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Institutional clients buy stocks for first time in 9 weeks: BAML
Asset Management
<p>Last week, institutional clients turned net buyers of U.S. stocks for the first time in nine weeks, though private clients sold the rally for the fourth consecutive week, reports BofAML. After tracking BofAML equity client flow trends, Jill Carey Hall and Savita Subramanian of Bank of America Merrill Lynch published their Nov, 4 research report highlighting that small caps continued to witness negative flow trends.<br /> Record inflows into Consumer Staples stocks<br /> Hall and Subramanian point out that last week (10/26 to 10/30), BofAML clients were net buyers of U.S. stocks for the first time in four weeks. Though hedge funds and institutional clients had been net sellers for the last three weeks and last eight weeks respectively, they led the net buying. Even though private clientssold the rally for the fourth consecutive week, they remain the only net buyers of stocks year to date:</p> <p>After analyzing the weekly flows by sector, client and size, the BofAML analysts point out that net buying last week was led by ETFs and record inflows into Consumer Staples stocks. The analysts also said that net buying was chiefly in large caps, while mid-caps also witnessed small inflows but small caps saw net sales:</p> <p>Hall and Subramanian point out that small caps have continued to witness negative flow trends after they noted several weeks ago that flows in this segment looked like they were starting to roll over. The BofAML analysts continue to prefer large caps over small caps, and they anticipate that large caps will fare better in a rising rate environment:</p> <p>Hedge funds – Net sellers on 4-week average basis<br /> After tracking the data based on rolling four-week average basis in terms of sector, Hall and Subramanian point out that Telecom has witnessed net buying since mid-Oct, while Materials has witnessed net selling since late June:</p> <p>Analyzing the flows based on rolling four-week average trends by client type, the BofAML analysts note that hedge funds are net sellers of U.S. stocks on a </p>
Betterment hits $3B in AUM
<p>Betterment has been crowned the new king of the robo-advisors.</p> <p>The 7-year-old wealth management platform now holds more than $3 billion in assets under management, almost three time as much as it managed in January, reports the New York Post. Betterment has made strides across the industry, as Goldman Sachs recently approved the platform for Goldman employees to use for investing. Betterment is also in talks with JP Morgan for a similar agreement.</p> <p>Wealthfront, Betterment's main fintech rival, manages "nearly" $3 billion in assets, according to its website. Charles Schwab's robo-platform has the backing of a traditional firm, but a product that rivals fintech firms like Betterment. The Schwab robo-platform manages more than $4 billion.<br /> Photo: OTA Photos</p>
Media ETFs look to join discretionary party
Asset Management
<p>The consumer discretionary sector is the best performer in the S&amp;P 500 this year and as measured by the Consumer Discretionary Select Sector SPDR XLY 0.23%, the battle is not even close. XLY, the largest consumer discretionary exchange traded fund by assets, is up 13.9 percent year-to-date, an advantage of 600 basis points over the second-best SPDR, the Technology Select Sector SPDR XLK 0.06%.</p> <p>With the strength of the broader discretionary group in mind, perhaps it is surprising media stocks have been laggards. Although Walt Disney Co DIS 0.42% is one of the best-performing member of the Dow Jones Industrial Average this year, the PowerShares Dynamic Media Portfolio PBS 0.11%, an ETF that allocates 5.1 percent of its weight to Disney, has posted a year-to-date gain of just 4.6 percent.</p> <p>Earnings reports from 21st Century Fox FOXA 2.01% and Time Warner Cable Inc. TWC 0.45% could provide PBS with the spark the ETF needs. Those stocks combine for 9.6 percent of the ETF's weight.</p> <p>Read more at Benzinga.<br /> Photo: Bruce Tuten </p>
The three big challenges facing fintech founders
<p>As large as the fintech opportunity is in Asia, it is also complex and full of pitfalls for even the most capable entrepreneur. </p> <p>At Accenture's Fintech Innovation Lab Investors' Day at Hong Kong’s  Cyberport on Wednesday — during which seven fintech startups pitched to an audience of prospective investors — Jonathan Allaway, senior managing director at Accenture, highlighted three of the key challenges facing fintech startups entering his company's  accelerator program:</p> <p> Anticipating demand</p> <p>"Many founders underestimate the sheer demand in the market for their innovation. They have to learn to prioritize, and learn that adopting a less-is-more management approach is a good thing. That is probably paradoxical when there are entrepreneurs who want to capture as much market share as possible. But they can't physically do it given the scale of their business so they must always prioritize." </p> <p> Balancing scale and innovation</p> <p>"A lot of financial institutions want to differentiate and become bespoke. There is a tendency to take a startup's standard product that is already innovative and to try and make it unique to each instance it's applied it in. Founders will have to make management choices about how they can get standardization to scale and also keep innovating." </p> <p> Human resources</p> <p>"Another challenge is that founders underestimate the importance of people in their business for pre-sale and post-sales support as the company grows and accelerates. One CEO told me he felt like the chief HR officer not the CEO, spending more time looking at people issues. But that is just a natural reality of being innovative and being in a market that is growing and investing."<br />  Photo: NexChange</p>
Tech stocks: Brace for a bursting bubble?
Capital Markets
<p>Any potential downturn in the tech sector might cause pain for some investors, but it likely would pose little danger to the overall U.S. economy.</p> <p>A recent article in Vanity Fair (of all places) seems to have troubled several in the financial community. Appearing in the September 1 issue and titled, "Is Silicon Valley in Another Bubble…and What Could Burst It?" its author, Nick Bilton, draws parallels to the tech bust of 2000. He and subsequent commentary suggest that a burst bubble now, as in that past episode, would impose huge losses on investors and precipitate an economic decline. Enough evidence of a social media bubble, if not one for the broad tech sector, exists to warrant attention, but when it comes to the economic ramifications, reality diverges from such fears on at least two levels: 1. a deflation of a social media bubble would not approach the scale of what happened in 2000, and 2. even the tech bust of 2000 had less economic impact than many suppose, certainly than the recent commentary suggests.1</p> <p>Bubble?<br /> Evidence, in Mr. Bilton's words, of "eerie familiarities to the infamous bubble of 1999" rests on five observations (excepting, of course, the proximity to Halloween):</p> <p>1. The spending on buildings, parties, salaries for new graduates, and the like rivals what went on in the late 1990s as the last bubble inflated.<br /> 2. The Nasdaq Index2 recently surpassed its old highs of 2000.<br /> 3. The preponderance of tech startups, what the industry for some reason calls "unicorns," rivals what went on in 1999.<br /> 4. The Shiller price-to-earnings (P/E) multiple signals an overpriced market generally.<br /> 5. Ominously, at least in the eyes of those calling for a bust, money on balance is flowing out of tech companies and into the general market, even as the heavy flow of startups continues. Though not identified as a concern in Bilton's and other such discussions, one might add a sixth observation: The new companies in Silicon Valley are distinguishing themselves from their ancestors of 1999 by stating that they do not just want to get rich, they also want to "make the world a better place." They see this as a difference in kind, but in reality, such rhetoric screams that Silicon Valley has, if it were possible, reached even higher levels of self-important arrogance than it had 15 years ago.3</p> <p>Some of these observations, though, do give pause. The endless flow of so-called unicorns, for instance, could signal froth, as might the lavish spending by such companies. One of these observations might actually suggest the opposite of a bubble. That several of these firms have pushed some of their value into other investments in the general market points to a diversification and, consequently, a source of stability that certainly did not exist in 1999–2000. Other of these observations are either meaningless or say little about the foreseeable future. In the former camp is the concern that the Nasdaq, after 15 years, finally surpassed its old highs. That is hardly an ugly sign, since earnings have long since done so. As for the Shiller multiple, it famously signals overpricing for long periods before the market actually peaks, sometimes years. When it becomes apparent after the fact that the market did peak, many in the media give the Shiller ratio credit for having given the first signal. Saying over a long period, sometimes years, that markets will eventually peak is, of course, a safe bet, th</p>
Sequoia makes its first foray into Taiwan with AI investment
Venture Capital
<p>Venture capital behemoth Sequoia Capital has made its first incursion into Taiwan, leading a $23 million Series B round investment in Appier, a "smart marketing" company using artificial intelligence. </p> <p>The startup, which announced its investment on Tuesday, uses AI to tracks the browsing habits of web audiences across multiple devices in order to provide better targeted advertising. </p> <p>UOB Venture Management, JAFCO Asia, TransLink Capital, and MediaTek Ventures are among those who also took part in the deal which brings Appier's total funding to $30 million. CEO and co-founder Chih-Han Yu, who has seen his company grow 600% since its Series A round in June 014, said:<br /> “We are living in a post-mobile era: the era of cross screen. Artificial intelligence is the best approach to resolve this complexity and make cross screen easy. In fact, advertising is just the beginning. We believe in the future our AI can help businesses solve a variety of difficult analytical problems.”<br /> Photo: Allan Ajifo</p>
Financial services get a 'wake-up call' as Asian fintech deals quadruple
<p>Fintech investments in Asia Pacific are set to quadruple this year as venture capitalists and financial institutions hungry for piece of the action pile cash into the rapidly growing sector.</p> <p>These are the findings of a report released by management consulting firm Accenture on Wednesday. The report estimates 122 deals netted $3.46 billion of investment in the region's fintech space for the first nine months of the year, dwarfing the $879 million raised over 117 deals for the whole of last year. Beat Monnerat, senior managing director at Accenture and the company’s Financial Services lead in Asia Pacific, commented:<br /> “The increasing deal size should serve as a wake-up call to financial services companies in China and across Asia-Pacific that if they do not offer truly useful, customer-friendly digital solutions, competitors will step into the breach not just on the retail front but also in commercial transactions.”<br /> The report neatly  coincides with the Fintech Innovation Lab Investors' Day being hosted by Accenture at Hong Kong's Cyberport. The event — which marks the culmination of Accenture's 12-week fintech accelerator program — showcases seven of the most promising fintech startups operating in Hong Kong.<br /> Photo: Peyri Herrera<br /> &nbsp;</p>
Video: Larry Fink -- Investing for the long term
Asset Management
<p>;feature=player_embedded<br /> In a short-term world driven by quarterly returns, shareholder pressures, endlessly compressed news cycles and election campaigns that start before the last one has ended, how can the public and private sectors develop strategies and invest for the long term?<br /> Laurence D. Fink, chairman and C.E.O., BlackRock, introduced by Andrew Ross Sorkin, columnist, DealBook founder and editor at large, The New York Times.<br /> Photo: tallalex85</p>
Daily Scan: Asia extends global rally; VW scandal widens
Capital Markets
<p>November 4</p> <p>Asia shares remained in the green until the final bell today extending a global rally. In Japan the Nikkei rose 1.3% following Tuesday's holiday, boosted by a Japan Post's strong trading debut. It is the country's  biggest privatization in decades. China also saw sharp gains  after Zhou Xiaochuan, head of the People’s Bank of China, hinted that the Shenzhen-Hong Kong Connect programme, which will give global investor freer access to mainland shares, could begin this year.</p> <p>Over in Europe Volkswagen shares plunged 8.4%  after the car maker said its emissions-testing scandal had widened to encompass a broader set of infractions affecting about 800,000 more cars potentially costing an extra $2 billion. The Stoxx Europe 600 was 0.6% higher in early trade.</p> <p>Here is what else you need to know:</p> <p>Japan Post, in biggest IPO of year, rockets 26%. Following its long-awaited and successful stock market debut, Japan Post Bank says it will use its giant pool of deposits to become a more aggressive international investor, outlining plans to push more of its $500 billion investment fund towards global risk assets. The $11.9 billion offering was the biggest since the $25 billion Alibaba IPO in 2014. Financial Times (paywall)/ AlJazeera</p> <p>ASEAN stumbles on South China Sea row. South East Asian defense ministers meeting in Malaysia have failed to agree on a closing statement for their summit, amid a row over Chinese activity in the South China Sea. BBC</p> <p>China confirms historic meeting with Taiwan leader. President Xi Jinping is set to meet Taiwanese President Ma Ying-jeou in Singapore this Saturday, Beijing confirmed through its Xinhua news agency. The tete-a-tete would be the first for the  leaders from either side of the Taiwan Strait since 1949. Taiwanese are already planning a protest. SCMP (paywall)</p> <p>Air bag supplier Takata could pay up to $200 million in fines. The National Highway Traffic Safety Administration says that the Takata air-bags have ruptured, causing seven deaths and injuring almost 100 others in the U.S. Takata owes $70 million in fines, and could pay another $130 million if it does not comply, or if the NHTSA finds other safety violations. Reuters</p> <p>HSBC may wait to move headquarters. The European bank has been growing in Asia. In recent years it has been getting pummeled by regulatory violations and fines in the U.S. and Europe. HSBC seems to be edging toward a future in Asia, but says it wants to make sure that that decision makes long term sense. U.S. News &amp; World Report</p> <p>U.S. Navy admiral tells China that exercises are not a threat. During the first of a three day visit to China, Admiral Harry Harris told Peking University that US naval exercises near territory claimed by China were not “a threat to any nation” but were designed to defend freedom of navigation in international waters. </p>
Bill Gross says its time for the Fed to turn on 'Operation Switch'
Asset Management
<p>Forget 2012's "Operation Twist," it's time for "Operation Switch," says Bill Gross in his latest investment outlook. Central banks need to raise their inflation targets to benefit the markets, he says. The Fed needs to produce a steeper yield curve to allow businesses and savers to increase their profit margins. Gross explains:<br /> I propose an “Operation Switch”. Instead of 2012’s “Operation Twist”, which sold 2-5 year notes and reinvested the proceeds in longer dated Treasuries now resting in their portfolio, the Fed should do just the reverse. After all, the twist did nothing to improve YOY GDP growth – it may in fact have lowered it as the above argument claims – dropping GDP in the 4th quarter of 2013 to .9% YOY following the “Twist” in 2012. The Fed now holds upwards of $2 trillion longer dated Treasuries and mortgages that can be “switched” into 2-5 year paper, steepening the yield curve and benefiting savers, liability-based businesses, and the economy itself. But they won’t, you know. Yellen and Draghi believe in the Taylor model and the Phillips curve. Gresham’s law will be found in the history books, but his corollary has little chance of making it into future economic textbooks. The result will likely be a continued imbalance between savings and investment, a yield curve too flat to support historic business models, and an anemic 1-2% rate of real economic growth in even the most robust developed countries.<br /> &nbsp;</p>