Your humble Spy found himself invited to a Japanese whisky tasting this week by a certain wealth manager in Hong Kong keen to give off the impression it is not parochially European. Thus, Spy discovered first-hand the liquid gold that is the Hibiki Harmony Master’s Select and also that Hibiki in Japanese means “resonance”. The happy bankers, asset managers and well-to-do Hong Kongers may have been enjoying the free flowing spirit, feeling in harmony with the world. However, Spy hopes none were looking at the performance of the Nikkei this year: to date, it is down 13%. Not quite so harmonious.
Spy hears news that Principal, the huge US investment and pensions manager based in Des Moines, has pinched Suresh Singh from BlackRock iShares to head up Asia distribution. Suresh is based in Singapore. Suresh had a long stint at Macquarie before joining Blackrock for nearly six years. Spy understands that this hire will mean that Gaurav Kumar, based in the Middle East for Principal, will relinquish his Asian duties and focus primarily on building AUM in that region.
Spy is all too aware that many investors think ETFs are the answer to all their investment problems. According to information published by ETFGI, the consultancy, by mid-year, assets in ETFs had gone up to $3.2trn globally; impressive numbers indeed. However, Spy spotted a welcome dose of sanity from M&G on its Equities Forum blog this week. “Rather like a dormant volcano, the risks [of ETFs] tend to rumble under the surface ready to erupt at any time. A foretaste was experienced in late August 2015 following a sharp drop in equity markets around the world. Many markets fell around 5% in just one hour of trading but certain ETFs, including those tracking the same market indices, fell by up to 40%. The underlying risk of ETFs when markets suffer excessive volatility was clearly highlighted.” Indeed!
How enthusiastic is the Bank of Japan to prop up its equity market? asks Spy. Pretty enthusiastic. The BoJ has announced that it would almost double its ETF purchases to ¥6 trillion, or $58 billion, up from the current ¥3.3 trillion. That number is mind bogglingly big. If it carries on at this rate, Bloomberg claims, by June of 2018, the BoJ is likely to hold ¥20.5t ($200b) in ETFs and it will become the largest indirect shareholder in 55 of the Nikkei 225’s companies. The BoJ is making Alan Greenspan and his “put”, and Bennie Bernanke and his helicopters look like amateurs. Who is benefiting from all of this? Well, a couple of Japanese funds have done nicely out of this largesse in the face of the Nikkei weakness. GAM’s Star Japan Equity Acc JPY is up 35.2% over one year, close behind is RWC’s Nissay Japan Focus R GBP is up 34% and Comgest’s Japan C is up 30.9. Spy’s advice to the fund boys and girls at GAM, RWC and Comgest should buy themselves a Hibiki Harmony Master’s Select and toast their success.
Standard Chartered in Singapore has published its quarterly conviction list online for all to see. Whilst Spy has not done an extensive survey of the changes from the 2nd quarter to 3rd quarter, a few changes did become apparent. Franklin Templeton has had some luck with the Franklin K2 Alternative Strategies (SGD Hedged) being added to the liquid alternatives list. Pimco has won over the SC team with the GIS Total Return Bond (SGD Hedged) which has been added to the global fixed income list. Meanwhile, Blackrock’s European Equity Income (SGD Hedged) – has been dropped from the list from the list for the quarter.
Do you want some more evidence that emerging markets are back in vogue? Look at the share price performance of Ashmore, the listed specialist EM manager. Over the last year its shares have rocketed up 51%. That share price action is a better performance than Ashmore’s leading fund over the last 12 months -- its EM Sovereign Debt fund is “only” up 41.8% in the last year. You could not give away EM and commodities last year – but, in the investment world it is always thus…
Spy’s advice if you find yourself at a grand dinner on The Peak and conversation is flagging a touch, bring up house prices. This week, don’t just chat about Hong Kong or Sydney property, bring up Vancouver for some real fireworks. Evidence is emerging that the British Columbia government’s “Metro Vancouver Foreigner Buying Tax” on houses has had a devastating effect, especially at the top end. House prices are off 20% in the last month alone, according to Global News, and everyone is now expecting more pain to come. Vancouver has been a darling of the Hong Kong and Chinese market with buyers thinking it was a one-way bet. Spy can understand their complacency: prices rose 450% between 2001 and 2016. Governments globally are grappling with the effects of non-existent interest rates and the real asset bubbles they cause, while money stays away from the real economy. Expect more of these local foreigner-specific taxes – London, Sydney, Singapore and Hong Kong all have them in one form or another. Good time to sell a mutual fund to these perennial condo buyers, says Spy.
Spy’s photographers in Singapore have been unable to avoid seeing Amundi, which has drenched the city in blue near Raffles Place with some brand advertising.
Also at Raffles Place, Fidelity preferred the big screen display
Until next week…