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Daily Scan: Asia caps the week lower; European shares tumble after Fed moves closer to rate hike
Capital Markets
<p>Updated throughout the day</p> <p>November 13</p> <p>A vicious assault on commodity prices sent Asian shares hurtling on Friday with the Hang Seng Index falling 2.15%, the Shanghai Composite dropping 1.43%, and the Nikkei 225 slumping 0.51%. Overnight, a bevy of Federal Reserve officials in the U.S. began speaking not about when to raise rates but by how much and how quickly. The rest of the region was also in pretty bad shape, ironically fitting today’s date:</p> <p>Day<br /> Week</p> <p>Hang Seng Index<br /> -2.15%<br /> -1.98%</p> <p>Hang Seng China Enterprises Index<br /> -2.19%<br /> -3.58%</p> <p>Shanghai Composite<br /> -1.43%<br /> -0.85%</p> <p>Shenzhen Composite<br /> -2.39%<br /> +2.59%</p> <p>Nikkei 225<br /> -0.51%<br /> +1.63%</p> <p>Straits Times Index<br /> -0.98%<br /> -3.085</p> <p>Shares in Europe aren’t looking that great either. The FTSE 100 – despite strong gains in mining shares – has fallen 0.39% and is currently on track to its worse showing in two months. The DAX 30 and the CAC 40 meanwhile are both trending the wrong way with the former tanking 0.13% while the latter falls 0.10%.</p> <p>Here’s what else you need to know:</p> <p>Suu Kyi's NLD wins Mayanmar election by landslide.  Myanmar's opposition National League for Democracy has won a landslide election victory, officials say, with more than 80% of contested seats now declared. BBC</p> <p>German GDP growth decelerates. German GDP came in at 0.3% for the third quarter, in-line with expectations but still disappointing given that it expanded 0.4% the quarter before. If this keeps up, Merkel’s going to have a real bad time. Financial Times (paywall)</p> <p>U.S. has “Jihadi John” in its cross-hairs. US forces have carried out an air strike targeting the British Islamic State militant known as “Jihadi John,” the Pentagon has said. The extremist was seen in videos of the beheadings of Western hostages. BBC</p> <p>Japan industrial production beats estimates. Japan’s industrial output grew 1.1% in September, just a smidge higher than the forecasted 1% climb but well above August’s 1.2% contraction. Tertiary industry activity however slumped 0.4%, far below expectations of a 0.1% nudge. METI</p> <p>Malaysian GDP growth cools to a two-year low. Malaysia’s GDP growth rate came in at just 4.7% in the third quarter, its slowest growth rate in more than two years. A fall in consumption seems to be the main driver of the fall. Nasdaq</p> <p>Singapore retail sales disappoint. Singaporean retail sales came in at just 4.7% last month, a marked drop from the preceding month’s 6.6% reading, and quite the fall from the expected 6.5% climb. It could’ve been way worse though, had auto sales not surprised to the upside. Investing/Straits Times</p> <p>U.S. flies B-52 bombers near the Spratlys. In another “freedom of navigation” operation, the U.S. flew two B-52 bombers within 12 nautical miles of the Spratly Islands in the South China Sea. The flights came after China parked a few of its J-11 fighter jets on Woody Island, one of the five artificially constructed landmasses in the area. The Hill</p> <p>India PM Modi visits the UK. In a speech to the UK parliament Narendra Modi said current negotiations between the UK and India are a “huge moment for our two great nations.” BBC</p> <p>VW sets November whistle-blower deadline. Volkswagen has set a November end deadline for its whistleblower program designed to encourage workers to disclose information about the carmaker’s two emissions scandals in a move to speed up investigations. Reuters</p> <p>Goldman Sachs promotes 425 people to managing director. Almost 30% of the new managing directors are millennials. About 40% of those were hired at Goldman as entry level analysts, and 20% began as summer interns. Loyalty counts somewhere!Business Insider</p> <p>Deutsche Bank keeps moving executives. The top officials of the investment bank are shifting, with Goldman Sach’s Alasdair Warren appointed as head of corporate and investment banking for EMEA. John Eydenberg will be vice chairman of CIB for the Americas, and Marc
Mint Greens founder James Rogers: How corporate golf is changing
<p>&nbsp;</p> <p>Golf has always been synonymous with business. But now other sports, as well as a general lack of time, have contributed to a 30 percent decline in golf in the last decade. Seeing the evolving trend, James Rogers decided to found a golf concierge service in London, Mint Greens, to cater to the new corporate way of the sport.<br /> Mint Greens has a confidential agreement with some of the top clubs around London. As they have a portfolio of partner clubs, they can usually find tee times for their clients even during the peak golfing season.<br /> “We are also in a position to help our clients when they are traveling as we have over 200 golf course partnerships overseas,” said Rogers.<br /> Before founding Mint Greens in 2010, Rogers dabbled in law, medical research and software development, as well as advertising.<br /> “I was destined to be a lawyer, did a placement at a big city firm and decided it wasn’t the career for me. I then worked for a medical research organisation and then a software business, where I cut my teeth in marketing.<br /> “My dad was a keen golfer and I have been playing since I was ten years old and realised I could apply my marketing skills to my passion for golf,” he said.<br /> Rogers had the idea of a golf marketing company in 2010 and launched an online service called iSpyGolf.<br /> “Our new business, Mint Greens, has now developed alongside this but is an entirely different service that’s aimed at corporate and executive golfers here in the city. We’ve looked to create a new kind of solution in partnership with top clubs around London that sets new standards of service and value,” says Rogers.<br /> There has reportedly been a 30 percent decline in golf in the US, UK, and Europe since 2004.<br /> “There’s no question that golf is under pressure in the UK, as it is in Europe and the US, though some of our partner clubs are reporting positive noises again from the corporate market. It’s traditional memberships that have suffered in recent years. There are a lot of reasons for this, though I think demand on people’s time these days is the main cause,” he said.<br /> “A lot of people would like to play more golf, but time just doesn’t allow it. But this dip isn’t a phenomenon that’s confined to golf and clubs are beginning to adapt to the changes. For companies like ours, there are opportunities to help the industry by identifying new and more flexible approaches,” said Rogers.<br /> Golf still remains the sport of business, he believes. According to Rogers, recent research still has 97% of senior executives considering golf a great way to establish closer relationships.<br /> But while business still gets done on the golf course, Rogers concedes that corporate budgets are under intense pressure now which makes it difficult for companies to entertain clients on the golf course. New regulations following the banking crisis have had their impact too. Corporate golf days have been scaled back and many companies are opting to spend their time on the golf course in the company of just their key clients.<br /> Amongst Mint Greens’ clients, the financial services sector is the most heavily represented, with other clients drawn from across a broad range of industries including insurance, media and advertising.<br /> The average annual service is £2,500 per year with the flexibility of use within a corporate or executive team. They also have a private executive service for individuals.<br /> “We only launched Mint Greens last summer but we’ve made healthy progress and have a 100 percent renewal rate with our clients so far, so we know we are doing something right,” Rogers says, before explaining that the arrangements are good for the clubs too, delivering extra business and giving them the opportunity to showcase their venue to some influential people.<br /> Gerard Kenny, CEO of Mansion House Consulting, said he would recommend Mint Greens and “their simple, but very effective business model.”<br /> “I have been using Mint Greens for the past year and have been continually impressed wit
Singles' Day reveals the extent of China’s fintech revolution
<p>Online shopping records were smashed by China’s ecommerce giants Alibaba and JD.Com on Tuesday as the country celebrated Singles’ Day, an annual consumer holiday that puts Black Friday to shame. It was a big day for e-commerce but it was also a notable milestone for mobile payments, with rival platforms Alipay (Alibaba) and WeChat payments (Tencent) battling for supremacy.</p> <p>Techcrunch reports that of the $14.4 billion transacted by Alibaba - itself is remarkable jump from last year’s tally of $9.3 billion - 69% came via mobile, up from 43% last year. That means around $10 billion was transacted via Alibaba's Alipay.</p> <p>But there was also competition. – Tencent’s e-commerce partner – didn’t announce its sale figures, but did reveal a 130% jump in single day orders for the same period on the previous year. The company claims 74% of its total orders were placed via mobile platforms, including's native app and through Tencent’s WeChat - which has it own Alipay payments service embedded - and Mobile QQ’s platform. </p> <p>The day was a major validation of the success of Alibaba’s mobile payments platform, but Tencent and’s success also proved that the battle for market dominance will be a hard fought.<br /> Photo: Jamz196</p>
People Moves: ICBC Credit Suisse names new index & quant chief; Nikko Asset appoints new global product boss
Asset Management
<p>ICBC Credit Suisse names Laura Lui head of index &amp; quantitative investment. Lui, who has over 12 years of experience under her belt, joins the firm from Mirae Asset Global Investments, where she was the head of the ETF and index team. She will be based in Hong Kong and will report to Richard Tang, the joint venture’s chief executive officer. PR Newswire</p> <p>Nikko Asset appoints Peter Lynn head of global product promotions. Lynn, a 15-year Nikko Asset veteran, has held several key roles within the firm including head of strategy, head of quantitative analysis, and managing director of Nikko Asset Management New Zealand. He will be moving to Singapore for his new role. Asia Asset Management</p> <p>Northern Trust names Ali Sheikh head of APAC hedge fund services. Sheikh, who joined Northern Trust through its acquisition of Omnium from Citadel, was most recently a senior relationship manager for the firm’s hedge fund services business in New York. He will be based in Hong Kong and will report to Peter Sanchez, global head of Northern Trust hedge fund services. Business Wire<br /> Photo: Luke Ma</p>
People Moves: Deutsche names new APAC corporate & investment banking chief; Barclays appoints new head of semiconductor research
Capital Markets
<p>Deutsche names James McMurdo APAC CIB chief. McMurdo, who will remain as the bank’s chief executive in Australia “until further notice,” will be replacing 25-year Deutsche Bank veteran John McFarlane. Prior to joining Deutsche, McMurdo was co-head of investment banking for Goldman Sachs in Australia and New Zealand, and worked on the firm’s sponsors group in London and the Middle East even before. He will be based in Hong Kong and will report to Gunit Chadha, chief executive of Asia Pacific, as well as to Jeff Urwin, the head of the corporate and investment bank. Sydney Morning Herald/Wall Street Journal</p> <p>Soc Gen appoints James Shekerdemian head of APAC prime services. Shekerdemian, the French bank’s current global head of prime brokerage sales, will be succeeding Laurent Cunin, who is said to be pursuing other opportunities. He will continue to be based in Hong Kong and will report locally to Frank Drouet, the firm’s Asia-Pacific head of global markets, and globally to Chris Topple and Christophe Lattuada, Soc Gen’s co-heads of prime services. Asia Asset Management</p> <p>Barclays names Bruce Lu head of semiconductor research, Asia ex-Japan. Lu, an old hand in the semiconductor industry, will be taking direct responsibility for the firm’s Greater China technology semiconductor team. He joins Barclays from CLSA, where he held a similar role, and reports to Bhavtosh Vajpayee, Managing Director, Head of Equity Research- Asia ex-Japan, according to a memo seen by NexChange.<br /> Photo: Wendy</p>
Has the hedge funds industry lost its way?
Hedge Funds
<p>Has The Hedge Funds Industry Lost Its Way? by [email protected]<br /> For months, the news for the hedge fund industry has been grim. Funds racked up abysmal results last summer, with August showing the biggest monthly loss since October 2008.</p> <p>Then the prominent Bain Capital Absolute Return Capital hedge fund announced in early October that it would close, having lost money for three years. Soon after, the well-known Fortress Investment Group said it would shut its flagship fund after losing 17% for the year through September. The two funds used a “macro” investing strategy that bet on things like economic trends, currency moves or central banks’ interest rate policies – and trends had been unkind.</p> <p>At the end of October, Carlyle Group’s Claren Road Asset Management LLC said that a heavy demand from investors wanting their money back would not be met immediately. Instead, two-thirds of the $2 billion in redemption requests would be spread over a number of quarters, a relatively uncommon practice used when heavy withdrawals are seen as potentially disruptive to fund investing strategy.</p> <p>Poor performance, closures, investors rushing for the exits…. A casual observer might wonder if the industry’s best days are behind it. Indeed, naysayers have long argued that these high-fee investment pools for institutions and wealthy investors could not keep up in an era of low-cost index-style investing, where investors are content to simply match the market.</p> <p>But, as the saying goes, reports of the hedge fund industry’s decline are greatly exaggerated. In fact, the industry’s assets under management recently set a record of over $3 trillion before pulling back slightly, according to the industry-tracking firm Hedge Fund Research. Many funds started to show better results in the fall, and from the start of the year through September, the industry, while losing 1.5%, beat the Standard &amp; Poor’s 500 and Dow Jones Industrial Average by 3.7 and 7 percentage points, respectively — the widest margin since 2008. In this respect, hedge funds did what they are supposed to do: minimizing losses in a down market.</p> <p>Many experts say that because stocks are risky and bond yields are near historic lows, sophisticated investors will continue to try to tweak their risk and returns with alternative investments like hedge funds.</p> <p>“In general, I do not expect large, sophisticated clients to start a big exodus from the hedge fund space.” –Bilge Yilmaz</p> <p>“It is a no-brainer that there is a demand for alternative [types of investments], and there will be a demand for hedge funds?Twitter ,” says Wharton finance professor Bilge Yilmaz, who follows the industry and is a partner in Ada Investments, a portfolio strategy firm.<br /> Zig vs. Zag<br /> Key to hedge funds’ continued appeal is their ability to zig when broader markets zag, offering diversification that has become harder to find as other assets like U.S. and foreign stocks tend to move in lockstep more than in the past. “In general, I do not expect large, sophisticated clients to start a big exodus from the hedge fund space,” Yilmaz says.</p> <p>See full article here.</p> <p>&nbsp;</p> <p>This story first appeared in ValueWalk.<br /> Photo: Seongbin Im</p>
Are we at a market peak?
Capital Markets
<p>The question that seems to be occurring to more and more people is, “Are we at a market peak?” It has been a multiyear bull market, stock prices have tripled from the base, profit margins have been at record highs for years, and now interest rates are going up. It’s not a crazy thought.<br /> Signs of a peak<br /> Mega-mergers have taken off, the most recent being the SABMiller merger with Anheuser-Busch Inbev. Technology companies are rocking, with multibillion-dollar valuations for Airbnb, Uber, and many others. It sounds like we’ve seen this movie before.<br /> We may indeed be at a short-term top, as valuations are stretched, and it may take some time for earnings to catch up. The question behind the question is, “Are we at a roller-coaster top, one that will be followed by a precipitous decline?” Again, this is not a crazy thought, as the last two tops—in 2000 and 2007—have been exactly that. The last thing anyone needs right now is another 50-percent decline in the market.<br /> Look at the past<br /> The thing to remember is that big drops, like the past two, are not the result of just the markets but of a combination of the markets and the larger economy.</p> <p> In 2000, the economy was running very hot, with unemployment at all-time lows and wages growing quickly, powered by stock market valuations over twice as high as what we see right now.<br /> In 2007, we had a multiyear real estate boom, loading bad debt in the financial system.</p> <p>In both cases, we had a massively overvalued market combined with a drastically slowing economy—resulting in massive market declines.<br /> Things are not nearly so out of balance now. Although the market is expensive, it’s not nearly as expensive as during the previous two booms. The economy is starting to grow more quickly but is hardly in boom times. The systematic imbalances that drove the last two crashes don’t exist yet, meaning we don’t have either of the two preconditions for a serious decline.<br /> View from the second story<br /> This doesn’t rule out a lesser pullback. As we recently saw, you simply can’t crash as hard jumping out of a second-story window as you do from a tenth-story window. Right now, at the second story, we may see some damage eventually, but nothing like the last two downturns.<br /> This analysis is comforting for right now, but it also points to a future we should be worried about, as another major decline would be all too possible. Right now, the economy is still growing, and the Fed is still stimulative. But at some point in the next couple of years, growth will start to overheat, and a recession will inevitably come. At that point, if the market were to follow past practice and continue to appreciate, valuations could be even higher than they are right now—and that would fit thepreconditions for a major market decline.<br /> Is a major decline coming?<br /> If we agree that two things are necessary for a major decline—a recession in conjunction with significant market overvaluations—we arrive at the conclusion that we have, at most, only one of those right now. In fact, I would argue that market valuations are not high enough to warrant the “significant” title, so perhaps only one-half of one of the conditions. Good news for the present. We can, however, see a not-too-distant future where we will have both. This is what I will be watching.<br /> Brad McMillan is the chief investment officer at Commonwealth Financial Network, the nation’s largest privately held independent broker/dealer-RIA. He is the primary spokesperson for Commonwealth’s investment divisions. This post originally appeared on The Independent Market Observer, a daily blog authored by Brad McMillan.<br /> This story first appeared in Advisor Perspectives</p> <p>Photo: Patrick McGarvey</p>
Is value set for a comeback?
Asset Management
<p>&nbsp;</p> <p>Since 2008, value investing has underperformed growth investing for the longest period on record. As a result, at the end of August, value was trading at its widest valuation discount to growth since the Dotcom Bubble of the late 1990s.</p> <p>And value’s performance since the financial crisis has been unexpected. Value investing as a style has historically outperformed growth more. Still; past results are no guarantee of future performance, and there’s no guarantee that value will recover.</p> <p>However, as Franklin Templeton points out when major global central banks begin policy normalization, the idea of mean reversion, or normalization, offers an intuitive argument for an eventual recovery in value. Securities trading at a discount to the fundamental value of their underlying businesses are not likely to maintain that discount indefinitely.</p> <p>Value returns<br /> Rare opportunity<br /> For value investors looking to snap up bargains, there hasn’t been an opportunity like this since 2000. The price-to-tangible book value of the MSCI World Value Index vs. the MSCI World Growth Index is now at its lowest level since late 2000/ early 2001. Value-oriented stocks trade at a 75% discount to growth in terms of price-to-tangible book value — two standard deviations below the long-term average level based on figures to the end of August.</p> <p>According to Franklin Templeton, it’s unlikely that value will continue to trade at a discount to growth indefinitely. The concept of mean revision offers an intuitive argument for an eventual recovery in value.</p> <p>The post-global financial crisis era brought a new wrinkle to the idea of normalization: ZIRP—the zero-interest-rate policies pursued by the world’s most powerful central banks. Indeed, the rising tide of cheap, readily available credit has seemingly lifted all boats, delaying bankruptcies and restructurings and creating a broadly indiscriminate trading environment. Sustained high equity correlations still stand as a testament to the market’s indifference to bottom-up fundamentals.</p> <p>Meanwhile, the almost non-existent yields offered by bonds perceived as “risk-free” has forced investors up the risk curve into higher yielding debt. Bond investors have also been forced into equities in their search for yield and equity investors chasing growth in a yield-starved environment have incurred a tremendous amount of volatility just to keep up.<br /> “This is not how the market’s risk–reward proposition is typically framed over time. Dislocations have become extreme, and once conditions potentially normalize, the market’s eventual snap-back to its typical function as cash-flow discounter and value arbiter could be profound, much to the potential benefit of patient, value-oriented equity investors.” — Source<br /> Tracking interest rates<br /> Historically, the performance of value as a style has been closely correlated with the interest rate cycle. If you believe that interest rates will never head higher again, then value isn’t the strategy for you. But if we take the view that over the long-term, interest rates will head higher, value as a strategy is appealing for the long-term investor. The Fed’s long-term directional preference is clear when it comes to interest rates.</p> <p>The entire discipline of value investing revolves around buying stocks when they are out of favor. Global stocks recently have been correcting, value has underperformed for the longest stretch on record, and we may be approaching the trough of a long-term interest rate cycle; what better time for contrarian investors to re-commit to value?</p> <p>&nbsp;</p> <p>This story first appeared in ValueWalk.<br /> Photo: Allan Ajifo</p>
Daily Scan: Fed commentary shocks markets, stocks fall
Capital Markets
<p>Updated throughout the day</p> <p>November 12</p> <p>Stocks had a terrible, horrible, no good, very bad day after all the Fed comments sent mixed messages. The Dow lost 1.4%, the Nasdaq fell 1.2%, and the S&amp;P 500 dropped 1.4%. The Stoxx Europe 600 lost 1.6% as well. Federal Reserve Chair Janet Yellen spoke Thursday morning about monetary policy in general, but didn't comment on the outlook for the U.S. economy. New York Fed President William Dudley and St. Louis Fed President James Bullard both seem to be leaning toward a rate hike. Bullard called the near-zero interest rate policy a "considerable risk of future inflation" for the U.S. economy. Chicago Fed President Charles Evans was a bit more hesitant, saying it could be "well into" next year before the inflation goal is reached. The Wall Street Journal found that 92% of economists think the Fed will vote to raise rates in December.</p> <p>Here’s what else you need to know:</p> <p>Goldman Sachs promotes 425 people to managing director. Almost 30% of the new managing directors are millennials. About 40% of those were hired at Goldman as entry level analysts, and 20% began as summer interns. Loyalty counts somewhere! Business Insider</p> <p>Amundi shares rise after debut. The massive French asset manager's stocks were up about 4% on the Euronext stock exchange in Paris. Societe Generale, one of the banks behind the manager, sold a 20% stake and raised about $1.6 billion. The offering was priced at 45 euros a share Wednesday. New York Times</p> <p>Robots could steal 80 million U.S. jobs. Andy Haldane, Bank of England chief economist, says that 15 million U.K. jobs and 80 million U.S. jobs are at risk from automation. “The smarter machines become, the greater the likelihood that the space remaining for uniquely-human skills could shrink further,” says Haldane. MarketWatch</p> <p>Deutsche Bank keeps moving executives. The top officials of the investment bank are shifting, with Goldman Sach's Alasdair Warren appointed as head of corporate and investment banking for EMEA. John Eydenberg will be vice chairman of CIB for the Americas, and Marc Pandraud will be vice chairman of CIB for EMEA, new roles for the firm. Wall Street Journal (paywall)</p> <p>IMF tells U.S. Fed to wait for inflation numbers. The IMF paper released Thursday says that the Fed should look for firm signs of rising inflation, as well as a stronger labor market before raising interest rates. The report came out in anticipation of of the G20 meeting in Turkey. Reuters</p> <p>Apple in talks with banks to develop P2P mobile system. Move over Venmo and Square. Apple is in talks with major banks including JPMorgan and Wells Fargo to enable iPhone users to pay their buddies through Apple Pay. Wall Street Journal (paywall)</p> <p>Morgan Stanley to offer savings accounts, certificates of deposits. It's not as exciting as deal-making, but the investment bank hopes the broader suite of consumer offerings will lure customers to its wealth management division. Competition is intense in the sector. Reuters</p> <p>Angie's List in unwanted bid. IAC/InterActive has offered $512 million for the Internet site, which provides online reviews of home-related services. It hasn't turned a profit since going public four years ago. IAC owns and Vimeo. New York times (paywall)</p> <p>The feds move to ban smoking in public housing. An announcement should come Thursday from the Department of Housing and Urban Development. The move would affect more than one million people -- who are likely to wonder whether the government can really tell them what to do in their homes. New York Times (paywall)</p> <p>Draghi offers more bouquets. The ECB president said in speech: “If we were to conclude that our medium-term price stability objective is at risk, we would act.” Mario Draghi took to the in Brussels to reiterate his “anything it takes” approach. European Central Bank</p> <p>U.S. arrests cousins of Venezuela president in drug bust. The pair were charged with trying to transport 800 kilograms of cocaine into the country. The
Runaway stories and fairy tale endings: the cautionary tale of Theranos
Capital Markets
I saw the new Steve Jobs movie, with the screenplay by Aaron Sorkin, over the weekend. As a long-time Apple user and investor, I must confess that I was bothered by the way in which the film played fast and loose with the facts, but I also understand that this is a movie. Sorkin clearly saw the benefit of using