overconnected

Key takeways from the book Overconnected by William H. Davidow :

• connectedivity created new business models (e.g. railroad, internet)
• overconnectivity can cause instability from positive feedback 
• overconnectivity can cause vulnerability from overspecialization
• complex systems are at risk of accidents and contagions
• overconnectivity was a factor in the collapse of Iceland and the subprime crisis
• need to reduce the positive feedback (e.g. through regulation), design more robust systems and restructure overconnected systems

ICAP AGM/Open Day 2016

Notes:

• not good outlook for O&G, property
• not keen on USD beneficiaries (short term)
• cash as call option
• clean energy and electric/driverless cars (Tony Seba)
• entrepreneurship is tough in Malaysia (different from independent business operator)
• use heart-mind to make decision (Mencius)
• opium trade benefited US (e.g. funded ivy league universities)
•  Trump to win elections (disastrous policies)

Ten Golden Rules of Equity Investing

Ten Golden Rules of Equity Investing

1. treatment of minority shareholders
2. Remember that companies are about peple not assets
3. Balance sheet strength is crucial
4. Understand what you are buying
5. Be wary of overambition
6. Think long term
7. Benchmarks are measuring devices not portfolio construction tools
8. Take advantage of irrational behaviour
9. Do your own research
10. Focus on growth industries in which it is possible to have a sustainable competitive advantage

Hugh Young, Aberdeen Asset Management

end of high returns?

For over 40 years, asset returns and alpha generation from penthouse investment managers have been materially aided by declines in interest rates, trade globalization, and an enormous expansion of credit – that is debt. Those trends are coming to an end if only because in some cases they can go no further. Those historic returns have been a function of leverage and the capture of “carry”, producing attractive income and capital gains. A repeat performance is not only unlikely, it is impossible unless you are a friend of Elon Musk and you’ve got the gumption to blast off for Mars. Planet Earth does not offer such opportunities.
-Bill Gross

undervalued and overvalued assets

undervalued asset classes  -  emerging market equity, Asia ex-Japan equities, emerging market debts, US and global high-yield bonds and European asset-backed securities.
overvalued assets - government bond asset classes such as those from Germany, Japan, the UK and the US.
-  HSBC Global Asset Management

Investment strategies in Asia if Trump triumphs

Nomura highlights some investment strategies to adopt if Trump makes it to the White House.

1) FX strategy

Direct risks to foreign exchange in Southeast and South Asia are likely to be less severe than in Northeast Asia, says Nomura.

In Asia, Nomura recommends being short Chinese yuan and Korean won, and long Indonesian rupiah and Malaysian ringgit.

“We believe the impact on IDR and MYR would be more contained, given robust growth, relatively favourable political and policy developments and bond inflows into both countries,” Nomura says.

2) Rates strategy

Nomura believes a Trump victory is likely to make central banks shift their bias further towards easier-for-longer policies.

“In such an environment we expect investors to focus on high-quality carry trades where an idiosyncratic domestic story is favourable for local rates,” Nomura says.

This would benefit rates market in Korea, India, Malaysia and Australia, while Hong Kong and Singapore are likely to underperform US rates.

“As far as trade recommendations are concerned, we believe receive 3yr MYR NDIRS; long 7yr MGS; long 7yr IGB; receive AUD 2yrfwd1yr IRS; receive KRW 3yr; and receive THB 5yr positions would perform,” says Nomura.

“We would express our view of HKD and SGD rate underperformance via pay HKD 5yr vs USD 5yr and pay SGD 2yr vs USD 2yr positions,” it adds.

3) Equity strategy

If Trump becomes president, Nomura says “an initial negative reaction in equities” is likely, but the longer term impact on equities beyond that is unclear.

China, Korea and the Philippines are likely to be most affected, followed by India, Singapore and Indonesia in the next group, and the least impact seen in Thailand and Malaysia.

“Specifically, we would expect our Asia Arms Race basket (rising risks of confrontation in the region), defensive stocks in Thailand and Malaysia (markets least impacted), and higher-yield stocks (to the extent that a Trump presidency contributes to lower global yields) to outperform,” says Nomura.

“Longer-term, downsides to growth and rising uncertainty in policy would imply a further flattening of our expected trend for Asian equities over the next 12-24 months,” Nomura adds.

8 market predictions for 2H2016

2H2016 in eight predictions by DBS Chief Investment Officer Lim Say Boon

1) Brexit will not break the EU but it will be negative for European stocks.
2) The global economy will continue to struggle and a corporate earnings recession will spread.
3) A decline in US corporate earnings will inevitably take the Standard and Poor’s 500 Index down with it.
4) The Bank of Japan will have to unleash further stimulus because a strengthening yen is bad for the economy and corporate earnings.
5) China will continue to ease.
6) Asia ex-Japan stocks will outperform global equities because their dividend yields are higher.
7) Lim is negative on the US dollar and believes that commodities and gold will rise, given the global central banks are in easing mode.
8) Bonds will continue to outperform equities.