forced, humbly, to disagree with a grand investment guru of Asia, Franklin Templeton’s own Mark Mobius. Dr Mobius claims, in a recent note, that Brexit could be good for Asia as “the center of gravity for capital markets activity could move east, away from London, toward Far Eastern markets such as Shanghai.” Spy has not forgotten the turmoil of last summer when Chinese regulators randomly suspended trading on hundreds of stocks, banned shorting and just about everything else to prevent excessive volatility, only to capitulate when reality took over. It remains hard to make the case that any Asian stock markets have the liquidity, effective governance or regulatory history to displace London or New York anytime soon.

Spy's photographers have caught Manulife making some guarantees in an advert spotted in Singapore. Spy notes the “T&C” apply. With the investment world the way it is, I bet they do!



Your faithful Spy says, "Enjoy the Trump show." Until next week...


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