Singapore
Look past the panic and think long-term -- Western Asset
Western Asset Management, the leading global fixed income manager wholly-owned by Legg Mason, Inc., said it is essential for long-term investors to look past the current panic and remain committed to spread-sensitive sectors. “Rather than fixate on near-term economic prospects, investors should focus on developments over the medium- and long-term,” said Mike Zelouf, Product Specialist at Western Asset. “Assuming that central bank and government policies succeed in sustaining some level of financial market and economic function, trust in the financial system will eventually recover. At that point, the deep liquidity discounts apparent across spread sectors should disappear, leaving prices that once again reflect the underlying probability of default.” “We continue to focus on mortgage-backed securities and the financial sector, two areas where we believe risk-adjusted returns look particularly promising over the next few years. Clearly, firms are susceptible to both a credit crunch and an economic downturn, but we believe investors are more than adequately compensated for bearing these risks,” said Zelouf. Zelouf noted that bank deleveraging has triggered a negative feedback loop in financial markets which has driven bond market pricing far from fundamental value. “This type of dynamic is restricted to fractional-reserve banking systems. The underlying global economy is not a fractional-reserve system. It will not experience such a negative feedback loop itself. It is vulnerable to the effects of such loops in the financial market, but only when monetary and fiscal policies fail to counter those effects. Policy-makers learned a lot from the mistakes made during the Great Depression and have been working hard to avoid repeating those mistakes during the current crisis,” continued Zelouf. Western Asset notes that while the magnitude of the current financial crisis is unprecedented, so too is the policy response. The U.S. Federal Reserve reduced policy rates by amounts unparalleled this early in the business cycle, and the real Fed funds rate has been negative for nearly a year. The Fed has also willingly expanded its balance sheet and provided short-term financing en masse to commercial banks, investment banks, and insurance companies alike. U.S. Treasury conservatorship has allowed Fannie Mae and Freddie Mac to continue their mortgage securitization operations, sustaining the flow of credit to the housing market at a time when the private-label mortgage securitization business has ceased to exist. This has helped reduce yields on conventional 30-year mortgages to pre-crisis levels, an important development that directly addresses problems in the U.S. housing market, the ultimate source of current ailments. The European Central Bank (ECB) and the Bank of England have implemented similar liquidity measures. While EU-wide fiscal initiatives have been slow, individual member states are aggressively taking independent counteractive action to the extent that they can, including deposit guarantees and coordinated government loans to troubled institutions. “We continue to believe that these and any forthcoming actions should be sufficient to prevent deep dislocations in the underlying economy, though we do expect a mild recession across much of Europe and the U.K.” “In seeking price stability, the ECB has intentionally been restrictive enough to induce a mild economic contraction. We now think the ECB has enough cover to begin its easing cycle and expect initial rate cuts before year-end. As such, we have increased duration in Europe to a slight long position to match our long position in sterling markets. We will also maintain short currency positions to the euro and pound sterling relative to the U.S. dollar as support erodes along with rate cuts,” Mike Zelouf concluded.
Look past the panic and think long-term -- Western Asset
Western Asset Management, the leading global fixed income manager wholly-owned by Legg Mason, Inc., said it is essential for long-term investors to look past the current panic and remain committed to spread-sensitive sectors. “Rather than fixate on near-term economic prospects, investors should focus on developments over the medium- and long-term,” said Mike Zelouf, Product Specialist at Western Asset. “Assuming that central bank and government policies succeed in sustaining some level of financial market and economic function, trust in the financial system will eventually recover. At that point, the deep liquidity discounts apparent across spread sectors should disappear, leaving prices that once again reflect the underlying probability of default.” “We continue to focus on mortgage-backed securities and the financial sector, two areas where we believe risk-adjusted returns look particularly promising over the next few years. Clearly, firms are susceptible to both a credit crunch and an economic downturn, but we believe investors are more than adequately compensated for bearing these risks,” said Zelouf. Zelouf noted that bank deleveraging has triggered a negative feedback loop in financial markets which has driven bond market pricing far from fundamental value. “This type of dynamic is restricted to fractional-reserve banking systems. The underlying global economy is not a fractional-reserve system. It will not experience such a negative feedback loop itself. It is vulnerable to the effects of such loops in the financial market, but only when monetary and fiscal policies fail to counter those effects. Policy-makers learned a lot from the mistakes made during the Great Depression and have been working hard to avoid repeating those mistakes during the current crisis,” continued Zelouf. Western Asset notes that while the magnitude of the current financial crisis is unprecedented, so too is the policy response. The U.S. Federal Reserve reduced policy rates by amounts unparalleled this early in the business cycle, and the real Fed funds rate has been negative for nearly a year. The Fed has also willingly expanded its balance sheet and provided short-term financing en masse to commercial banks, investment banks, and insurance companies alike. U.S. Treasury conservatorship has allowed Fannie Mae and Freddie Mac to continue their mortgage securitization operations, sustaining the flow of credit to the housing market at a time when the private-label mortgage securitization business has ceased to exist. This has helped reduce yields on conventional 30-year mortgages to pre-crisis levels, an important development that directly addresses problems in the U.S. housing market, the ultimate source of current ailments. The European Central Bank (ECB) and the Bank of England have implemented similar liquidity measures. While EU-wide fiscal initiatives have been slow, individual member states are aggressively taking independent counteractive action to the extent that they can, including deposit guarantees and coordinated government loans to troubled institutions. “We continue to believe that these and any forthcoming actions should be sufficient to prevent deep dislocations in the underlying economy, though we do expect a mild recession across much of Europe and the U.K.” “In seeking price stability, the ECB has intentionally been restrictive enough to induce a mild economic contraction. We now think the ECB has enough cover to begin its easing cycle and expect initial rate cuts before year-end. As such, we have increased duration in Europe to a slight long position to match our long position in sterling markets. We will also maintain short currency positions to the euro and pound sterling relative to the U.S. dollar as support erodes along with rate cuts,” Mike Zelouf concluded.
CFA offers five facts when investing in turbulent markets
In the wake of recent market and firm failures, CFA Institute, the global association for investment professionals, today issued five facts investors should know when making investment decisions. Nearly 30 percent of CFA Institute members manage assets for individual investors.“Investors with properly diversified portfolios that match their risk tolerance are better able to focus on rebalancing their portfolios in response to turbulent markets,” said Stephen Horan, CFA, head of Private Wealth Management at CFA Institute. “Even in times of exceptional market stress such as we are experiencing now, the key fundamentals of investing can serve as sound guideposts. Focusing on these top five facts and seeking the advice of a trusted investment professional will help investors stick to their long-term investment plan and meet their financial goals.”1. Having an investment policy statement makes weathering financial storms easier. From the outset, every investor should form an investment policy statement that serves as a framework to guide future decisions. A well-planned strategy takes into account several important factors including goals, time horizon, tolerance for risk, amount of investable assets, and planned future contributions. “An investment policy statement conceived in normal market conditions provides critical guidance in severe market conditions that create a stressful decision-making environment,” said Horan. 2. Knowledge (of your risk tolerance) is power. “There is no such thing as risk-free investing, but knowing how much risk you are both willing and able to accept is a necessary step in building the portfolio that is right for you. It makes the difference between sensible investment decisions that providelong-term benefits and spur-of-the moment choices that can bring poor results,” said Horan. Determining your appetite for risk involves measuring the potential impact of a real dollar loss on both your financial condition and psyche. In general, individuals planning for long-term goals should be willing to assume more risk in exchange for the possibility of greater rewards. However, their psychological makeup maynot allow them to do so. You certainly don’t wait until a sudden or near-term drop in the value of your assets to conduct an evaluation of your level of tolerance for risk. Nonetheless, Horan added that determining risk tolerance “involves contemplating the impact on your wealth and psyche of severe fincial crises that might occur every decade or so.”3. Investing in a diversified portfolio of securities rather than individual stocks mitigates risk. Investing in only a few individual stocks increases risk for which an investor is not rewarded compared to investing in a diversified mutual fund or index fund. Investors should incorporate different asset classes and investment styles in their portfolio that do not tend to move together so that market swings in one part of their portfolio are offset in another part. Failing to diversify leaves individuals vulnerable to fluctuations in a particular security or sector, such as financial services. Also, investors should be mindful of not confusing mutual fund diversification with portfolio diversification. You may own multiple funds but find, on closer examination, that they are invested in similar industries and even the same individual securities. “Be careful to avoid investing in too many products, which can create unnecessarily high fees relative to the size of your portfolio,” said Horan. “It is relatively easy to create a diversified portfolio with only a few properly chosen investment products. Often, this can best be done with the advice of a professional advisor, such as one with the Chartered Financial Analyst designation.” 4. The fundamental principle of investing is buy low and sell high. So why do so many investors get that backwards? The main reason is “performance chasing.” People tend to invest in the asset class or investment style that has recently performed well. “For example, funds flowing into mutual funds peaked just before the technology bubble burst in 2000 and reached a low point just before the market turned around in 2003,” Horan said. “Someone who has a long-term investment strategy, but doesn’t have the tenacity to stick with it has a tendency to buy high and sell low. They throw their strategy out the window in response to short-term changes in the market, investing tactically instead of strategically. Actively reviewing one’s portfolio and doing nothing is a better strategy than acting on emotions.”When investing in individual stocks, many professional and novice investors alike have difficulty admitting they have made a mistake by selling a stock at loss. Many want to hang on until they break even. Smart investors realize when they may never recoup their losses. Not every investment will increase in value. Sometimes, it is far better to take the loss and redeploy the assets toward a more promising investment. 5. Frequent trading can be costly. Trading too often cuts into investment returns more than anything else. A study by two professors at the University of California at Davis examined the stock portfolios of 64,615 individual investors at a large discount brokerage firm. They found that transaction costs decreased investor returns by 2.4% per year and that these investors underperformed the market by 1.8% per year. Again, the solution is a long-term buy-and–hold strategy, rather than an active trading approach.
Japanese equity can withstand credit turmoil -- Schroders
Japanese equity markets experienced sharp falls today in response to intensified strains in global financial markets in the wake of the failure or rescue of several US and European financial institutions. Downside risks to the world economy appear to be growing daily and we believe that the Japanese market is being driven by highly negative investor sentiment, rather than fundamental weakness in the underlying companies. The slowdown has spread from the US to the majority of economies around the world and undoubtedly Japan will be affected, especially as it is an open economy with a large export sector. In the short-term, we also see private sector domestic demand remaining weak, as real income growth is stagnant and capex is being hit by downward pressure on corporate earnings.However, although not immune from the global cycle, we believe the Japanese economy is now in better shape to withstand turmoil than in previous crises, making us optimistic for a more muted slowdown. In particular, the banking system is relatively unaffected by the credit crunch, having already been through painful deleveraging during the crisis of the 1990s.Uncertainties are likely to remain significant in the short term as the full extent of the fallout from the global financial crisis is still unclear. But we see many stocks with good fundamentals currently trading on extremely attractive valuations, presenting selective buying opportunities.
Asia Pacific is home to 28 percent of the world's HNWIs
The combined wealth of Asia Pacific's millionaires expanded 12.5 percent to U.S. $9.5 trillion last year, according to the third annual Asia Pacific Wealth Report published by Merrill Lynch and Capgemini. The report covered nine key markets in Asia Pacific: Australia, China, Hong Kong, India, Indonesia, Japan, Singapore, South Korea and Taiwan.
FOF provider Kenmar opens Singapore office
Kenmar, a Connecticut-based fund of hedge funds, has opened its first international office in Singapore. Kenmar Asia will be headed by Chris McLeod who was formerly with ABN Amro in Hong Kong and was in charge of alternative investments.
Credit Suisse wins Outstanding Global Private Bank award
Credit Suisse was awarded two major international industry accolades as "Outstanding Global Private Bank" and "Outstanding Business and Entrepreneurs Private Bank" at the 18th Private Banker International Wealth Management Summit held in Singapore.In addition, Credit Suisse was also selected as a finalist in the award categories of "Outstanding Private Bank - Europe", "Outstanding Global Private Banker" and "Outstanding Young Private Banker". Mr Walter Berchtold, Chief Executive Officer of Private Banking for Credit Suisse commented, "At Credit Suisse, we are extremely honored to receive this recognition of our Private Banking franchise. In the midst of such unprecedented and exceptionally challenging environment for our industry, this is a strong vote of confidence for the success of our growth strategy, the dedication of our employees, our firm commitment to focus on our clients and deliver to them the integrated bank solutions from across all our businesses for their personal and corporate needs. The strong continuous inflow of net new assets of CHF 40 billion we received in the first nine months of this year underscores the strength of our franchise and the trust placed in us by our clients worldwide." "Our Private Banking business has demonstrated strong resilience and achieved good results in these challenging times. Consistent with Credit Suisse's strategy, we will continue to invest in and grow our Private Banking franchise which I am convinced will be even stronger when we come out of this environment. Most importantly, now more than ever, we will continue to stay close to our clients, restore confidence and lend solid support to our employees."Commenting on the awards, John Evans, managing editor of Private Banker International and lead judge for the awards said, "Credit Suisse has had to take hits from the credit crisis, but unlike its rivals in Switzerland and elsewhere, it has escaped the worst of the mauling and is undergoing rapid expansion of its wealth management capabilities. Credit Suisse has been exceptionally well placed to be among the favored homes for client funds as the credit crisis unfolds.""The 'Outstanding Business and Entrepreneur Private Bank' award is for the institution that is able to most professionally harness its capabilities to meet the disparate business, private investment and estate planning needs of its clients. Credit Suisse's One-Bank integration of private and investment banking is steadily gaining momentum, and so this year the bank takes the award. It is reporting steadily more impressive revenues across the group from referrals between business units."The Wealth Management Awards are based on inviting nominations from the worldwide readership of Private Banker International. Form the short list, winning institutions are chosen by PBI's Advisory Board which is made up of independent industry experts. The awards aim to benchmark best practices and best business models in the quickly evolving wealth businesses in Asia and worldwide. The Private Banker International Wealth Management Summit 2008, held in Singapore from November 6 to 7, is organized by the global wealth journal Private Banker International (PBI), part of VRL Knowledge Bank.
Threadneedle ranks top performing fund manager in HK
Threadneedle, a leading European asset manager, has been ranked top performing fund manager in Hong Kong according to Global Investor Magazine, which uses Morningstar ratings.James Campion, Head of Asia Distribution for Threadneedle, based in Hong Kong, said, “This ranking is testimony to the quality of Threadneedle’s fund managers and the range of products we have to offer investors in this market with an average of 3.6 stars over the 31 Threadneedle funds rated by Morningstar.”He continued, “These are challenging times for investors all over the world and we are determined to continue to develop our product range to meet their needs and aim to deliver good performance in any market condition.”Threadneedle expanded into Asia this year to serve its global clients better. It opened its first regional office in Hong Kong in May 2008, followed by an office in Singapore in October 2008. The Singapore office is led by Sue-Wei Wong, who relocated from Threadneedle’s London head office and is responsible for business development relationship in the region. Threadneedle’s range of 34 equity and fixed income mutual funds and eight hedge funds are authorised as restricted schemes in Singapore. Threadneedle has US$98 billion of assets under management globally, as at 30 September 2008. Threadneedle can only deal with professional or institutional investors in Hong Kong and Singapore respectively in accordance with local legislation.
Fortis merges Asian equities and China investment centres
Fortis Investments is merging its Asian Equities and Greater China investment centres into one single, autonomous unit as it recognizes the strategic importance of the Asia ex-Japan region and Asian equities as an asset class for investors. This streamlining ensures that clients gain the maximum possible benefit from a centralised research platform. It also reflects Fortis' view that stock picking across sector rather than country lines should continue to gain in importance as a driver of excess returns. For the Greater China region, the addition of regional sector analysts will enhance the research capability greatly. Patrick Ho, head of Asian equities, will lead the combined investment centre, assisted by Desmond Tjiang as deputy head and CIO for Asia ex-Japan portfolios and Mandy Chan as CIO for Greater China funds. Their team will be one of the most comprehensive buy-side resources in the region running Asia ex-Japan portfolios today. Because of the change in investment approach, Ronald Chan is stepping down as CIO for Asia ex-Japan portfolios.
F&C and Hua Xia signs MOA on Chinese joint venture
F&C Asset Management has signed a Memorandum of Understanding with Hua Xia Bank agreeing in principle to form a joint venture fund management company in China. The move is a key milestone in F&C’s strategy of building a presence in Asia following the opening of its first office in the region, in Hong Kong, earlier this year.Hua Xia Bank is one of the twelve nationwide joint stock commercial banks in China and has seen strong growth since its incorporation in 1992. Hua Xia became the fifth listed bank in China in 2003 when it floated on the Shanghai Stock Exchange in 2003. Hua Xia now has 294 outlets in 31 cities, with a footprint covering 19 of the 22 Provinces in China. It employs around 10,000 people and has a global network of 464 correspondent banks.Alvin Chua, F&C’s Head of Distribution and Business Development for Asia, commented: “We are very excited about the prospect of establishing a joint venture fund management company in China with one of the premier banks as our partner. Hua Xia is a highly respected and successful bank and the proposed joint venture company will give us a foothold in a vast and fast growth market with 1.3 billion potential customers. As China continues to experience strong economic growth, we see excellent opportunities to help provide high quality investment products for both retail and institutional Chinese investors.”
HSBC Securities appoints Head of Global Markets in Japan
HSBC announced the appointment of Kenichi Tatsuzawa as Head of Global Markets, HSBC Securities (Japan) Limited. Tatsuzawa is responsible for managing fixed income, equities, treasury and foreign exchange operations in Japan. Locally, Tatsuzawa reports to Yoneo Sakai, chief executive officer, HSBC Securities (Japan) Limited and functionally to Gordon French, managing director Sales and Regional Treasury Management, Global Markets, Asia-Pacific. Tatsuzawa replaces David Jacob, who has returned to London to assume the role of Head of Regional Treasury, Europe, Middle East and Africa.Anita Fung, Group General Manager, Treasurer and Head of Global Markets, Asia- Pacific, HSBC, said: “Japan is a significant part of HSBC's treasury operations in Asia. Our strong balance sheet and expansive international network enables us to provide clients in Japan access to a full range of products and services from across Asia and other regions. HSBC's local presence in Japan also ensures our clients have access to one of the world's largest financial markets.”Yoneo Sakai, Chief Executive Officer, HSBC Securities (Japan) Limited, said: “We are delighted to promote Kenichi to this position. His extensive global markets experience, particularly in fixed income and derivatives sales, will help us further expand our securities franchise in Japan.”Tatsuzawa was previously Head of Fixed Income Sales. He joined HSBC in 2005 after serving as Head of the Global Markets Group at Bank of America in Japan and Head of Fixed Income Sales at Merrill Lynch in Japan.
