January 2011
Timorous or Bold World?
A Timorous v Bold World
Today I attended a gourmet lunch hosted by Bank Julius Baer at the Four Seasons Hotel, Singapore, coming away with additional information to that I have gleaned so far from just attending UBS dinner talk at the Ritz-Carlton a few nights ago.
If you read my blogs on Jan 11 and 12 at this website, you will be able to follow my train of thought.
Dr Van (Anantha Nageswaran), the Chief Investment Officer, Bank Julius Baer, gave the keynote address to those invited to the gourmet lunch.
His outlook for 2011 is not too far from that of UBS , such as:
1. Economies: The global cyclical backdrop is expected to be more unsynchronized, with a multi-speed growth pattern. Growth will be predominantly in emerging economies while the Americas and Europe will remain below pre-crisis levels.
2. Equities: A constructive medium term outlook on equities with a combined benign inflation and low GDP growth is attractive for equities, especially in emerging markets.
3. Money Market & Bonds: Central banks in many emerging economies are tightening policies too slowly in the face of inflationary pressure due to their robust growth. This overall liquidity backdrop creates a headwind for benchmark government bonds in 2011.
4. Currencies: The major currencies such as EUR, USD, JPY and GBP would remain low-yielding in 2011 and perform poorly. This also creates supportive backdrop for carry trade strategies. The CHF is expensive but enjoys a solid economic backdrop such as current account surplus and a balanced budget. The CNY would appreciate steadily as the Chinese government reins in inflation.
5. Commodities: A steady global recovery, liquidity, erratic weather condition should provide support for commodities such as precious metals to energy to agriculture. Gold is still preferred.
Q&A- Moderators: Dr Van & Dr Lee Boon Keng (Co-Head Investment Solutions (ISG) & Dy CIO Asia Pacific, Bank Julius Baer.
Q by me: I made a statement that a couple cannot buy a second home on loan in China to curb the housing bubble. To circumvent this ruling, most couples would ‘pretend to be divorced’.
A by Dr Lee: I would like to add to what you said. Most couples also resort to using their mothers’ names to buy the second home under loan.
On the question of having children in China, Dr Lee revealed that in the rural areas, there is no restriction but in the urban cities, couples can pay the penalty of USD20,000 to have a second child.
My personal take is that since China is now an economic success story, couples should be allowed to have as many children as they wish as long as they can afford to give them a good standing in life. Singapore which used to have a 2-child policy has now been more flexible too.
Annoucements:
1.Bank Julius Baer announced today the appointment of David Lim, a Singaporean, as CEO Bank Julius Baer Singapore with immediate effect.
2.Onshore private banking needs “critical mass” to make money, the head of Julius Baer Group Ltd.’s French-speaking region in Switzerland said in an interview in L’Agefi.
“We want to show that an onshore presence can be profitable,” Remy Bersier told the Geneva-based newspaper. “That can only be done in specific markets because it involves a critical mass.”
I shall be attending another such event next week and hope to add more then.
New Perspectives Emerging
New Perspectives emerging in 2011
With the game-changers in global markets in 2010, financial institutions are changing their perspectives in 2011.
UBS is taking the lead to set up a team to understand the needs of UHNW (ultra high net worth) clients in the Asia Pacific region.
With emerging markets in this region, there are now ultra high net worth individuals who have businesses across the region or globally. They travel frequently and have a good understanding of investment opportunities. They usually have family members across the globe, and are very sophisticated . They require a different level of advice and expertise only available at global integrated banks.
These UHNW clients fall into three tiers:
1. Investment
2. Business
3. Family needs.
UBS has this team under Amy Lo, its Regional Head for UHNW clients. The team will be specially trained and supported by dedicated UHNW competency teams which leverage expertise across Wealth Management, Investment Bank and Global Asset Management businesses.
She explains that to be competitive, UBS must have a model capable of the following:
1. Accommodating the local regulatory environment
2. A broad geographical footprint in key markets
3. A robust approach to managing risk without sacrificing agility
4. Access to a deep pool of talent
5. A broad product offering
6. A strong and trusted brand name
She has the vision to translate building a sustainable and high-quality wealth management business which creates value for its clients.
MY TAKE
With memories of LTCM and the rogue trader of Barings debacles still fresh in our mind, I rate risk and money management top criteria in any investment strategy.
Divergence in view of a Fractured World
Divergence between Weak & Strong
In yesterday’s blog, I mentioned a fractured world or globe. What does it all mean? It means we have to tread carefully this year.
According to Dr Andreas Hofert, Global Head of Wealth Management Research, UBS, in his talk last night at the Ritz-Carlton, he summed up that no investment should be considered ‘safe’ as inflation and currency weakness for indebted nations loom.
Investors have to reorient their perception of ‘safe’ fixed income investments. When the facts change, investment strategies should also change. As traders, this is what we believe and do too: when the market changes direction, we need to reorient our strategies. We must use intuition not ‘into wishing‘ , as most novice traders tend to do.
What else should we do? This is the question posed.
2010 was a year of reasonable returns for most investors but the investment environment in 2011 will be shaped by difficult political choices, a choice of three options or ‘trilemmas’ where only two can have favourable outcomes at the same time and where one will have to give.
If political uncertainties exist, some economic certainties remain, as the gap between weaker and stronger economies and their divergent growth paths becomes more evident in 2011.
The US, long the engine of world economic growth, is in the camp of the weak economies, while China and its South-east Asian neighbours are in the camp of the strong economies, including commodity exporters, Canada, Australia and Brazil. UK, France and the Mediterranean countries are struggling while Germany, Switzerland, the Benelux countries and Scandinavia are pulling ahead.
Following from this, we see the selection of fixed income and currency investments preferred in stronger economies whereas equity exposure continues to be directed to the world’s stronger growth regions.
Investments into so-called assets like equities, commodities and real estate could be looked into. The European debt crises is not over yet and financial markets are dividing debt in the region into safe and unsafe. European peripherals like Portugal and Greece have small economies and therefore have limited impact on the global economy. But the big economies like the US, France, Japan and the UK are worrying. At the other end of the scale, Switzerland, Sweden, Germany and several emerging economies look well prepared for the challenge ahead for 2011.
Stay tuned for more soon.
A Fractured World!
Tonight I attended a UBS cocktail followed by a presentation at the ballroom of the Ritz-Carlton, Singapore. The buffet spread was good but being conscious of my weight, I ate sparingly with a swig of red wine. I hardly know the crowd as I mentioned to one guest: these days the young are the ultra high net worth clients! But one young lady told me she was representing her mother. Still, I am sure there are just as many young as old clients of ultra high net worth among the crowd, numbering about 500 when seated at the ballroom.
Two speakers of UBS flew in : Andreas Hofert from Switzerland and Yonghao Pu from HK. They both paint a cautionary tale for 2011 for both developed and emerging markets.
Mr Pu was very humourous in his presentation: digging at Singapore eg: Singapore wants mainland Chinese money to be spent in Singapore, in luxury goods and especially at the casinos. The Chinese with money love Singapore for its good infra-structure and clean air but HK has more ‘life’ and this poses a dilemma where to invest in a second home!
Another dig was at the world accusing the US, Western countries , Tokyo of printing more money; but no finger was pointed at China which was also printing money like the others.
The best joke was about China prohibiting married couples from buying a second property on loan ; the smart ones ‘pretend to be divorced’ to circumvent this rule and to buy a second property on loan! The audience was in stitches.
Now to the serious notes.
Views By Andres Hofert:
Deflationists camp stress points to the lingering credit crunch from stressed financial sectors, the conspicuous slack in economic activity due to rising unemployment.
The inflationists camp stresses the impact on prices of surging government debt and overactive money-printing.
Both scenarios present opportunities and risks, and it is vital to understand which asset classes tend to outperform under each condition.
One can say that an investment that is positive in an inflationary environment is negative during deflation.
Those who expect inflation are best to stay with consumer-discretionary and capital-goods stocks, inflation-linked bonds and the euro.
Those expecting deflation will benefit from healthcare, energy and insurance stocks, nominal government bonds, the dollar and the yen.
Gold should prove resilient either way, given its status as an alternative currency.
Against this backdrop, global investors should diversify, as not all markets and regions experience the same level of inflation.
Investors in the West may want to invest in emerging markets in Asia, which reflects inflationary trend.
Views by Yonghao Pu:
Both East and West can take advantage of this investment opportunity. Those who believe in deflation have sheltered in government bonds, while those in the inflation camp are venturing into risky assets eg stocks, gold and real estate.
He believes the more accurate scenario in the world is now in a ‘coflation’ period; developed markets suffer deflation and inflation, while emerging markets experience inflation.
Investment opportunities exist across the board with a clear bias towards emerging markets.
Real estate is most likely to perform best as it is the least affected by global factors. Favourable local conditions have a positive effect on property prices, and with low interest rates, investors in emerging markets are likely to channel funds from deposits to property.
Result: virtuous circle of rising asset prices reinforcing local inflation, and high inflation expectations spurring buying activity.
Emerging market stocks should also strive such as department stores and automakers and luxury goods companies.
Fixed-rate credits, will prove attractive amid falling government bond yields.
Growing emerging market demand does not translate to higher commodity prices eg crude oil. Some agricultural commodities have good prospects, eg gold, with its safe-haven status.
Selective currencies eg from China resists appreciation while that of India is more tolerant.
Caveat:
If inflation rises in emerging markets as deflation ends in the developed world, aggressive monetary tightening in both economic regions will follow.
This will lead to high borrowing costs and end the liquidity-driven asset-price inflation in emerging markets.
The Fed will probably raise rates when it sees an end to deflation.
This is the key development to watch out for.
IDKIT aka Ana
Rabbit Year 2011
Chinese New Year 2011 – Year of the Rabbit (or Hare) 辛卯
The date for Chinese New Year 2011 – February 3rd. This is also known as Spring Festival or CNY 2011.
- The Chinese Calendar
- The Year Of The Rabbit
- Chinese New Year Masks
- Lantern festival held in London, England
- Chinese New Year Jokes
- Great Wall of China
∇
The Chinese Calendar
Unlike western calendars, the Chinese calendar has names that are repeated every 60 years. Within the ‘Stem-Branch’ system is shorter cycle of 12 years denoted by animals and 2011 is the year of the Rabbit. Actually, this is the Xīn-măo 辛卯 year. Xīn (Metal) is the eighth of the ten celestial stems and Mao (Rabbit) is the fourth of the twelve terrestrial branches and marks the year of the Rabbit or Hare.
Rat Ox Tiger Rabbit Dragon Snake Horse Sheep Monkey Rooster Dog Pig
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2007
Calculating ‘When is the Chinese New Year in 2011′
The fact that the date of Chinese New Year (CNY) varies within about a month is a clue that it’s linked to the new moon. A rough, and almost infallible guide is that the date of the Chinese New Year falls on the second new moon after the winter solstice. The winter solstice always falls on December 21st, the next new moon is January 4th, and the second new moon is on February 3rd 2011.
Will and Guy admit that the precise rules for determining ‘When is the Chinese New Year’, are far more complex. For example, one problem with any lunar calendar system is that some years there are 13 new moons. The Chinese deal with this be slotting in an extra intercalary month.
Don’t ask, Don’t Tell!
Just home after a week away in HK to take in the new Year 2011!
It dawned on me on this trip to HK that all these few years that I stayed at the Conrad Hotel, I did not realize I was entitled to breakfast and Internet on the house as a special guest! Unless this is a new complimentary throw-in as a special guest.
I don’t remember ever asking the hotel what is or are complimentary for me. On this trip, all I know is I heard clearly that I was entitled to breakfast and free Internet as a special guest.
Well, what do you know? You don’t ask, they don’t tell!
On the flight to HK on SIA, I was on the latest A380-800 plane and was not too familiar with the movie channels. So I decided to ask the air hostess, who addressed me: Lady Wong, and she promised to return soon to help me get to : Wallstreet: Money never sleeps. Meanwhile, I decided to play around with the channels, and managed to find Wallstreet, instead of waiting for the hostess to tell me how to locate it. My love of tinkering with electronic gadgets.
On the flight back from HK yesterday, it was an older plane, B777-300ER, and being more familiar with this plane, I went straight into the channel for : The Social Network, based on Facebook and Mark Zuckerberg with his continuous legal battles especially with the twins: Cameron Winklevoss, Tyler Winklevoss, among others.
Mark’s woes:
http://valleywag.gawker.com/tech/facebook/a-brief-history-of-mark-zuckerbergs-legal-woes-280901.php
My conclusions on looking back:
So, it is not just: Don’t ask, don’t tell, but don’t sue, don’t get!!
