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UK asset managers are not happy with Yellen
Asset Management
<p>While fund managers in the U.S. were a little more simpatico with Janet Yellen’s decision to keep rates on hold, across the pond, British money runners were apparently not that happy.</p> <p>According to the Financial Times, several U.K.-based asset managers found the Fed’s recent decision not only “frustrating,” but also a blow to the central bank’s creditability.</p> <p>Luca Paolini, Pictet’s chief strategist, said that by keeping the status quo, the Fed has only made things worse: “The uncertainty is worse than a rate hike. A Fed hike could have been a major turning point for emerging markets. Now the concerns about global growth will intensify.”</p> <p>Kevin Adams and Kevin O’Nolan meanwhile both agreed that the move was “pretty frustrating,” with Adams – head of institutional fixed income at Henderson – adding that it “massively undermines [the Fed’s] credibility,” while O’Nolan – a portfolio manager at Fidelity – stated that this just means that “uncertainty [over emerging markets] will remain.”</p> <p>And they do have a point. While the buyside did push spoos higher after the announcement, fear and loathing eventually overcame the equity markets and bathed it in a sea of red. The only things bidding up right now are safe havens such as the swissie, the yen, and gold. Heck, even the euro – a currency not known for its stability and virtue – actually managed to post some gains.</p> <p>All is not lost however. While it did spike January Fed fund rates after she insisted on a 2015 rate hike, the market still hasn’t voted against Yellen in a real way. So while things may get a little choppy, it could be much worse.</p> <p>Her belief in the Phillips Curve should be of some concern though.<br /> Photo: Brookings Institute</p>
Hong Kong Cyberport startups scoop UK fintech awards
<p>Five start-ups based in Hong Kong technology hub Cyberport clinched prizes at  the UK Trade &amp; Investment (UKTI) Fintech Awards 2015 last week. The event - attended by The Right Honourable the Lord Mayor of the City of London Alan Yarrow -was intended to promote links between London's burgeoning fintech industry and Asia.</p> <p>UKTI says  the UK fintech market is now worth about 20 billion pounds ($31 billion) in annual revenue, making it the fastest growing fintech industry in the world by deal volume. In all two grand prizes, and three runner-up merit prizes, were awarded. The grand prize winners were given a 5-day trip to London and Manchester with business class flights and accommodation. They also bagged three months free co-working space at WeWork in London and free access to the global innovation conference "Innovate UK" in London. All winners will get to have dinner with British Consul-General to Hong Kong and Macau at the Consul General’s Residence with VIPs from UK and Hong Kong financials institutions.</p> <p>Here are the winners in full:</p> <p>Grand Prize </p> <p>  Lattice -  A capital-markets fintech company, focusing on developing front-office portfolio decision-support platform. <br />  Ironfly Technologies -  A combined order and execution management system for equities and equity derivatives.</p> <p>Merit Prize</p> <p> Argentum Code -  An information technology company developing innovative open accounting products.<br /> Bitspark -  An end to end money transfer platform leveraging Bitcoin.<br /> Innopage -   The company behind stock portfolio management app Ticker.</p> <p>Photo: UKTI</p>
The rise of the ethical hedge fund
Hedge Funds
<p>Hedge funds, in the eyes of the general public, seem to be nothing but vehicles of cutthroat greed, tools for untold and unfair riches, or to quote former UK Prime Minister Edward Heath, “the unacceptable face of capitalism.” With investors pushing for more ethical investments however, that image might actually change.</p> <p>The Financial News reports that Deutsche Asset &amp; Wealth Management has just sealed a deal with an unnamed hedge fund to create a product that will “invest only in stocks screened using ethical, social and governance guidelines,” adding that it plans to create more of these vehicles in the near future.</p> <p>This isn’t the first time a fund decided to integrate ESG principles though, Jersey-based Auriel Capital has been doing so since 2009, and Lansdowne Partners have been running a version of its $10 billion Developed Markets fund using ethical guidelines for quite some time already.</p> <p>However, they’re quite miniscule compared to their unconstrained brethren. Lansdowne’s ESG fund runs a mere $212 million compared to its 11-figure big brother, while Auriel Capital’s ESG strategies seem to be a non-dominant slice of its total AUM.</p> <p>Still, Deutsche’s signing could mean a lot for the space in the longer term, and as their competitor Lyxor says, demand for such products have been growing at “a very fast pace” the past years. That, coupled with the industry’s current scramble to repackage itself, could mean that we might see friendlier, more socially and environmentally conscious hedge funds within the decade. Stay tuned.<br /> Photo: Julija Rauluševičiūtė</p>
Rumor of FRC enquiry into Esprit
Capital Markets
<p>Hong Kong shareholder activist David Webb reckons that the Financial Reporting Council (FRC) is preparing to investigate fallen stock market star Esprit Holdings.</p> <p> On Friday, the FRC replaced its chairman John Poon Cho-ming with Nicholas Sallnow-Smith from today because Poon "is not able to perform the functions of his office as chairman as a result of his disclosure of interests", according to a FRC statement.</p> <p>Poon was deputy chairman and chief financial officer of Esprit before he left in 2008.</p> <p>Poon’s “standby role is a highly unusual step and would only be necessary if [he] had a conflict of interests due to an ‘investigation’ by the Audit Investigation Board into possible auditing and reporting regularities in a HK-listed entitiy, or an ‘enquiry’ by the Financial Reporting Review Committee into possible non-compliance with accounting requirements by a listed entity,” wrote Webb on his website. </p> <p>The council also appointed Vincent Duhamel and Professor Wong Tak-jun as temporary members until November 30; they may have to fill in for two other FRC officials who also had close ties with Esprit in the past.</p> <p>Lai Sun Development deputy chairman Chew Fook-aun was CFO of the clothing giant between 2009 and 2012, and Wong Kai-man was a partner at PwC, the auditor of Esprit since 1995.</p> <p>Investors used to love Esprit – but have bitter-sweet memories. The company’s shares have returned a negative 92% since their peak in October 2007, compared with -8.85% on the Hong Kong Tracker Fund.<br /> Photo: Jam Zhang<br /> &nbsp;</p>
Could Russia launch a state-run "BitRuble"?
<p>The Russian state could launch its own version of Bitcoin. At least that's what's being speculated after the Central Bank of Russia put together a team to research blockchain technology.</p> <p>This is less than a week after Sergey Solonin, general director of Russian payment services provider Qiwi, said his firm was developing BitRuble: a blockchain-based digital currency pegged to launch in 2016. According to the Coin Telegraph, this has led to a rumor - further spread by Spain's El Mundo - that BitRuble could be a new national digital currency overseen and managed by the state central banking system .</p> <p>This is interesting because the Russian state has been very critical of Bitcoin and even banned Bitcoin-based websites for a brief period at the beginning of the year. Only last week Russian Ombudsman Pavel Medvedev said Bitcoin was "absolutely illegal" and called it "technical hooliganism," his point being that only the Russian state should be able to issue money in the country.</p> <p>This latest development is not a case of the Russian state getting on board with Bitcoin, but more likely a case of it using blockchain technology to exert greater control over the use of digital currency. Whatever Russia's next move is, it will set an interesting precedent for state adoption of crypto-currencies.<br /> Photo: Nickolas Titkov<br /> &nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p>
Video: Say hello to the Monaco Yacht Show
Lifestyle, 4:01
<p>Wondering where to park that extra $50 mil of yours? Well, wonder no more.</p> <p>The annual Monaco Yacht Show is set to begin this week, allowing you to take your pick out of the €3 billion worth of superyachts, sailing yachts, tenders, and various other playthings on display.</p> <p>Among the yachts available for sale or charter are the 85 meter superyacht Solandge, the classically-styled sailer Pink Gin, and the futuristic, high-performance sailing yacht Angel’s Share.</p> <p>If that doesn’t whet your appetite, here’s a video from last year’s event. Check it out.</p> <p>The show starts on the 23rd at Port Hercule in Monaco.<br /> Photo: Steve Corey on and off</p>
Inaugural fintech meetup to focus on opportunities in Hong Kong
<p>Hong Kong is catching the fintech bug. And now Cyberport and NexChange are launching a monthly meetup to put together startups in the region to discuss critical issues: fund raising, growth, talent search, and more.</p> <p>The inaugural Fintech O-2-O Meetup will take place on Tuesday, September 22 and is expected to attract about 200 delegates from startups in the area as well as investors and customers. Increasingly, founders are discovering that online -to-offline is a key element in developing their ideas and relationships with potential clients.</p> <p>Fintech is attracting big money. More than $12 billion was invested last year, according to consultancy firm KPMG. The U.S. accounted for almost 80% of the total, followed by Europe with a 12% share and Asia a lagging third place with 6%.</p> <p>The event at Cyberport should help both entrepreneurs and investors in Hong Kong learn about the tremendous opportunities in this sector. </p> <p>Leading practitioners will share their experiences across a range of FinTech segments such as payments, peer-to-peer lending and portfolio management.</p> <p>Chris Dark, president international of C2FO will deliver the keynote speech. There will then be a panel discussion that includes Mukesh Bubna, founder &amp; CEO of Monexo Innovations, James McKeogh, partner at KPMG, Van Ta, founder of Suisse Tech Partners (STP) and Dominic Wong, head of large merchant acquisitions at PayPal.</p> <p>NexChange and Cyberport look forward to seeing you all on Tuesday! To register, click here.</p> <p> </p> <p> </p> <p>&nbsp;</p>
The China Syndrome – how volatility is affecting Asean
Capital Markets
<p>The Risks to Asia from China's Financial Volatility</p> <p>The economic slowdown in China and accompanying volatility in its financial markets is wreaking havoc in many parts of the global economy as the country’s demand for commodities and other manufacturing inputs wanes. Many countries in East and Southeast Asia are on the front lines of this shift and were immediately affected by the devaluation of the yuan. In this [email protected] interview, Wharton finance professor Franklin Allen outlines the risks hanging over the region and global economy.  </p> <p>An edited transcript of the conversation appears below.</p> <p>[email protected]: I want to welcome Wharton finance professor, Franklin Allen, who is also a professor of finance and economics at Imperial College in London. He is also executive director of the Brevan Howard Center there.</p> <p>I want to discuss how the situation in China, particularly the devaluation, is affecting East and Southeast Asia. We see the uncertainty in China as having widespread effects. Commodity prices are down, and countries that supply commodities and other goods to China, like Indonesia, are feeling the effects. Many Asian currencies are at multi-year lows against the dollar — the Malaysian ringgit, for example, is down 23% against the dollar this year. Other Asian exporting countries are responding in kind.</p> <p>For some, this brings back bad memories of the late 1990s Asian financial crisis. Now, many of those countries have made important changes to guard against the kind of problems they had back then. More have floating currencies, larger foreign exchange reserves, better banking rules and debt insurance. Still, the pressures seem to be mounting. What are the risks of an intensifying currency war or a financial crisis?</p> <p>Franklin Allen: First of all, the devaluation [in China] itself of course was not very big. It was 3% or so, but it did have a big trigger. There is a sense that we don’t really know what the exchange rate should be. The real issue is what are capital flows going to be like once they start reducing capital controls. That is the big uncertainty.</p> <p>This move — one of the reasons it may have had so much impact is that people realize that [the Chinese] are serious about globalizing, and becoming part of the global financial system. The IMF has been asking them to move towards a freer float and many people have been asking the same thing. This was a sign that they were going to do that and suggests that over the next year or two, or few years, they are going to really change the way they interact with the global economy.There are worries about how that is quite going to play out that helps trigger so much of the turmoil that we saw.</p> <p>It is a very different situation than it was in the mid- to late 1990s, and I don’t know how things are going to go from here going forward. A lot depends on what happens with interest rates in the U.S., and not just in terms of whether it [a rate increase by the Fed] is now, or three months from now, or six months from now, or whenever they start raising rates, but it is about how far is that process going to go, how much money is going to float back from emerging economies in to the U.S. And if the Europeans eventually get through with their quantitative easing, how much will go back to Europe.</p> <p>These are all big uncertainties, and that is why markets are so volatile at t</p>
Should emerging market investors fight the Fed?
Capital Markets
<p>KEY TAKEAWAYS</p> <p>· Fighting the Fed may be a winnable battle for EM.</p> <p>· EM valuations are compelling and, in our view, have priced in a fair amount of risk.</p> <p>· We see sufficient upside potential to maintain modest EM equity allocations despite significant growth challenges.</p> <p>· We expect the Fed to hike rates in December 2015, although it could come earlier — as soon as this week — or potentially slip into early 2016. For our latest thoughts on the Fed, please see our latest Weekly Economic Commentary and Bond Market Perspectives.</p> <p>Emerging market stocks have not won much lately, but the Fed may be a winnable fight. The Federal Reserve, which announces its policy decision on September 17, 2015, is on the verge of starting a rate hike cycle for the first time in more than 10 years. We have previously written that the start of Fed rate hikes has not marked an impending end to bull markets for U.S. stocks (despite the popular Wall Street adage “don’t fight the Fed.”) In reality, the first rate hike has told us we are about halfway through the cycle as discussed in our Weekly Market Commentary of August 25, 2014.</p> <p>But what about emerging markets (EM)? Aren’t these markets more dependent on low interest rates and stimulative monetary policy? Here we look at how EM has performed leading up to and after the start of prior Fed rate hike campaigns. While historical data are limited, we believe this exercise may steer EM investors to consider “fighting the Fed.”</p> <p>WALK DOWN MEMORY LANE</p> <p>Before we take a walk down memory lane to assess how emerging markets equities might handle Fed rate hikes, some context is important. EM has performed poorly for five years now, having underperformed the S&amp;P 500 by more than 50 percentage points during that period [Figure 1]. Tighter expected monetary policy is among the factors that contributed to this weakness. But we would argue that EM’s struggles go much deeper than that and can mostly be explained by other factors as we discuss below.</p> <p>It is evident from looking back at performance during the “Taper Tantrum” during May through July 2013 (annotated in Figure 1) that Fed fears contributed to EM weakness. In May 2013, the Fed announced it would taper bond purchases associated with its quantitative easing program, which caused rate hike fears to intensify sending the 10-year Treasury yield more than 100 basis points (1%) higher in only about eight weeks. This period, during which EM underperformed the S&amp;P 500 by about 12 percentage points, provided a reminder that EM had become somewhat dependent on low interest rates associated with quantitative easing. But as the figure shows, this was just a blip within a prolonged and much more significant period of weakness.</p> <p>International and emerging markets investing involves special risks, such as currency fluctuation and political instability, and may not be suitable for all investors.</p> <p>So should investors sell EM because of the Taper Tantrum? Not necessarily. We have two Fed rate hike cycles to assess (1990s and 2000s) for a more complete picture and EM generally performed well around both of them as shown in Figure 2. (Note that the MSCI Emerging Markets Index only goes back to the late 1980s.)</p>
Weekend Scan: Syriza victorious in Greece; Pope meets Castro; US to accept more refugees
Capital Markets
<p>&nbsp;</p> <p>While you were enjoying the first days of fall, the Pope was touring Cuba and Greeks held elections. Here's what you need to know:</p> <p>U.S. to accept 100,000 refugees annually. Secretary of State John Kerry says the U.S. must do its bit to help Europe with the migration crisis. He was meeting in Berlin to discuss the problem. Wall Street Journal (paywall)</p> <p>The Pope meets Fidel Castro. After addressing tens of thousands in Revolution Square, the Pope had an informal meeting with the ailing Cuban revolutionary. The pair exchanged books. BBC</p> <p>Syriza claims victory. The far left party fell short of a majority but the Independent Greeks said they would help forge a colaition. At last count, Syriza had 35% of the vote and New Democracy 28%. Syriza famously rebuffed a European bailout that it said was too onerous only to turn around and accept an even more austere offer to keep it from falling into economic oblivion. BBC</p> <p>Ben Carson says Muslims should not be president. The GOP candidate says the Muslim faith doesn't vibe with American principles."I would not advocate that we put a Muslim in charge of this nation. I absolutely would not agree with that," Carson told NBC's "Meet the Press." Reuters<br />  More GOP  controversy as Trump bails out of public appearance. The Donald was a no-show at a South Carolina event after he failed refute comments at another event that President Obama is a Muslim and "not even an American." He begged off saying he had to attend to a major business deal. The Hill</p> <p>Died: Romance novelist Jackie Collins at age 77. The legendary chronicler of Hollywood sex and glamour died on Saturday in Los Angeles after a private struggle with breast cancer. Variety</p> <p>Concorde could fly again. A group of British enthusiasts says it has raised enough money to buy a Concorde with the aim of getting it flying again by 2019. Club Concorde, made up of former captains, charterers and aviation fans, says it has £120m in reserve for the "return to flight" plan.<br /> BBC.</p> <p>Photo: Republic of Korea</p>