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Retail banking could witness “fintegration”: EIU
FinTech
<p>Over the next five years, retail banking is likely to see a growing trend of banks’ co-option of Fintech models, notes EIU.</p> <p>The Economist Intelligence Unit published a report titled: “The disruption of banking” after surveying over 100 senior bankers and 100 Fintech executives to ascertain the likely landscape for the retail banking industryover the next five years.<br /> Fintech will strongly impact retail banking landscape<br /> The EIU report points out that digital disruption is the top-of-mind technological issue in the C-suite today, with senior executives in virtually every industry wondering whether their firm will be Amazoned or Ubered. The report notes the multi-trillion-dollar banking industry is facing disruptive challenges by financial technology upstarts, known as “Fintech”. The EIU report reckons over $25 billion has been poured into Fintech in the past five years, making it the number-one target for venture funding.</p> <p>Highlighting the enormity of the challenge, the EIU report draws attention to JPMorgan CEO Jamie Dimon’s remarks to his shareholders about Fintech: “They all want to eat our lunch. Every single one of them is going to try”.</p> <p>The EIU report points out that though over 90% of households in developed economies use a bank, over 90% of bankers project that Fintech will have a significant impact on the future landscape of banking. However, a majority of bankers (54%) believe that banks are either ignoring the challenge or that they “talk about disruption, but are not making changes”.</p> <p>Touching upon the strength of banks, the report notes one of the hallmarks of the customer relationship is a reputation for trustworthiness and stability with no major retail bank failed in the 2008 financial crisis. Nearly 95% of bankers and Fintech executives believe that banks will remain in a strong position even as Fintech gains ground:</p> <p>Banks will continue to dominate<br /> The EIU survey reveals that Fintech executives respect the banks more than the bankers themselves do. Responding to the future balance between the two segments, Fintech executives were more than twice as likely to predict that banks would continue to dominate the market:</p> <p>The EIU report points out that Fintech firms have the ability to take a “category killer” approach to banking portfolios, as the Fintech firms are able to maintain a laser-like focus on a single product, building excellence into both the technology and customer experience:</p>
Deference and deal-making: The absurdity of Xi's UK tour
Capital Markets
<p>China’s decision to invest 6 billion pounds ($9.2 billion) into the U.K.’s Hinkley Point nuclear plant project is one of many deals being struck between the two countries as the U.K. rolls out the red carpet for Chinese President Xi Jinping. But the lavish welcome has both baffled economists and worried the U.K.’s traditional allies.</p> <p>The U.K. has spared little pomp in welcoming their guest. Highlights so far have included a state banquet at Buckingham Palace, afternoon tea with members of the royal family at Clarence House, and a ride in the Queen’s diamond jubilee state coach.</p> <p>The U.K. government is selling the five-day visit — now in its third day — as a boon for the U.K. economy, claiming the trip has already drummed up 40 billion pounds worth of business. But Prime Minister David Cameron has also come in for a lot of flak both at home and abroad, accused of "kowtowing" to Chinese interests.  </p> <p>The PM’s own former advisor Steve Hilton — now a Silicon Valley CEO — took to the pages of The Guardian newspaper to accuse Cameron of “sucking up to despots” and questioned the economic sense of chuming up so closely to China.</p> <p>He is not alone. Former Wall Street trader Michael Pettis, now professor at Peking University’s Guanghua School of Management, has also used his blog to call out the PM for the "almost teenagerish excitement" with which he has been “BFFing” China, He writes:<br /> “For a rich, developed country like England, inward investment almost always affects growth adversely (unless it brings technological and managerial advances with it) and never more obviously so than when interest rates are struggling against the zero bound and every country is urgently trying to export excess savings. As one of my exasperated PKU students asked me after class last Saturday when we discussed the president’s trip: ‘So everyone agrees that it is good for England to get much more foreign investment, and everyone also agrees that it is bad for England to have a much bigger trade deficit. Don’t they know it’s the same thing?’”<br /> And then there are the U.K.’s long-standing diplomatic partners. The Financial Times has reported the U.K.’s efforts to accommodate China has caused U.S.-U.K. relations to become frayed. Patrick Cronin, an Asia expert at the Center for A New American Security, warned:<br /> “There is a growing concern in Washington about China’s intentions with respect to deepening ties with our key ally in Britain. The Chinese are definitely insinuating themselves way into the inner sanctum of the British national security [world] through these investments.”<br /> Its easy to see how in the long run China may be the one that stands to gain the most from this new relationship. Not the U.K.<br /> Photo: Foreign and Commonwealth Office</p>
No joke: Hong Kong manager launches 'HAHA' on NYSE as it gains toehold in US ETF market
Asset Management
<p>While western firms scramble to set up shop in the region, Hong Kong-based CSOP revs up its quest to dominate New York.</p> <p>Hot on the heels of its first New York-listed ETF – the CSOP FTSE China A50 ETF (ticker: AFTY) – the asset manager is set to launch two more ETFs on the NYSE, according to a statement.</p> <p>Its second ETF, the CSOP MSCI China A International Hedged ETF (ticker: CNHX), aims to track the performance of the MSCI China A International Index while neutralizing the ups and downs of the yuan relative to the greenback. The third one -- the amusingly tickered CSOP China CSI 300 A-H Dynamic ETF (ticker: HAHA) -- seeks to track the performance of the CSI 300 Smart Index.</p> <p>Apparently, HAHA will be the first time anyone combined A and H-shares together in one product, and was specifically engineered “for the vast number of investors who have only invested in offshore H shares ETFs in the U.S.” Interestingly, the fund was also structured to arb A-shares and H-shares price differentials, which sounds neat. Let’s just hope investors won’t find any irony involved with its ticker.</p> <p>Joking aside, this actually sounds like a great opportunity for U.S. investors, as Louis Lu, a portfolio manager at CSOP, had to say:<br /> “After launching our first FTSE China A50 ETF in the U.S. market, we are proud to bring two more exciting products to U.S. investors. With the expedited opening steps of China's capital market, we maintain a constructive view on China's A-shares market and think it is good timing for U.S. investors to increase their holdings of China A-shares.”<br /> Photo: Thomas Hawk</p>
Aberdeen Asset to bag first private fund management license in China
Asset Management
<p>Say goodbye to joint ventures and say hello to a new era for foreign fund managers because according to the SCMP, Aberdeen Asset Management is about to bag the first ever private fund manager licence in China:<br /> “British fund manager Aberdeen Asset Management is due to be granted a private fund manager licence in China, signifying foreign fund managers will no longer need to go into joint ventures and can operate at 100 per cent shareholding in their investment businesses.</p> <p>The fund manager will receive a private fund licence for its wholly-owned foreign enterprise (WFOE) setup in Shanghai.</p> <p>The quota for Britain's renminbi qualified foreign institutional investors (RQFII) programme is due to be increased as part of the 200 trade agreements that are to be concluded over President Xi Jinping’s visit to London this week, sources familiar with the situation told the South China Morning Post.”<br /> The license not only allows Aberdeen to trade in China's secondary markets, but to also raise cash from individual and institutional investors onshore.<br /> Photo: Anthony Kelly</p>
Startups eager for sky-high valuations should heed this cautionary tale
Venture Capital
<p>As the IPO market tanks and startups continue to seek absurdly high valuations, they would do well to remember the 2013 listing of textbook rental service Chegg and its ill-fated use of the IPO "ratchet."</p> <p>Wall Street Journal's Venture Capital Dispatch recalls how Chegg sought to secure a higher valuation during its pre-IPO funding rounds by promising investors their share price would double by time the company went public – a term known as a "ratchet." It backfired. Massively. As early Chegg investor Oren Zeev explained in a conference this year:<br /> “While it turned out that the top line was great, the fundamentals of the business, or the assumptions we were making about the business, were a stretch. It was far less clear it was a great business.”<br /> The upshot was that the business sunk below its IPO valuation after going public and could not deliver on what it promised, and Chegg was forced to issue additional shares to Insight Venture Partners, the VC with which it had the covenant. Companies like Box Inc. and Kayak Software Corp. have also had to pay a painful price for the same reason. </p> <p>One has to wonder how many  of our newly-born unicorns managed to achieve such lofty valuations, and how they will cope when it's time to go public.<br /> Photo: Jellaluna</p>
$1.4 billion in losses don’t scare Bill Ackman
Hedge Funds
<p>In Ackman’s world, cutting losses is for fools:<br /> “Hedge fund manager Bill Ackman said Wednesday that he purchased an additional 2 million shares of Valeant Pharmaceuticals as the stock plunged following the release of an explosive note from Citron Research that alleges the drugmaker is channel stuffing.</p> <p>Ackman told CNBC that he believes in the company despite Citron claims. His firm, Pershing Square, was already one of the largest holders of Valeant stock.”<br /> Pershing Square has so far lost $1.4 billion on Valeant, with Reuters estimating his Wednesday loss at $500 million.<br /> Photo: Insider Monkey</p>
Silicon Valley is hot for insurance tech, and Google is leading the way
FinTech
<p>Insurance may be not be the sexiest area of finance but it certainly seems to be doing something for Silicon Valley where investors are courting disruptive start-ups, and internet giants like Google are looking for a piece of the action.</p> <p>Back in June, CBInsights reported that 2015 was already a record year for insurance tech investment with for $832 million being pumped into the space. That's a 9X increase from five years ago, accounting for more than a third of the $2.12 billion raised by insurance tech companies since 2010.</p> <p>A more recent report shows that Google in particular has been doubling down in this space, signing off six separate partnerships and investments in insurance tech just this year. Its biggest deals include the firm's own Google Compare service, an auto insurance comparison platform launched in March in partnership with CoverHound and Compare.com. But it goes beyond that.</p> <p>Google has backed three firms in the medical insurance space, via its investment units Google Ventures and Google Capital, the most recent being Collective Health.  It has also partnered with home insurers Liberty Mutual and American Family Insurance through its internet-of-things product line Nest.<br /> Photo: GotCredit</p>
Weight Watchers surge 170% thanks to Oprah
Lifestyle, 4:01
<p>Move over Uncle Carl, that “Icahn lift” of yours has nothing on what Oprah recently did:<br /> “Winfrey announced on Monday morning that she had agreed to purchase a 10% stake in Weight Watchers International and had signed a collaboration deal to promote the diet company and its services. The announcement has caused shares of Weight Watchers to soar. With the stock changing hands for around $18, Winfrey has single-handedly generated $700 million in stock market value in two days, given that the company has 63.6 million shares outstanding following the Winfrey deal.</p> <p>Shares of Weight Watchers are up about 170% since they opened for trading on the New York Stock Exchange on Monday morning. Weight Watchers’ stock doubled in value on Monday and rose by another 30% or so on Tuesday.”<br /> Winfrey, who reportedly bought her stake for $43.2 million, now has $110 million in paper profits thanks to an option allowing her to purchase 3.5 million more shares for just $6.79 each. Not bad for just two days work.</p> <p>Guess its time to set up Harpo Capital Partners there, Oprah.<br /> Photo: United Nations photo</p>
With stocks on shaky ground, a promising ballast in bonds
Capital Markets
<p>Weekly Commentary Overview</p> <p> Stocks advanced last week, benefiting from mergers and acquisitions, and the recent drop in interest rates, a trend that continued last week.<br /> The gains we have seen in stocks, credit and even emerging markets in recent weeks have not been driven by signs of economic improvement, firming inflation or rising earnings.<br /> Instead, investors are once again taking solace in low rates and benign monetary conditions, which can and probably will persist for the remainder of the year. But that can only take the market so far.<br /> Meanwhile, another important trend is emerging: For investors looking for some longer-term ballast in their portfolios, particularly equity-centric portfolios, longer-duration bonds are reasserting their role as an effective hedge to equity risk.</p> <p>Stocks Advance, But on Wobbly Trends<br /> Stocks advanced last week, with the biggest gains in Asia. In the U.S., the Dow Jones Industrial Average rose 0.77% to 17,215, the S&amp;P 500 Index grew 0.94% to 2,033 and the tech-heavy Nasdaq Composite Index climbed 1.16% to close the week at 4,886. Equities continue to benefit from an active cycle of mergers and acquisitions. Last week's list included Dell's plans to buy hardware maker EMC and AB InBev raising its bid for SAB Miller.</p> <p>Stocks are also benefiting from the recent drop in interest rates, a trend that continued last week: The yield on the 10-year Treasury fell from 2.09% to 2.03%, and at one point dipped below 2%. German, Italian and Australian yields also dropped last week, as bond prices rose.</p> <p>Recent weeks have seen stocks, credit and even emerging markets start to recover. Unfortunately, the gains have not been driven by signs of economic improvement, firming inflation or rising earnings. Instead, investors are once again taking solace in low rates and benign monetary conditions, which can and probably will persist for the remainder of the year. But that can only take the market so far. Meanwhile, another important trend is emerging: For investors looking for some longer-term ballast in their portfolios, particularly equity-centric portfolios, longer-duration bonds are reasserting their role as an effective hedge to equity risk.<br /> Sugar High<br /> In most countries, interest rates are being held down by persistently low inflation. For example, the latest readings on Chinese inflation came in below expectations while U.K. readings turned negative for only the second time since 1960. Even in the U.S., producer prices are falling at the fastest pace since 2009.</p> <p>As realized inflation has remained stubbornly low, inflation expectations have also been stuck. For example, U.S. five-year inflation expectations fell to around 1.15%, down from 1.25% the previous week. With inflation expectations still falling, a 2015 rate hike by the Federal Reserve (Fed) looks increasingly unlikely; even the odds of an early 2016 hike appear to be fading.</p> <p>This has all helped keep bond yields low. But with bonds providing little appeal and short-term rates fast approaching their ninth calendar year at zero, investors are once again relying on stocks to do the heavy lifting in their portfolios. But this comes with the cost of escalating valuations: Since Sept. 30, the trailing price-to-earnings ratio on the S&amp;P 500 has risen by 10%.</p> <p>That said, while stocks have managed to rebound from their lows, the S</p>
Daily Scan: Asia ex-China shares fall; Europe lower ahead of ECB decision
Capital Markets
<p>Updated throughout the day</p> <p>October 22</p> <p>Good afternoon everyone. Asian shares finished the session lower Thursday, save for China, where stimulus bets led the Shanghai Composite up 1.45%. The Shenzhen Composite meanwhile – buoyed by tech shares – climbed 3.71%. Here’s how the rest did:</p> <p> Hang Seng Index: -0.63%<br /> Hang Seng China Enterprises Index: -0.46%<br /> Nikkei 225: -0.64%<br /> Straits Times Index: +0.44%<br /> Kospi: -0.98%</p> <p>Over in Europe, equities seem to be trending lower ahead of the ECB’s rate decision. The FTSE 100 is currently down 0.25%, the DAX – which climbed as much as 0.28% earlier – is currently up just 0.14%, while the CAC has slipped 0.13% so far.</p> <p>Here’s what else you need to know:</p> <p>Don't panic, says China, as outflows spike.  Recent outflows of money from China are “normal” and not a sign of panic capital flight, a senior official at the foreign exchange regulator said on Thursday, downplaying fears over growing outflows as the economy slows. SCMP</p> <p>U.K. retail sales beat estimates. U.K. retail sales rose sharply in September, punching in at 6.5% year on year versus a forecasted 4.7% climb. Month on month figures were also great, showing a 1.9% jump versus an expected 0.3% bounce. Interestingly, alcohol drove some of the gains. FXStreet</p> <p>South Korea rapper PSY in row with artist tenants.  PSY is fighting a legal battle with artist tenants who are reluctant to leave a building he owns in Seoul. The property dispute has struck a nerve in a country notorious for super-high rents that critics say are killing vibrancy in cities by spurring gentrification and evictions. SCMP</p> <p>China agrees $9.2 billion deal for U.K. nuclear power plant. The deal came in the wake of Chinese President Xi Jinping to Great Britain.  China General Nuclear Power Corporation (CGN) has entered into a deal with French state-owned energy firm EDF to acquire a one third stake in its Hinkley Point nuclear power plant in Somerset. The Telegraph</p> <p>Legoland heads to China. Merlin Entertainments has signed an agreement with China Media Capital to establish a Legoland park in Shanghai. It is part of a deal between the two to explore opportunities to build visitor attractions throughout China. BBC </p> <p>Singapore church leader pulled off $35 million fraud to support wife's failed singing career. The founder of a popular Singapore church, Kong Hee, has been found guilty of misappropriating more than $35.5 million in donations to support his wife's singing career, in a rare case of graft in the city-state. Aljazeera</p> <p>CIT chief John Thain to retire. John Thain, best known for leading Merrill Lynch during the financial crisis, will retire from CIT on March 31. He will remain onboard the lender as its chairman. CIT board member Ellen R. Alemany, will replace him as CEO. </p>