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Daily Scan: Asia caps the day mixed; European shares climb
Capital Markets
<p>Updated throughout the day</p> <p>November 10</p> <p>After a long and valiant fight to remain deep in the green, the Shanghai Composite finally succumbed to all the bad news reported by the nation and finished the day down 0.18%. Hong Kong’s Hang Seng Index meanwhile slumped a massive 1.43%, while over in Japan, bargain hunters and a weak yen led the Nikkei Average to gain a surprise 0.15%. As for the rest:</p> <p> Hang Seng China Enterprises Index: -1.82%<br /> Shenzhen Composite: +0.82%<br /> Straits Times Index: -0.42%</p> <p>Elsewhere in the world, European bourses are brushing off China’s weak inflation data to notch up some pretty decent gains. At pixel time, the U.K.’s FTSE 100 is up 0.27%, while Germany’s DAX 30 and France’s CAC 40 are up 0.39% and 0.44%, respectively. U.S. stock index futures meanwhile are narrowly higher with S&amp;P 500 contracts climbing 0.05%, DJIA futures nudging 0.06%, and Nasdaq contracts advancing 0.02%.</p> <p>Here’s what else you need to know:</p> <p>Cameron warns EU over U.K. terms. Prime Minister David Cameron has said that Britain will question its commitment to the European Union if his demands for changes to the U.K.’s membership are rebuffed. Wall Street Journal (paywall)</p> <p>China inflation figures miss estimates. Chinese consumer inflation climbed just 1.3% in October, slower than September’s 1.6% reading and lower than a Wall Street Journal survey of a 1.4% gain. Producer prices meanwhile slumped for the 44th-straight month. Wall Street Journal (paywall)</p> <p>Japan’s current account surplus shrinks. The land of the rising sun’s current account, a gauge of trade and financial flows, came in at just Y1.468 trillion ($11.9 billion) in September, 11% less than October’s showing. The figure was much less than the Y2.15 trillion reading analysts had expected. Financial Times (paywall)</p> <p>SCMP changes editor-in-chief amid staff exodus. In a move one employee called “staggering,” the South China Morning Post announced that it will be replacing Wang Xiangwei, the English-language paper’s editor-in-chief the past four years, with Tammy Tam beginning January 2016. The switch comes in the middle of a massive staff exodus which includes several award-winning journalists. HKFP</p> <p>Ericsson and Cisco form a $1 billion alliance. The Swedish mobile maker and U.S. teleco have formed a business and technology partnership that should generate additional revenues of $1 billion by 2016. The deal should strengthen the pair against China’s Huawei and Finland’s Nokia. Reuters</p> <p>Myanmar’s NLD confident of victory. Myanmar’s opposition National League for Democracy says it expects to win about 70% of seats. Party leader Aung San Suu Kyi said: “I think you all have the idea of the results.” BBC</p> <p>Israel’s Netanyahu still committed to a two-state solution. U.S. President Barack Obama and Israeli PM Benjamin Netanyahu said on Monday that they have not given up on the Middle East peace process despite the poor prospects of reaching a lasting agreement. Financial Times (paywall)</p> <p>Russia accused of state-sponsored doping at Olympics. The World Anti Doping Agency has accused Russia of operating a huge state doping programme that sabotaged the London 2012 Olympics, adding the country should be banned from athletics. Guardian</p> <p>Volkswagen gives $500 to car owners. The car manufacturer is handing over the money to VW car owners affected by the emissions cheating scandal, but owners say it’s too little too late. The $500 will come in the form of a gift card that can be used anywhere. Owners will also get a $500 card to be spent at VW or Audi dealerships, and free 24-hour roadside assistance for the next three years. CNN</p> <p>Brevan Howard cuts 50 support staff. The European hedge fund has laid off 50 people globally in back and middle office positions. The firm suffered its first annual loss in 2014, and the fund was down 0.7% in September. Reuters</p> <p>Wall Street bonuses likely to fall for the first time since 2011. A report by Johnson Associates predicts debt traders w
Would you take your paycheck in bitcoin?
FinTech
<p>The idea of getting paid in a cryptocurrency as volatile as Bitcoin would probably put most people off, but the idea is gaining traction. We already have services like Bitwage – a Bitcoin-based payroll platform for international payments – now Europe is getting in on the act.</p> <p>The Coin Telegraph reports that Bitcoin service Cashila has just released it's own Euro-to-Bitcoin payroll system that allows European employees to request their wage in bitcoin through simple bank payment, regardless of whether the employer runs a Bitcoin scheme or not. </p> <p>For a platform like Cashila, the hope is that the payroll system will fuel wider adoption of Bitcoin and therefore add value to the broader ecosystem of bitcoin services, including their own flagship product. Assuming of course that a sufficient number of employees are bold enough to quite literally stake their livelihood on a cryptocurrency.<br /> Photo: BTC Keychain</p>
Gaw Capital Partners to launch fifth Asian real estate fund
Asset Management
<p>Hong Kong-based Gaw Capital Partners, known for such hits as acquiring the InterContinental Hong Kong Hotel and developing Vietnam’s tallest skyscraper, is apparently hitting the fundraising circuit for its fifth and largest real estate fund.</p> <p>Mingtiandi reports that the family-run firm plans to raise $1.5 billion for the Gaw Capital Gateway Fund V, a fund, unlike its China-centric predecessors, which will carry a pan-Asian mandate and just $750 million set for mainland Chinese properties.</p> <p>The move apparently comes after regional REPE firms dimmed their outlook on mainland real estate:<br /> “Gaw’s decision to move beyond its traditional base in Hong Kong and mainland China to look for opportunities may reflect the challenges that fund managers are currently facing raising funds for acquisitions in China after a flurry of sour economic news from the mainland.</p> <p>In 2014 Gaw invested a reported $200 million to acquire an office tower in Seoul, South Korea, and that same year purchased the Hyatt Regency in Osaka for a reported $30 million.”<br /> Gaw, according to its website, has raised over $5.2 billion since its inception and now commands over $10.6 billion in capital.<br /> Photo: InterContinental Hong Kong</p>
Saudi Arabia plans bond binge
Capital Markets
<p>The protracted slump in oil prices is forcing Saudi Arabia to turn to international investors. The decision follows issuance of domestic bonds in the summer to fund a rapidly deteriorating budget deficit, as the price of crude more than halved to $50 a barrel in less than a year .</p> <p>"Saudi officials say the kingdom could increase debt levels to as much as 50% of gross domestic product within five years, up from a forecasted 6.7% this year and 17.3% in 2016," reports the Financial Times. (paywall)</p> <p>"While banks have yet to receive any mandates, some lenders have already sent unsolicited proposals to guide the kingdom in approaching international markets," it adds.</p> <p>Saudi's foreign reserves have plunged from last year’s high of $737 billion to a three-year low of $647 billion in September, as its attempts to put rival oil producers out of business by over-producing in a falling market failed dismally.</p> <p>Now it intends to be a big issuer of international bonds just when yields are set to rise.<br /> Photo: Al Jazeera English</p>
Hedge funds are dumping gold at a record pace
Hedge Funds
<p>With the Fed practically trapped into producing a December rate hike; investors around the globe are starting to flee precious metals at a rapid pace – and hedge funds seem to be among the biggest sellers, writes FINalternatives:<br /> “Hedge fund managers sold gold contracts during the week ended November 4 by the most since Bank of America Merrill Lynch began tracking their movements in 2006, according to the last edition of the bank’s Hedge Fund Monitor.”<br /> Long positions in gold have apparently been sold off, while holdings in silver and palladium have been largely slashed. Short positions on copper meanwhile have been added to, a move that has not done well for the already-battered copper ETFs.</p> <p>Still though, the report does add that gold may still bounce back, but with one hulking caveat:<br /> “Gold may rally tactically, but remains vulnerable on sizable longs by large speculators, wrote BofAML.”<br /> I wonder how Peter Schiff feels about all this.<br /> Photo: Giorgio Monteforti</p>
PIMCO says former bond king Gross needs better screenwriter
Asset Management
<p>Former bond king Bill Gross needs a better screenwriter, says the investment giant Gross founded. On Monday PIMCO asked a California state judge to dismiss a lawsuit filed by Gross, saying reads more like a movie script than a strong legal argument.<br /> PIMCO: Gross legal document reads more like a screenplay than a court pleading<br /> Calling Gross’s lawsuit against the firm he once headed “a sad postscript to what had been a storied career at PIMCO,” lawyers for PIMCO wrote in their rebuttal filed Monday in California Superior Court in Orange County. PIMCO, headquartered in Newport Beach, said the complaint reads “more like a screenplay than a court pleading” in that it “uses irrelevant and false personal attacks on Mr. Gross’s former colleagues in an apparent effort to distract attention from the fundamental failings” of the legal complaint.</p> <p>In its rebuttal, PIMCO made the case sound more like a divorce trial with a despondent lover, claiming Gross was engaging in “reputational warfare.” Like any good divorce, it’s time to turn the page, forget about the past and stop blaming others regarding financial problems. “Pimco has moved forward since Mr. Gross’s resignation,” PIMCO’s rebuttal said. “It is time for him to do the same, instead of treating this court as a forum to engage in the kind of reputational warfare embodied in his legally groundless complaint.”</p> <p>PIMCO said the Gross lawsuit “is only the latest step in Mr. Gross’s effort to resurrect a personal reputation damaged by his own unacceptable behavior.”  During his final year at PIMCO, Gross engaged in some rather unusual behavior, which the PIMCO lawsuit didn’t forget:</p> <p>During his final year with PIMCO, Mr. Gross engaged in a pattern of conduct that was incompatible with the values and standards that PIMCO expected of those entrusted with its leadership. When Mr. Gross finally came to understand that PIMCO would not exempt him from these standards, he abruptly resigned from the firm without notice or transition— disregarding the potential impact on the individual and institutional clients whose assets he was responsible for managing.<br /> Bill Gross had a messy divorce from the love of his life: PIMCO<br /> As reported in ValueWalk, the October legal complaint attacked PIMCO and its management head on. “Driven by a lust for power, greed, and a desire to improve their own financial position and reputation at the expense of investors and decency, a cabal of Pacific Investment Management Company LLC (“PIMCO”) managing directors plotted to drive founder Bill Gross out of PIMCO in order to take, without compensation, Gross’s percentage ownership in the profitability of PIMCO,” the legal complaint reads in its first paragraph, not holding back. “Their improper, dishonest, and unethical behavior must now be exposed.”</p> <p>In his initial charges Gross said his one-time anointed successor Mohamad El-Erian didn’t want to be held accountable for performance on risky investments. El-Erian had engaged in a risky hedge fund approach while Gross wanted to stick to his bond market strategy. After El-Erian’s “abrupt departure,” the lawsuit charged that PIMCO management conspired to rid the firm of Gross so they could be done with his high percentage of profits he took for himself.</p> <p>PIMCO essentially says in court documents that the charges made against the firm are irrelevant and more dramatic than substantiative. Lawyers from Gross note that PIMCO did not directly dispute any of the charges in their rebuttal, saying they “are confident in our case moving forward. Notably, Pimco’s papers do not dispute the substance of Mr. Gross’s allegations in any material way.”</p> <p>Gross currently managed nearly $1.4 billion in the Janus Global Unconstrained Bond Fund, which recently witnessed a high profile redemption in the wake of his lawsuit. This is but a shadow of his former glory when at his peak Gross was managing nearly $293 billion at the PIMCO Total Return Fund and had a reputation for consistent industry outperformance. With a record of unde
Danny Yong donates S$5 million to the National Gallery Singapore
Lifestyle
<p>Looks like American hedgies aren’t the only ones eager to be patrons of the art world. According to the Straits Times, Singapore's Danny Yong has been doing his share for the arts as well:<br /> “The National Gallery Singapore has received a $5 million donation from hedge fund manager Danny Yong, its largest individual cash donation to date.</p> <p>The gallery announced this yesterday, ahead of its opening on Nov 24. The amount will help to fund the art acquisitions for the national collection.”<br /> The 43-year old Yong is chief investment officer of Dymon Asia, one of Asia’s largest – and most successful – global macro funds, and interestingly, he isn’t that big on art collecting:<br /> “He said he is ‘not big into collecting art’ but has enjoyed viewing art in a museum since he was a young boy. He added: ‘I’m constantly amazed at how artists can translate their imagination into visual form so magically. I think art is great for stimulating our creativity.’”<br /> Either way, the National Gallery was “deeply grateful” for his donation and has dedicated Forest Fire, a painting by Indonesian artist Raden Saleh, to the Yong Hon Kong Foundation in recognition of his gift.<br /> Photo: GokuPhoto</p>
Juwan Lee connects finance professionals globally with new app NexChange
Lifestyle
<p>Juwan Lee, a former hedge fund manager turned entrepreneur is taking the finance world by storm and has created NexChange, a social network exclusively for financial service professionals globally, writes Finbuzz.</p> <p>Lee is Korean-American and studied and worked in the US, and now lives in Hong Kong. He is no stranger to the world, living in seven different countries and working in financial markets for nearly thirty years. Lee was Head of Long-Short Equity on the Global Proprietary Trading desk in Asia Pacific at JP Morgan before moving within the bank to the asset management division. Before that, he was CIO at Continuity Capital and Osprey Capital Management. He’s managed portfolios for SAC Capital Advisors and was a Senior Portfolio Manager at Rothschild Asset Management during the Asian currency crisis in 1997.</p> <p>He explains that as a money manager, he took for granted the ease in connecting as people were compelled to reach out to him. It wasn’t until he left that he realized he took it for granted, that it’s not normally so easy to talk to others in the financial world. Lee saw a gap and created NexChange, which is 50 percent for business and 50 percent social.</p> <p>“Currently there are many niche networks in insurance, real estate, and such but they are too small and can never be large social networks. The overall finance market, banking, asset management, private equity, makes for a massive market globally. The addressable market range is 50-75 million people if you include people in corporations and all types of financial services,” Lee estimated.</p> <p>When asked if he found the transition from banking to creating a start up easy, Lee said no.</p> <p>“With a start up the pace is much quicker – rather than theorize you must go out and make changes much faster in terms of execution and feedback. The pros and cons of running your own business are that you have to wear so many hats. This makes the dynamics more inspiring but also more challenging. You have to put in more hours and have very little work-life balance. The window of opportunity is small to take the lead so there is no way to avoid the urgency and time imbalance. In the infrequent moments that I get down time, I like to go to the beach with my family. It could be anywhere as long as the beach is beautiful. But the rest of the time I am flying a lot, working a lot and drinking a whole lot of green tea,” Lee laughed.</p> <p>When Lee is asked if he looks up to any recent entrepreneurs in technology, Lee says he’s more inspired by the icons from the time when Silicon Valley was first being created. Lee was one of the first investors in Yahoo, Google, and Netscape during the mid-nineties tech boom. He says the changes in technology were greater back then than now. Lee is currently reading a book by Ben Horowitz, an American businessman who wrote, “The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers ”</p> <p>Lee also admires Andy Grove, the co-founder of Intel, famous his mantra, “Only the paranoid survive.” Lee finds it admirable how Grove propelled Intel to where it is today.</p> <p>“Trading has changed a lot and it’s more difficult than it used to be. My advice to investors is to do a lot of fundamental work on stock and get to know it in the short term. Focus on risk management and have very strict guidelines on your exit positions. Everyone can access information so you need to be thorough in your research information,” Lee said.</p> <p>Lee is excited with what is next for NexChange.</p> <p>“We plan expansion into China in 2016, further expansion into other major US cities like Chicago, San Francisco, and other markets like Germany. Basically, we want to be in all the major cities around the world. We are currently looking for additional financing. We have already raised $2.5 million since inception and are potentially doing another financing round early to mid next year. We are not finished with this round yet which will finish in the next couple of months,” Lee explained.</p> <p>NexChange has thirty em
Emerging markets winners and losers: Q3 2015
Capital Markets
<p>&nbsp;</p> <p>Investor risk aversion battered emerging market (EM) assets during the third quarter. Local currency and hard currency markets both posted negative gains and EM equities posted double digit losses.</p> <p>The carnage in emerging markets during Q3 was largely driven by China, with prolonged depressed commodity prices and US dollar strength also contributing to declines. The August market meltdown was led by the Chinese stock market collapse, its precipitous fall triggered massive selling across global equity markets, spiking volatility and moving investors out of risk and EM. The delayed Fed rate hike, a reaction to market turmoil, kept investors defensively positioned with many calling into question the prospects for global growth.</p> <p>The convergence of these difficult macroeconomic conditions accelerated EM capital outflows, which worsened on the heels of Brazil’s downgrade to junk by S&amp;P and lead to a re-pricing of EM assets in the third quarter.</p> <p>Currency</p> <p>In Q3, the JP Morgan GBI-EM Global Diversified Index was down -10.54% in USD terms. The rout in commodity prices played a key role, with high beta currencies plunging on low oil and negative sentiment.</p> <p>Latin America, down -16.19%, was the index’s worst regional performer in Q3. Underperformance was led by Brazil, down -25.66%, which is struggling with ballooning inflation, a looming recession and a government that lacks the political capital to restore fiscal order.</p> <p>High beta Asian currencies were also delivered a blow in the third quarter. Both Malaysia, down-14.48%, and Indonesia, down -14.15%, have seen capital outflows fueled by global risk aversion and magnified by China-related risk.</p> <p>Romania was the top performer in the index, up 4.0% at the close of September. European growth has been strong in 2015, making emerging Europe a bright spot in the local markets during Q3.</p> <p>Sovereign USD Debt</p> <p>The JP Morgan Emerging Markets Bond Index Global (EMBIG) ended the 3rd quarter down -2.04%. Once again there was a substantial divergence in returns between the investment-grade and high yield segments. The high yield component posted flat returns, outpacing the investment grade segment, which was down -3.13%. High yield was almost entirely supported by the recovery in Ukraine.</p> <p>Ukraine was the top performer in Q3, posting a massive 50.18% gain. Ukraine completed restructuring talks with creditors, bond prices railed on better than expected terms for bondholders.</p> <p>Argentina was another top performer, up 7.28%. The rally was driven by positioning, as investors bet the new government, elected in October, will resolve the country’s decade long battle with creditors and lift the country out of default.</p> <p>The worst performer for the quarter was Ecuador, down -18.67%. Bonds have continued to decline as prolonged low oil prices force government spending cuts.</p> <p>Emerging USD Corporate Debt</p> <p>The JP Morgan Corporate Emerging Bond Index (CEMBI) returned -2.76% in the third quarter, with high yield, down -5.79% underperforming investment grade, which was down -1.08%.</p> <p>In the 3rd quarter, Russia was the best performing country, up 2.21%. Market volatility in Latin America (Brazil was down-16.86%) and Asia (Indonesia was down -12.06%) rotated investors back into Russia, which has been EM’s second best performer this year.</p> <p>Looking across sectors, returns were muted. Resilience by the large, highly rated conglomerates in Hong Kong drove returns in the diversified sector, up 0.33%.</p> <p>Equities</p> <p>The MSCI Emerging Markets Index was the major underperformer in Q3, down a blistering -17.77%. The massive downturn was led by Chinese equities; the Shanghai composite was down -29.69% over the same period.</p> <p>2015 Outlook</p> <p>Looking ahead to the end of 2015, the landscape for EM assets is challenged, with investor sentiment remaining cautious. The fundamental backdrop for many emerging countries has deteriorated, which has also lead to substantial asset re-pricing. Valuati
Daily Scan: Stocks slide as OECD raises concerns about trade; VW gives diesel owners $500
Capital Markets
<p>Updated throughout the day</p> <p>November 9</p> <p>Stocks fell Monday as the U.S. edges closer to December, and a potential interest rate rise. The Dow, Nasdaq, and S&amp;P 500 all fell 1%. The Stoxx Europe 600 was down 1.1% for the day as well. Globally, investors were concerned about a report by the Organization for Economic Cooperation and Development that said trade flows had declined to levels usually associated with recessions. Overnight, China reported exports fell 6.9% and imports tumbled 18.8%. In the U.S., Caterpillar shares dropped 2.6%, and Nike lost 1%. Priceline, which gave a dour outlook in its quarterly earnings, tumbled 9.6%. Pharmaceutical maker Mallinckrodt found itself in the cross-hairs of short-seller Citron Research and plunged 17%.</p> <p>Here's what else you need to know:</p> <p>Volkswagen gives $500 to car owners. The car manufacturer is handing over those affected by the emissions cheating scandal. Owners aren't impressed with the $500 gift cards, which will cost VW $250 million. Owners will also get a $500 card to spend exclusively at VW or Audi dealerships, and free 24-hour roadside assistance for the next three years. CNN</p> <p>Wall Street bonuses likely to fall for the first time since 2011. A report by Johnson Associates predicts debt traders will get slammed with a 10%-20% drop. Bankers who manage bond and stock raises should see their bonuses reduced by 5% to 15%. Still in line to get a raise -- equities traders and M&amp;A bankers. Wall Street Journal (paywall)</p> <p>U.S. and Israel leaders hold first post-Iran deal meeting.  Barack Obama and Benjamin Netanyahu met in Washington for the first time since relations deteriorated over Iran. Netanyahu told Obama that he is still committed to a two-state solution to the Israeli-Palestinian conflict, but that a Palestinian state would have to be demilitarized and recognize Israel as the homeland of the Jewish people. Reuters</p> <p>Pimco wants Bill Gross's suit gone. The California firm told a court that Gross's civil suit is "legally groundless" and a "sad postscript" to Gross's career. Gross called foul on the firm he helped found, saying it violated his contract and forced him out. Wall Street Journal (paywall)</p> <p>Virginia frat sues Rolling Stone. The University of Virginia's Phi Kappa Psi is suing the magazine for $25 million over the now-discredited article about a 2012 gang rape. The story, published in November 2014, alleged that the gang rape happened at the fraternity. Rolling Stone retracted the story in December. Reuters</p> <p>Mizzou football players force university president to resign. University of Missouri President Tim Wolfe has been under fire for his lack of response to racism on campus. The school's football team announced over the weekend that it wouldn't play until Wolfe resigned, which he did Monday morning, effective immediately. Washington Post</p> <p>Brevan Howard cuts 50 support staff. The European hedge fund has laid off 50 people globally in back and middle office positions. The firm suffered its first annual loss in 2014, and the fund was down 0.7% in September. Reuters</p> <p>Match Group sets IPO. The online dating company, which includes the popular brands Tinder and OKCupid, says it will raise up to $536.7 million, selling 33.3 million shares at $12 to $14 each. The high end would make Match worth more than $3.4 billion. Wall Street Journal (paywall)</p> <p>An Olympics without a Russia-U.S. rivalry just won't be the same. The World Anti-Doping Agency found that Russia's track-and-field athletes have participated in state-sponsored doping for years. The commission recommends that the Russian athletes be banned from the 2016 Olympics. Wall Street Journal (paywall)</p> <p>China lifts ban on IPOs and markets celebrate. The Shanghai Composite finished the session up 1.58% and is now firmly in bull market territory while the Nikkei 225 – ignited by a weaker yen – capped the day up 1.96% to close at an 11-week high. The markets chose to shrug off news that China's exports slid 6.9% in October, much more tha