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Struggling to become even an 'emerging' market
Capital Markets
<p>Ghana recently completed an offering of $1 billion of 15-year bonds at 10.75% interest, with a World Bank guarantee of 40% of the issue.</p> <p>That's a hefty price to pay.</p> <p>I have a fondness for Ghana, going back to 1962 when I wrote my masters thesis on West Africa and had the privilege of staying at the Ghanaian Embassy in Washington on the day that the U.S. approved a loan that enabled Ghana to build its first hydroelectric project, the Volta River Dam. Ghana was among the first African nations to become independent of its colonial ruler, it had a young president who had gone to college in the U.S., and dreamers like me thought the nation had a great future. The dam, for example, would provide electricity for the capital city of Accra and for the aluminum smelter for the alumina that Ghana had plenty of. What a great step forward for a new country—from selling the raw material to, eventually, selling the finished goods.</p> <p>That was 53 years ago, as I calculate it, and our hopes have not been realized. The reasons are many. I will not try to detail them here. Suffice it to say that after the passage of over 50 years, there is again some optimism about the future of Ghana, but that optimism wears thin.</p> <p>How can a nation with a growth rate of about 7% (Ghana, lately, if the figures are right) get ahead by paying 10.75% (plus whatever it is paying the World Bank for its support) to fund itself? The use of proceeds section of the prospectus is, as I suppose is usual in such cases, vague. Proceeds will be used for “budgeted capital projects”, three words that sound right in the context but tell the reader nothing. There is nothing there to give a reader any confidence that the funds will be used wisely.</p> <p>How, also, can it make sense for a developing nation to fund domestic projects in dollars when its currency has been depreciating significantly in recent years, as the Ghanaian currency has been doing, it has a seriously negative balance of payments, and its export products have been declining in price in the world’s markets? In all likelihood, Ghana will end up having to plunder other sources of income in order just to pay the interest.</p> <p>Borrowings like these tend to make nations forever developing, never quite emerging.<br /> Photo: Tulane Public Relations</p>
The Week Ahead: China GDP, an ECB rate decision, more guidance for the Fed
Capital Markets
<p>(Note: all times HKT)<br /> Good day. It is a busy economic calendar across the world this week. Markets will scrutinise important data from China on Monday, including quarter 3 GDP figures, for clearer signs that annual economic growth is on course. President Xi Jinping warned last week that maintaining an annual 7% rate is tough, but he has also repeatedly emphasised that the Chinese economy is in transition to a consumer-led model. The retail sales number should indicate whether a shift is underway.</p> <p>In Europe, the ECB will announce its interest rate decision on Thursday. Few analysts expect any change from the current 0.5% benchmark against a backdrop of continued sluggish economic activity in most of the Eurozone and following recent official statements that the ECB’s quantitative easing program might be extended.</p> <p>Housing and employment figures as well as earnings announcements by leading manufacturers will provide further clues about the effects of a strong dollar on the sustainability of US economic growth. Speeches by two Fed officials might give markets a better idea about interest rate intentions – but don’t bet on it.</p> <p>Here is a list of the most important official data releases this week:<br /> Monday, Oct 19 <br /> 09:00    China Gross Domestic Product   (Q3, YoY) - Forecast: 7%; Previous: 7%</p> <p>12:30     China Retail Sales (Sep, YoY) – Forecast: 10.8%; Previous: 10.8%</p> <p>12:30     China Industrial Production (Sep, YoY) – Forecast: 6%; Previous: 6.1%</p> <p>15:30     Hong Kong Unemployment (Sep) – Forecast: 3.4%; Previous: 3.3%</p> <p>17:00     German Buba Monthly Report</p> <p>21:00     US NAHB Housing Market Index (Oct) – Previous: 62 62</p> <p>23:00     US Fed Lacker speech</p> <p>Tuesday, Oct 20 </p> <p>08:30     Australia RBA Meeting Minutes</p> <p>13:00     Germany Producer Price Index (Sep, YoY) – Forecast: -1.7%; Previous: -1.7%</p> <p>19:30     US Housing Starts (Sep, MoM) – Forecast: 1.147m; Previous: 1.126m</p> <p>20:30     US Fed's Dudley speech</p> <p>Wednesday, Oct 21 </p> <p>24h         Hong Kong Chung Yeung Festival – Markets closed</p> <p>06:50     Japan Exports (Sep, YoY) (Sep) – Forecast: 3.4%; Previous: 3.1%</p> <p>06:50     Japan Imports (Sep, YoY) – Forecast: -11.7%; Previous: -3.1%</p> <p>11:30     Japan All Industry Activity Index (Aug MoM) – Previous: 0.2%</p> <p>15:30     UK Public Sector Net Borrowing (Sep) – Previous: £11.305B</p> <p>Thursday, Oct 22 </p> <p>08:30     National Australia Bank's Business Confidence (QoQ) (Q2)</p> <p>13:00     Spain Unemployment Survey (Q3, YoY) – Previous: 22.37%</p> <p>15:30     UK Retail Sales (Sep, YoY) – Forecast: 4.7%; Previous: 3.7%</p> <p>15:30     Hong Kong Consumer Price Index (Oct, YoY) - Previous: 2.4%</p> <p>18:45     ECB Interest Rate Decision</p> <p>19:30     US Continuing Jobless Claims (Oct 9) – Previous: 2.158m</p> <p>19:30     US Initial Jobless Claims (Oct 16) - Previous: 255,000</p> <p>19:30     US Chicago Fed National Activity Index (Sep) – Previous: -0.41</p> <p>19:30     ECB Monetary Policy Statement</p> <p>20:00     US Housing Price Index (Aug, MoM) – Previous: 0.6%</p> <p>21:00     US Existing Home Sales Change (Sep, MoM) – Previous: -4.8%</p> <p>21:00     US CB Leading Indicator (Sep, MoM) – Forecast: 0.0%; Previous: 0.1%</p> <p>21:00     Europe (Prelim.) Consumer Confidence (Oct) – Forecast: -7.5; Previous: -7.1</p> <p>Friday, Oct 23 </p> <p>08:35     Japan: Nomura/JMMA (Prelim) Manufacturing Purchasing Manager Index (Oct)</p> <p>09:00     China Leading Economic Index (Sep) – Previous: 1%<br /> Photo: </p>
The darlings of active managers: most crowded trades
Asset Management
<p>The “darlings” of mutual funds and institutional funds is a popularity contest tracked by Credit Suisse that might be almost used as a contrarian indicator, in a note titled The Darlings of Active Managers The Most Crowded Names in US Small, Mid &amp; Large Cap Funds. As a general rule, the report authors note, “owning too many darlings given less opportunity for differentiation.”</p> <p>Crowded Trades<br /> Large cap darlings underperformed while “Cherished Cousins” delivered<br /> Following darlings in large caps has not been a profitable strategy, the report noted, as twenty five of the most popular stocks are trading below the S&amp;P 500 total return index benchmark. The current darlings of large caps reads like a who’s who of Wall Street’s most discussed names, seven of which are in tech, including Apple Inc., owned by 398 funds, Microsoft owned by 347 funds. Banks on the list include JPMorgan Chase, which is set to report earnings on Tuesday, is owned by 291 funds, Wells Fargo, owned by 268 funds and Citigroup, owned by 209 funds, are expected to report later this week. Bank of America was a notable off the darlings list.</p> <p>What has generated performance is the “Cherished Cousins,” Credit Suisse notes. These are the most popular names in large cap funds, when managers move down cap to the Russell 2500. Relative to the S&amp;P 500 total return index these stocks outperformed by nearly 12 percent since December of 2012. In particular, this stock grouping has rocketed since December of 2014.  Notable names include Lear Corporation, owned by 63 large cap funds, Alaska Air Group, owned by 48 funds and Jones Lang LaSalle, owned by 44 funds.</p> <p>Crowded Trades<br /> Crowded Trades – Large cap rising stars have good then less than stellar performance<br /> Large cap rising stars got off to an early start in the Credit Suisse report, but have had difficulty out-performing more recently. The 25 stocks with largest increase in large cap fund ownership topped out with 15 percent outperformance in March 2014, but are now outperforming by near 5 percent relative to S&amp;P 500 Total Returns Index. The study also revealed that Fading Star stocks generally lagged in the quarter after names were sold, while highly owned Fading Stars have tended to rebound and outperform.</p> <p>Each quarter Credit Suisse c</p>
Mikhail Zelman, the man behind Burger&Lobster on his first McDonald’s hamburger and selling 5,000lbs of lobster a day
Lifestyle, 4:01
<p>Mikhail Zelman is certainly one of the most successful restaurateurs in London. His company Global Craftsman Group (GCG) includes 13 Burger&amp;Lobster chains, 3 Goodman steakhouses, Smack Lobster Roll, Rex &amp; Mariano, and Beast, which only serves Canadian crab and Nebraska-fed beef, writes FinBuzz.</p> <p>Zelman’s business started in London, but now seven more restaurants will open, one in Qatar, Kuwait, and the UAE. Mikhail invited Gyuzel Gubeydullina to interview him at his Mikhail Zelman School of Success office. Here, aspiring restauranteurs are taught how to welcome guests, choose meat, and cook the world’s best burgers and lobster.</p> <p>In fact, there is no menu, just two options: a burger or lobster.</p> <p>In London, it is expected to have to wait for a table, but it is rare to see a queue of people lined on the streets in the rain for a lunch. This is what I saw at the Burger&amp;Lobster in City, near the Royal Exchange. Right now it is my favorite restaurant, but there is one but – you even need to book a table for lunch. But who knows the price/quality balance better than investment bankers, working here in City?</p> <p>Soon the empire is set to expand. London’s chattering classes are talking about the (so far unconfirmed) news that the Qatar Investment Authority (QIA), a sovereign wealth fund, has invested 30 mln pounds in Zelman’s business. If the rumours are true, they are understandable for them to be impressed by the fact that the total monthly revenues of his restaurants are between £50,000-140,000. In an attempt to understand the phenomenon of Mikhail Zelman, who before was a stockbroker in Russia, we went for an interview.</p> <p>BEING A RESTAURANTER IN RUSSIA IN THE 1990s</p> <p>Mikhail, tell us how it all began?</p> <p>I finished school at age 14 in 1991 because I wanted to start working. In the 1990s, there were stores in Russia that were selling foreign stuff and everyone wanted to buy these things. I needed money to take girls out on dates, so I finished school as soon I could and went to work for my father — as a fitter-adjuster in the tool shop, where I stamped lids for the canning. I lasted only seven days. But I still remember my mentor Zura Mikhailovich.</p> <p>What a great career! How did you get interested in restaurants?</p> <p>I quickly understood that I had a unique opportunity to build my own business, do things that my father would have shot dead for. So I had this desire to make money and went to work for the Commodity Exchange, I was the youngest broker! I was trading vouchers for former Soviet factories that still produced and sold stuff like canned meat, machinery. Because of the weak economy, everything was sold on a barter basis. That year I bought myself my first car. Then I went deeper into business and started to organise logistics for the factories that were selling abroad. My older brother was already living in Israel. I visited him and was struck by when we ate at a Mongolian bar and grill After coming back to Moscow I persuaded a friend to open the same restaurant in Moscow. We called it Tamerlan. Working there I first realized that I had to be a restaurateur and that meat is my passion.</p> <p>Why meat?</p> <p>It all comes from the childhood. My dad — a very welcoming character. We always had guests at home, laughing and enjoying homemade barbecue from a hand selected meats. </p>
The rise of robo-advisors
FinTech
<p>The increasing presence of robo-advisors in the financial industry worries some investment professionals. If artificial intelligence can meet the needs of clients who want low-cost, tailored, active management of their savings, then the role of human intermediaries will soon become obsolete.</p> <p>Kurt Schacht, managing director of Standards and Financial Market Integrity at the CFA Institute, took a deep breath and checked out a robo-adviser.</p> <p>He found that it was “highly effective and efficient—probably a much better service and product than the traditional retail brokerage account with a salesperson on the other end”.</p> <p>The robot welcomed him to the platform, asked a dozen questions about his financial history, objectives and risk tolerance and quickly created an optimal portfolio of low-cost, no-transaction-fee funds.</p> <p>“It was slick and much more tailored and calculated than working with a typical broker salesperson”, writes Schacht.</p> <p>But there was a flipside. The experience was cold and impersonal.</p> <p>“It was as if investment management had been reduced to the equivalent of a drive-through fast food restaurant”.</p> <p>But, quant providers feel that their time has come. At a recent event in New York where he participated as a panellist, Schacht found that they are convinced that few aspects of financial analysis, security selection and asset allocation can be delivered better by humans.</p> <p>Eventually, they argue, soft skills for client relationships and communications will be unnecessary.</p> <p>After all, who needs to talk with a real person who understands your financial challenges and appreciates your desired outcomes if a computer can get you to the same place in seconds?</p> <p>“For traditionalist CFA charterholders who bleed the virtues of client loyalty, service, and professional judgment, the robo-adviser trend is disturbing,” writes Schacht.</p> <p>&nbsp;</p> <p>Cyberport and NexChange are hosting an O-2-O meetup that will discuss this issue as well as examine many other opportunities and challenges that new financial technologies are creating in the wealth management industry.</p> <p>The event will feature five speakers closely involved in the latest developments and it should attract a wide cross-section of more than 200 delegates:</p> <p>Date: October 27, 2015</p> <p>Time: 16:00-19:00</p> <p>Venue: Cyberport 3, Hong Kong</p> <p>Please register here</p> <p>&nbsp;<br /> Photo: Andrej Blagojević</p>
Barron's Roundup: The bulls still have it
Capital Markets
<p>October 17, 2015</p> <p>The bulls aren't gone yet. More than half, or 55%, of those surveyed by Barron's say they are bullish or very bullish about stocks at least through next June. When Barron's did a similar poll in the spring, only 45% of respondents were so optimistic. Maybe that 11% market correction in August has people feeling a bit better about the the value of stocks, or maybe it's the Fed's continued drag on actually raising interest rates. Either way, it's pretty much sunshine and rainbows for these equities guys.</p> <p>Hold on to your EMC stock; double digit gains are in your future. Dell's proposed purchase of EMC hasn't benefited shareholders yet, but Barron's is pretty optimistic that it will. Investors could earn a more than 10% return when the $67 billion deal closes, likely next summer, Barron's reports. Worst case scenario for EMC, if the Dell deal does fall through, there are other available options, such as a spin off.</p> <p>Looking for your next best stock pick? Chris Davis, chairman of Davis Advisors, sees opportunities in financials. Investors are, of course, still feeling the financial crisis burn when it comes to investing in financial stocks. But financials are looking as compelling as they did in 1991, Davis tells Barron's. Top picks? Wells Fargo, JP Morgan Chase, and Markel.</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;<br /> Photo: Uguran Betin</p> <p>&nbsp;</p>
Al Gore’s 'sustainable' generation investment beats most hedge funds
Hedge Funds
<p>Former Democratic vice president and almost-president Al Gore is known as a visionary and a thinker on a grand scale. Gore has remained politically and socially active since the turn of the century, and has spent his time writing several books and championing important environmental issues.<br /> Although not a lot of people are aware, Gore has also been focused on making money since he retired from politics. He and several colleagues founded a firm called Generation Investment Management a little over a decade ago. The asset management firm is focused on, and limits its investments to, businesses that operate on the principles of environmental sustainability.<br /> Gore and his colleagues at Generation describe their goal as the demonstration of a new version of capitalism that will create incentives for financial and business operations to reduce the environmental, social and political damage caused by unsustainable capitalistic excesses. In practical terms, Gore and his Generation partners have made more money using an environmentally conscious model of “sustainable” investing than most fund managers who were seeking profits at almost any environmental or social price.<br /> Keep in mind that this is just the track record of one firm, which has managed assets of relatively modest size for just over a decade. Generation has an AUM of close to $12 billion as of early October, with pension funds and other institutional investors the largest sources of capital, around half based in the U.S and half overseas.<br /> The MSCI World Index reports an overall average growth rate of 7% over the last 12 months. Based on data from Mercer, a UK analytics firm, the average pre-fee return for the global-equity managers it surveys was 7.7%. This meant that after fees (averaging about 70 basis points), the returns brought in by the average professional money manager barely kept up with low-cost passive index funds.<br /> However, Mercer’s data shows that the average return for Generation’s global-equity fund was 12.1 percent a year, which is more than 5% greater than the MSCI index’s growth rate. Among the over200 global-equity managers in Mercer’s survey, Generation’s 10-year average ranked as second.</p> <p>Gore is not shy about discussing his firm’s success. “I wanted us to start talking when the five-year returns were in, but cooler heads persuaded me that we should wait until now,” he noted</p> <p>The Generation team is not, however, bragging to try and drum up new business. Gore and the Generation team are rather aiming at a relatively small audience within the financial world that controls the flow of capital, and at the politicians that set the rules for the financial system. “It turns out that in capitalism, the people with the real influence are the ones with capital!,” Gore said in an interview with The Atlantic earlier this year. They hope that Generation’s success will bring attention to the fact that they can make more money if they change their practices to largely avoid the environmental and social damage modern capitalism can do.</p> <p>This article was originally published by </p>
Career Insights: Shaped by the financial crisis, millennial bond manager readies for rate hike
Asset Management
Andrew Szczurowski is the new breed of bond manager: For the bulk of his career, interest rates have hovered near zero. Szczurowski is one of many millennials who came charging onto Wall Street just as the markets crested, joining Eaton Vance in 2007 after two years at BNY Mellon.  Mortgages, of course, were ground zero for the crisis. Szczurowski, who
What we're reading: fantasy falters but reality inspires hope
Lifestyle, 4:01
<p>A warning for bubble investors, a disgruntled banker, a cure for ISIS, a list to reflect on and a happy tale of human resilience.</p> <p>The fantastic rise and fall of daily fantasy sports: A salutary lesson for venture capitalists as the FBI and US Justice Department investigate the business models of FanDuel and DraftKings. A relentless pursuit of customers with the promise of huge prizes, all funded by investors frightened about being left behind. The Wall Street Journal</p> <p>Another banker in court, but this one thinks he was screwed. A Dutch derivatives trader tells a British employment tribunal that he was fired so his boss could take the credit for his idea to save Barclays £51.5 million and boost his own bonus. Who would’ve thought that such machinations take place in the City? The Daily Telegraph</p> <p>Blocking financing to ISIS. Efforts to train and equip anti-Islamic State fighters have failed, so the U.S. and the West need to focus on choking financial support for ISIS. Nothing else has worked and besides, military action has been mired in confused objectives and has fuelled the misery for Syrians. Funding could well be ISIS’s Achilles Heel. The New York Times</p> <p>10 things you can’t live without. Okay, unlike the author my life would not be impaired by the absence of polka dots or red lipstick, but the list gives pause for thought. Even better, try to compile your top-ten without including anything techy. The Huffington Post</p> <p>Young Spanish entrepreneurs show creativity and initiative. Despite economic crisis and massive unemployment, the youth of Andalucía are combining new technology with old traditions to make their way. Time for the tourists to return and enjoy the beaches while gorging on locally produced food. The Spectator<br /> Photo: Hartwig HKD</p>
Opportunities for Asia's private bankers
Asset Management
<p>Asia’s wealth management scene is competitive, fluid and expensive. Cost-to-income ratios in Hong Kong are more than 70%, almost double the proportion in Western Europe, as blue chip private banks fish for talent in a small pool of relationship managers with networks among China’s new rich.</p> <p>The bait is a big salary and juicy benefits; the reward for the banks are connections to the world’s fastest growing market of high net worth individuals, according to the latest Capgemini and RBC Wealth Report 2015.</p> <p>However, single- and multi-family offices are gaining traction within Asia, undermining the strategies of the leading banks who argue that scalability is essential to survive. Experienced staff see an opportunity to use their contacts to set up on their own or join a niche, more focussed firm with a realistic expectation of even higher compensation as well as greater independence.</p> <p>Kenneth Ho, the former head of Julius Baer’s investment solutions group in Asia Pacific is the latest high profile banker to make the move. At the beginning of this month, he joined US-based Carret Asset Management where he is tasked to set up an Asian multi-family office, reports AsianInvestor.</p> <p>He is looking to buy independent asset managers in Hong Kong and Singapore, and might also form a private equity fund.</p> <p>In September, another private banking veteran, Stephen Repkow quit Union Bancaire Privée to launch an independent platform in Singapore that will serve both as an external asset manager and a multi-family office.</p> <p>If more bankers strike out for independence then, of course, the talent pool for the big wealth managers will become even shallower. They will have to offer larger salaries and bonuses which will push the cost-to-income ratio higher so that eventually head office must wonder: why bother?<br /> Photo: Mart</p>