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China Huarong faces tough IPO competition
Asset Management
<p>China’s biggest player in the distressed-asset space might need some de-stressing on the road to its long-awaited Hong Kong IPO.</p> <p>The Nikkei Asian Review reports that China Huarong’s upcoming $2.5 billion offering might not be the blockbuster it was cracked up to be, largely thanks to a slew of behemoths IPOs scheduled around the same time:<br /> “Alvin Cheung Chi-wan, associate director at Prudential Brokerage, expressed doubt that investors can digest a multibillion Huarong IPO. He said that there would be competition for investors' money as there is a swollen pipeline of big IPOs due to come in October, including that of Chinese International Capital Corp, an investment bank looking to raise about $1 billion.”<br /> Aside from the CICC, China Re – the region’s largest reinsurer – is also set to sell 5.77 billion of its shares this month.</p> <p>Further complicating matters for Huarong is its valuation. Analysts currently peg the asset manager’s shares at around 1.2 times book value, a decent estimate whichever way you look at it, save for the fact that Cinda – its closest rival – currently trades below book value.</p> <p>And that’s not all, state-owned enterprises apparently aren’t allowed to sell below book, giving its advisers – Goldman, CICC, HSBC, just to name a few – with very few options left to fulfill their duties.</p> <p>Still, it isn’t all bad news. Being a state-owned enterprise still brings the cache of being backed by Beijing, not to mention a rep that these shares are off-limits to short-term speculation. And that alone should help it attract more than a few investors.<br /> Photo: See-ming Lee</p>
Strength in numbers: Hong Kong's burgeoning crowdfunding industry
Venture Capital
<p>Crowdfunding is lowering the entry barriers for would-be venture capitalists worldwide. As one of Asia's bigggest financial centers, Hong Kong is quickly becoming a breeding ground for equity crowdfunding platform -- but regulators need to keep pace.</p> <p>To date, the crowdfunding ecosystem has been populated by reward-based platforms -- think Kickstarter and Indigogo in the U.S. - this is because offering material rewards instead of equity allows crowdfunding to avoid regulatory headaches while accessing a wider of pool of unaccrediated investors. Hong Kong's latest addition to this ecosystem is rewards-based platform SparkRaise. Its founder Yeone Moser Fok tells NexChange:</p> <p>“Crowdfunding platforms have the potential to turn traditional fundraising on its head.  It is becoming easier to invest in startups and more people now have the chance to back the projects they love.”</p> <p>She adds that these platforms offer startups two things: customer acquisition and product validation. Raising capital to complete the first run of a product is not only difficult, it's a big risk.  Crowdfunding plaftorm help startups raise capital while ensuring there is demand for a product. However, Fok notes that future  advances in regulation could see equity-based platforms being more widelyt adopted. She adds:</p> <p>“The JOBS Act in the U.S. has been a big leap forward for equity crowdfunding but it’s still early days.  In Asia, particularly in Hong Kong, there are still more regulatory hurdles to jump through before we see more equity-based platforms here.”<br /> That is not to suggest equity-based platforms do not exist in Hong Kong. There already platforms like BigColors, Colony88, and Investable that offer some form of equity crowdfunding, though exisiting regulations mean that investments are restricted to professional investors, meaning the minimum ticket size excludes mom and pop backers. Investable founder Jennifer Carver explains:</p> <p>"Right now the minumm investment is $10,000 on Investable and as an  angel investor you always have to be prepared to just say goodbye to that money. That said, we have a broad range of services so that our startups stand a better chance of survival than most, but it's still a high risk investment that's not suitable for all types of investors"<br />  Photo: James Cridland</p>
Asian family offices turn cautious
Asset Management
<p>Family offices in Asia Pacific are shifting towards a more conservative investment approach, according to a recent survey. Rather than pursuing growth as their main focus, they are getting cautious, moving towards balanced and preservation strategies.</p> <p>The recently released Global Family Office Report 2015 by UBS and Campden also found that the region’s family offices are an uncomplacent lot. </p> <p>Despite posting an average dollar return of 6.7% last year, the second best among their peers in Europe, North America, and emerging markets, they were less happy with their performance than the average in the study. </p> <p>The research questioned principals and executives in over 224 family offices across 37 countries. In Asia Pacific, 35 family offices participated with average assets under management of $431 million. </p> <p>A family office manages key areas of a rich family’s assets, including real estate holdings and direct or indirect investments, tax consolidation, and estate management as well as serving as the central hub for a family’s legacy, governance, and succession communication.</p> <p>It is becoming an attractive alternative to farming out cash and decision-making to private banks. But costs are also rising as offices compete for talent. </p> <p>Oh, the best regional performer last year? Europe, because of big bets on real estate and private equity.<br /> Photo: greg<br /> &nbsp;</p>
Video: Jim Chanos on Tesla
Hedge Funds
<p>Is Tesla a great company? Billionaire short-seller Jim Chanos seems to think so, though he’s not quite convinced that it could take on the likes of BMW and GM yet, and apparently, that's where its stock is priced at right now.</p> <p>Photo: Fatima</p>
Video: Richard Thaler: The less attention you pay, the more money you’ll have
Asset Management
<p>&nbsp;</p> <p>Merryn Somerset Webb talks to author, academic and ‘father of behavioral economics’ Richard Thaler about pensions freedom, central bankers and fund management fees.</p> <p>This video first appeared in ValueWalk.<br /> Photo: Chatham House</p>
Goldman touts Iran investment opportunity
Asset Management
<p>On the day last week when Israeli Prime Minister Benjamin Netanyahu was delivering a speech at the United Nations bemoaning the Iranian nuclear arms deal and those around the world “rushing to embrace and do business with a regime openly committed to our destruction,” a report from Goldman Sachs Group Inc (NYSE:GS) points to “The Awakening of Another Oil Giant” in Iran.</p> <p>Iran has "huge potential" but it is an investment wrapped in "significant uncertainty"<br /> The October 1 report asked the question, “Why focus on Iran,” then proceeded to answer: “Huge potential” that can be tapped but one that requires investors to do so in an environment of “significant uncertainty.”</p> <p>Iran possesses the 4th largest oil reserves in the world and largest gas reserves which has potential to be a key driver of global supply growth. Significant uncertainty remains, however, around the lifting of sanctions, the investment required in fields and infrastructure, and the framework to be put in place by the Iranian regime for international investment, the report noted.<br /> If sanctions are lifted, Iran could grow to fulfill nearly 25 percent of the expected global demand growth in 2016. Currently Iran accounts for 4.1 percent of global oil production and 5 percent of global natural case production.</p> <p>Unlocking Iran and its investment potential may take time and money<br /> However, don’t expect an investment in Iran to be an overnight success. “Growth may take time,” the report said, echoing a common investment pitch phrase that is most often followed by a call for cash. Such an investments is “requiring attractive contract terms and significant investment,” which Goldman estimates at $30 billion over 5 years. “There is potential for production growth far in excess of our base case, with the limiting factors ultimately being above ground issues, primarily around the level of investment that is incentivized. This potential growth could maintain pressure on oil prices, and delay the re-balancing of oil markets,” they wrote.</p> <p>The dropping price of oil is a concern for U.S.-based production, but those laws of gravity don’t necessarily apply to Iran, which has a much lower price of production. The report estimated that the average break even could be near $20 to $35 per barrel. With the price of oil hovering near $45, that appears as an attractive return on investment.</p> <p>This article was originally published by ValueWalk.<br /> Photo: </p>
The Tesla graveyard: Elon Musk calls out Apple
Venture Capital
<p> Year to date, Tesla Motors Inc TSLA 2.66% has outperformed Apple Inc. AAPL 2.39%, gaining nearly 2 percent versus a 1 percent decline in Apple.<br /> Speaking with a German newspaper, Tesla CEO Elon Musk dismissed concerns that Apple was poaching the company's talent, saying that Apple has "hired people we've fired."<br /> Musk added that, "we always jokingly call Apple the 'Tesla Graveyard.' If you don't make it at Tesla, you go work at Apple."</p> <p>Read more at Benzinga, here.<br /> Photo: Thomas Hawk</p>
Vitaliy Katsenelson predictions from 2010: shadow over Asia
Asset Management
<p>Five years ago, almost to the day, I was interviewed by David Galland, who worked at Casey Research at the time. This interview covered three topics: the Chinese overcapacity bubble, the Japanese debt bubble, and my sideways markets thesis. Five years is a long time, but with the exception of updating some statistics (for instance Chinese debt has gone up fourfold since), I really would not change anything. I have not been writing much on Japan or China lately because things haven’t really changed much – their respective bubbles have just gotten much bigger.</p> <p>I hope you enjoy this interview. Don’t kill your eyes; kill a tree (print it). Or you can watch a presentation I gave on the same subject at the Johns Hopkins University Applied Physics Lab (link here).</p> <p>The Casey Report (TCR): Is China’s system better than everyone else’s? Is it really possible the Chinese economy can keep steamrolling along?</p> <p>Vitaliy Katsenelson (VK): A few months ago, I watched a movie about Ayn Rand and it talked about how Americans in the 1930s looked at the Soviet Union’s flavor of managed economy as being superior to the American version of capitalism. At the time America was just coming out of the Great Depression, so that view made a lot of sense. So in the short run, and especially after the ugly side of creative destruction has paid us a visit, the grass of managed economy may look greener.</p> <p>So when we look at China, the conventional wisdom says that the government is very, very smart, and therefore they can do a very good job in steering the economy in the right way. Chinese government may have the best intentions, its leaders may have IQs of 250 each on a bad day, but it is impossible to centrally manage an economy of China’s size.</p> <p>I am a big believer that in the boxing match between a visible and an invisible hand, though the invisible hand may lose a few rounds, it will win the match every time. Last century we had the most amazing economic experiment take place when after World War II, Germany was split into two countries with different economic and political systems. But they were the same people, with the same language and culture, separated by a wall. We know how that story ended.</p> <p>Of course, for a time, having government control over the levers of the economy can have advantages. For example, by taking prompt action, the Chinese government was able to pull the economy out of the recession remarkably fast, basically by fire-housing the stimulus package that was equivalent to 12% GDP. That’s the advantage. The only problem is that these kinds of short-term advantages come with long-term, painful consequences.</p> <p>For example, when you have a huge government presence in the economy, you also have a huge bureaucracy, and bureaucracy brings corruption. This is one of the reasons why China is rated so poorly on Transparency International’s annual corruption rating. Corruption breeds misallocation of capital, because the capital flows not to the best use, but it basically flows to whatever the political connection or whatever the bribe is directed to.</p> <p>In addition, when you have a government-managed economy, it creates excesses. China has huge excesses in the industrial sector, as well as in commercial and residential real estate. We see plenty of evidence of these excesses, but </p>
People Moves: Henderson beefs up its Asian equities team; T. Rowe poaches sales chief from UBS GAM
Asset Management
<p>Henderson adds two new hires to its Asian equities team. Wee May Ling, an 18-year veteran of the asset management space, is set to join Henderson Global Investors as an investment manager within its Asian equities team. Prior to joining Henderson, May Ling was with Lloyd George Management in Hong Kong, serving the firm as its portfolio manager running Greater China equities. She began her career in Dresdner Kleinwort Wasserstein Securities in Singapore.</p> <p>Also set to join the British asset manager is Mervyn Koh, an ex-GIC man who will be working as one of the firm’s associate investment managers.  Koh was previously with Franklin Templeton Investments in Singapore, and was most recently a VP within its emerging markets group. He apparently co-managed the firm’s Southeast Asia fund as well. He began his career in the aforementioned GIC.</p> <p>On the firm’s new hires, Andrew Gillan, Henderson’s head of Asia ex-Japan equities, had this to say:<br /> “I am delighted to welcome May Ling and Mervyn to the team. They reflect Henderson’s commitment to increased resource within the region as we look to grow our Asia ex Japan equity products in the coming years.”<br /> They will be both based in Singapore. Henderson</p> <p>UBS GAM managing director moves to T. Rowe. Elsie Chan, a highly regarded player in the asset management intermediary market, has been named head of intermediary sales, Asia by the U.S. firm T. Rowe Price. Scott Keller, the firm’s head of global investment services, Asia Pacific, had this to say:<br /> “Providing top-quality investment solutions to intermediaries throughout the region is one of the key pillars to developing a successful and sustainable business in Asia. Elsie Chan is highly regarded and a very experienced practitioner in the intermediary market. Her deep knowledge and experience of the relevant markets in the region, in particular Hong Kong and Singapore, will enable us to accelerate our offering to intermediaries across the Asia region.”<br /> As previously mentioned, Chan was a managing director for UBS Global Asset Management prior to her jump to T. Rowe, and was responsible for the Swiss firm’s wholesale distribution in Hong Kong and Southeast Asia. Before that, she had stints at Allianz Dresdner Asset Management as well as in ABN AMRO Asset Management, though she apparently began her career in the U.S. at Merrill Lynch. She will report to Scott Keller. Asia Asset Management</p> <p>For Capital Markets moves, click here.<br /> Photo: Luke Ma</p>
Video: JPMorgan Asset Management tells CNBC Russia is cheap; China real estate bottomed
Asset Management
<p>JPMorgan Asset Management's Andres Garcia-Amaya says China's real estate market has hit a bottom and that Russia is his "biggest overweight." In this CNBC's Fast Money: Halftime Report, Garcia-Amaya notes that Russian markets are trading at a P/E of 4 1/2, lower than the market yield of 5%.  "So either Russia's going bust, or there's a lot more upside and we think there's a lot more upside."</p>