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The China survival guide: Foreign funds change strategy
<p>As China’s markets are consumed by panic and paranoia, foreign investment funds are in a scramble to switch their strategies and generate some upside from the chaos, or at least mitigate some of their loses.</p> <p>According to Reuters, there have been range of responses to the implosion. Here are a few of the strategies funds are adopting to survive the rout:</p> <p>Looking to Hong kong. Those who still remain bullish on China’s long terms prospects are now looking for more opportunities in the territory where valuations are lower. Another main attraction is that the market is better regulated and less subject to whims of Beijing officials than Shanghai and Shenzhen. </p> <p>Shorting Asian currencies. While the bearish sentiment on Asian currencies has eased recently, those that still see the decline in the yuan, and fall in national exports, as a precursor to more economic pain down the line are betting against the currencies of China's Asian trading partners.</p> <p>Shorting banks with heavy China exposure. Many of the same pessimists going short on Asian currencies are also banking on the decline of those with massive China exposure, particularly UL-headquartered banks like HSBC Holdings, and Standard Chartered.  </p> <p>Buying US mortgage-backed bonds. Some are investing in this area in the expectation that the wealthy Chinese looking for a safe haven will pull capital out of China and pour it into US real estate.</p> <p>...or just staying focused on China. Instead of fleeing the mainland completely some are just becoming more targeted. Fidelity Investments, for example, is seeking value in specific high-growth business, particularly in the consumer space, that were undervalued even before the meltdown.<br /> Photo: Lwp Kommunikáció, Bear Grylls Ventures</p>
And the world’s best banks are…
<p>Global Finance has recently released its annual World’s Best Banks report and guess who topped the list this year in the investment banking category? Let me give you a hint; it’s founder built U.S. Steel.</p> <p>That’s right, Jamie Dimon’s “port in the storm” snatched this year’s award from last year’s winners, Bank of America Merrill Lynch, while over in the FX space, long-time FICC juggernaut Deutsche Bank lost its crown to Citigroup, highlighting just how much the German giant has changed since the LIBOR trials.</p> <p>Here are the rest of the winners:</p> <p>Corporate Bank: Mitsubishi UFJ Financial</p> <p>Consumer Bank: BBVA</p> <p>Emerging Markets: ING</p> <p>Asset Management for Corporates: Deutsche Asset &amp; Wealth Management</p> <p>Global Custody: BNY Mellon</p> <p>Cash Management: Citi</p> <p>Trade Finance: HSBC</p> <p>Global Finance apparently chose the winners via performance, reputation, as well as management excellence, and will be honoring the awardees in Singapore during the SIBOS conference, as well as in Lima, Peru during the IMF/World Bank Annual Meetings.</p> <p>I’m sure some of you might disagree with the picks here though. Goldman, for instance, is currently on top of the FT’s overall league tables while Dealogic currently places them in second place right after JP Morgan. What do you think guys? I’m curious what you have to say here. I'm fairly certain Citi's right were it should be in regards to FX.<br /> Photo: Steve Jurvetson</p>
Ladies, say hello to one of the world’s most expensive necklaces
Lifestyle
<p>There are a lot of things you can do with $200 million. You can buy Jack Ma’s new pad and maybe this yacht, or you can buy Demi Moore’s Central Park West triplex and have this East Hampton home to go with it.</p> <p>If you’re a little more adventurous, you can take 100 of your closest friends on a week-long Kenyan safari, and have enough change to buy a Eurofighter for the trip back home.</p> <p>For the ladies however, this might be a little more appropriate:</p> <p>Made by world-renowned jeweler Wallace Chan for Chow Tai Fook, “A Heritage in Bloom” would set you back 200 million big ones if you were to recreate it.</p> <p>Beginning with the raw, 507.55 carat Cullinan Heritage diamond Chow Tai Fook purchased for $35 million back in 2010, Chan put in 47,000 man hours of cutting, polishing, and adding hundreds more stones to create the necklace that you see here today. It’s apparently centered on 24 flawless diamonds, with largest coming in at 104 carats, and Barron’s says that it can be worn in 27 different ways.</p> <p>It isn’t for sale though, as Adrian Cheng, Chow Tai Fook chairman Henry Cheng’s son told Barron’s:<br /> “This is jewelry of the company, Chow Tai Fook, but it represents the idea of family for generations as well. It represents a sense of heritage as well.”<br /> Photo: Judy van der Velden</p>
Could China's chaos be a boon for Bitcoin?
FinTech
<p>While China’s ongoing market turmoil has had everyone counting their losses, Bitcoin might just be counting its blessings. The prospect of Beijing bringing in massive the capital controls in a bid to bring outflows under control has set the stage for a surge in the virtual currency’s value, says ZeroHedge.</p> <p>Just as fears of a Grexit, and return of the Drachma, had pushed up the value of the Bitcoin at the beginning of summer - before Bitcoin’s value dropped over fears of a forking last month - China fears also could trigger another digital rally. </p> <p>Looking at the various Bitcoin indices on Coindesk.com this surge is yet to happen.  The volatile currency is now trading at around $229.7 apiece and has been jumping around at that price for past two weeks having hit a trough in the middle of August of around $220. A far cry from mid-July when the Bitcoin was valued at around $310.  </p> <p>But that doesn’t mean it won’t happen, ZeroHedge’s Evander Smart reflects that - with over US$22 trillion on deposit - even a small shift by the Chinese market towards bitcoin could dwarf the surge of 2013, when Bitcoin’s value increased ten-fold with its introduction to China.<br /> Photo: BTC Keychain</p>
Restoring faith in Hong Kong property
<p>Just about everyone you meet in Hong Kong seems to be an expert on the property market. They will tell you the price per square foot for apartments in smart areas and rundown districts, and argue about what’s a bargain and what’s a rip-off.</p> <p>But all of them agree on one thing: buying real estate in the territory is a surefire way to make money in the long run.</p> <p>So front page splashes on Thursday that property sales for August slumped to their lowest level in 18 months is a bit worrying, even enough to rattle the most zealous believers in bricks-and-mortar.</p> <p>Residential transactions plunged nearly 28% compared to July and more than 37% year-on-year according to the Hong Kong’s Land Registry. The SCMP reported that leading developers such as Henderson Land are slashing prices or offering cheap mortgages. But investors are sitting on their hands, nervously watching stocks plunge on the Chinese mainland.</p> <p>And here’s the irony.</p> <p>Research by Reuters has revealed that the Chinese government has forked out at least $70 million buying Hong Kong properties during the past year as Beijing swells its presence after last summer’s mass democracy protests.</p> <p>The shadowy Chinese Liaison Office has bought 62 apartments, filling them with new staff to keep tabs on any resurgence of “Occupy Central” civil disobedience in the territory. And there are no signs that the spending binge is about to end.</p> <p>So while a faltering Chinese economy and a collapsing Shanghai stock market threatens faith in Hong Kong property, tougher Big Brother vigilance could send prices higher.<br /> Photo: Hank Anderson</p>
Daily Scan: Nikkei hits seven-month low; World markets cut risk ahead of jobs report
<p>Updated throughout the day</p> <p>September 4</p> <p>Good evening everyone. Risk was definitely off today as the world’s markets seem to be waiting with baiting breath for tonight’s non-farm payrolls report. A good reading here might seal the deal on a rate hike this month, while a bad one would surely push it off to a later date. The selling during the lower half of the session however seemed a little panicky, which could be attributed to Hong Kong’s terrible PMI reading earlier in the day but with the Nikkei hitting seven-month low, it might be something else altogether. Anyway, here’s how the major Asia-Pacific markets fared this week:</p> <p>Day<br /> Week</p> <p>Nikkei 225<br /> -2.2%<br /> -7%</p> <p>Hang Seng Index<br /> -0.7%<br /> -4.7%</p> <p>ASX<br /> +0.3%<br /> -4.2%</p> <p>The Chinese markets were closed Thursday and Friday; the Shanghai Composite lopped off 2.2% in its shortened week. European markets aren’t doing too well, despite Mario Draghi’s assurance that he’ll expand stimulus “if warranted.” The FTSE 100 retraced gains to fall 1.63%, the DAX – exacerbated by Germany’s surprise drop in factory order – slid 1.75%, while the CAC slumped 1.83%.</p> <p>Here’s what else you need to know:</p> <p>Hong Kong PMI falls to six-year low. Weak demand, lower output, as well as one the largest and fastest workforce declines since 2003 led the Nikkei Hong Kong Purchasing Managers’ Index to fall to 44.4 in August. That's well below its 48.2  reading in July and its worst showing since February 2009. Markit</p> <p>Japanese wages miss estimates – badly. Japan’s manufacturing industry may be growing at a fast clip, but its labor market is continuing to disappoint. Labor cash earnings for the land of the rising sun grew just 0.6% in July, far below an estimated climb of 2% and even more worrisome if you adjust for inflation. It is. however, the first real wage rise the nation has experienced since 2012. Silver linings, man. Financial Times (paywall)</p> <p>China swaps Australian mining for the country’s agriculture. After plunking ungodly amounts of money into the nation’s mining industry, China is now investing in Australian agriculture. Not only is China the No. 1  buyer of meats, wheats, and various other treats, it is now Australia’s largest investor in the agricultural sector, plowing as much as $450 million into the industry in 2014 alone. Wall Street Journal</p> <p>ECB ready to expand stimulus. European Central Bank President Mario Draghi says the bank is projecting slower than expected economic growth in the eurozone, and the ECB will “act if warranted.” Wall Street Journal (paywall)</p> <p>Debris found confirmed to be from missing MH370 flight. French investigators say they are certain that a piece of an airplane wing that washed up on a remote Indian Ocean island came from Malaysia Airlines Flight 370, which disappeared in March 2014 with 239 people on board. The New York</p>
The real Apple flop: Do you know what it is?
FinTech
<p>How quickly we all forget. A new dawn, a new day, a new life -- well, never mine. Apple promised to change the face of payments with Apple Pay. And I had been betting the Apple Watch would flop. But the numbers suggest that consumers just don't  mind using their credit cards the old-fashioned way. Once more, the tekkies provide a solution to a problem that doesn't exist.</p> <p>Drum roll, please, for the data on Apple Pay via Bank Innovation:<br /> In a recent post from PYMNTS.com, retail data analytics firm InfoScout is reporting Apple Pay usage has been on a steady decline since a seemingly promising upswing in March 2015. In the three months that followed, usage fell two points from 15.1 to 13.1 percent. What’s more, of the nearly 40 percent of consumers surveyed in March who said they had used Apple Pay to complete a transaction, only 23 percent still said “yes.”<br /> Frankly, we think consumers would be much more excited if banks and retailers could thwart hackers more effectively.</p> <p>Photo: Allen</p>
Leon Cooperman blames risk parity for market chaos
Hedge Funds
<p>Last week JPMorgan Chase &amp; Co. (NYSE:JPM) Chase &amp; Co. warned its clients that Volatility Target strategies, CTAs and Risk Parity portfolios could sell a combined total of $150 billion to $300 billion of equities during the next few weeks as momentum drives selling (Concerns Over Risk Parity Grow [Cont.])</p> <p>The report from JPMorgan came a few days after the Financial Times published an article on the risks that Risk Parity strategies posed to the global bond market. The Financial Times cited a new report from AllianceBernstein (Introduction to Tail Risk Parity an old copy of the paper can be found here), which estimates that risk parity is now a $400 billion industry. Assuming an average leverage ratio of 355%, these funds control around $1.4 trillion in assets.</p> <p>Leon Cooperman on risk parity<br /> Reports from the Financial Times, AllianceBernstein and JPMorgan all imply that Risk Parity is a disaster waiting to happen. And Leon Cooperman, the founder of Omega Advisors just joined the party.</p> <p>Within his August letter to investors, Cooperman blamed Omega's poor returns (year to date Omega's funds are down between 6% and 11% according to Omega's letter to investors reviewed by ValueWalk) on "price-insensitive" investors.</p> <p>Our investment process, grounded in fundamental company research, with a capital marketr overview designed to help us gauge appropriate risk asset exposure, has served us well since our inception 23 years ago, and we believe in its continued effectiveness. The firm has virtually no debit balance, and we like what we own.<br /> With respect to the investment outlook, we believe that shares in the U.S. will end the year higher. A slowing in China's economic growth, the surprise devaluation of the yuan in August, continued weak oil and commodity prices, and uncertainty as to the timing of the first Federal Reserve rate hike, all contributed to an initial weakness in U.S. and global equity markets in late August. However, these factors, we believe, cannot fully explain the maenitude and velocity of the decline in equity markets last month. We think that much of that decline can Ix attributed to systematic/technical investors that are price-insensitive and largely indifferent to fundamentals. Such investors include risk-parity funds, derivative hedgers, trend-following CTA's, and insurance variable-annuity programs.</p> <p>The month of August was a bad one for global risk markets and a bad one for Omega. The S&amp;P 500 dropped 6%, its worst monthly decline in over three years. Our various investment funds, excluding our Credit Opportunity Fund which eased just 1.4% last month, declined by between 9% and 11% in August. Year to date, our equity-focused funds are down between 6% and 11%; differential returns among our funds reflect </p>
A month of pain: Latest on hedge funds returns for big 5 activists
Hedge Funds
<p>August was the month of pain.</p> <p>In August, per HFR, the average fund lost 2.2% (versus the S&amp;P 500's 6% fall) and is down 1% for the year. Some big name factivists aren't so lucky.</p> <p>Bill Ackman's Pershing Square was down 9.2% in August, putting the fund down 0.1% for the year.</p> <p>Top holding Mondelez International Inc (NASDAQ:MDLZ) (MDLZ) was down 6% for the month of August, no. 2 holding Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX) (VRX) was off 10.5%, no. 3 Air Products was down 2%, no. 4 Canadian Pacific (CP) was down 10%, no. 5 Zoetis (ZTS) down 8% and no. 5 Restaurant Brands (QSR) off 11%. Collectively, eight make up the bulk of the long-only portfolio.</p> <p>David Einhorn's Greenlight Capital was down 5.3% in August and now down 13.8% for the year.</p> <p>Top holdings Apple Inc. (NASDAQ:AAPL) (AAPL) and GM (GM) were down 7% and 6.6%, respectively, in August. Everyone wants to talk about SunEdison, which was off 55% for the month, with Micron Tech and CONSOL also being down 11% and 8%, respectively, for the month. Einhorn was cutting some of his long and short bets in August, though.</p> <p>Dan Loeb's Third Point was off 5.2% last month, but still up 1.2% for the year.</p> <p>Third Point's top holding, Baxter (BAX) was off 4% in August, no. 2 holding Amgen, Inc. (NASDAQ:AMGN) (AMGN) was down 14% and no. 3 Allergan (AGN) was down 8.2%. Collectively, the three make up about 40% of the long-only portfolio.</p> <p>Barry Rosenstein's JANA Partners was down 4.3% in August and down 2.9% for the year.</p> <p>JANA's top holding, Qualcomm, Inc. (NASDAQ:QCOM) (QCOM), was down 12% in August. Other top holdings off big in August were Walgreen Company (NYSE:WAG) (WBA), down 10.4%, and ConAgra (CAG), down 5.4%.<br /> Other activists down in August were Cliff Robbins' Blue Harbour, off 2.6% for the month, and Scott Ferguson's Sachem Head Capital, down 2%.<br /> Jeff Ubben's ValueAct Capital, up 1.6% in 2Q, the standout of sorts - although it remains to be seen how he did in August. YTD through June, ValueAct is up 8%.</p> <p>Learn More about activist strategy</p> <p>By all accounts, it wasn't a prett</p>
Funniest Tom Brady tweets
<p>Patriots quarterback Tom Brady may be cleared in the eyes of the law, but he certainly isn't for thousands of football fans in the U.S. Here are some of the best tweets about Brady:</p> <p>&nbsp;</p> <p>...And let the Tom Brady Internet reaction fun begin! #Deflategatepic.twitter.com/egRgjCXA1l<br /> — SundayNight Football (@SNFonNBC) September 3, 2015<br /> Some are witty zingers. </p> <p>Aside from Malcolm Butler, Judge Richard Berman has now forced the most significant turnover in Patriots franchise history.</p> <p>— Field Yates (@FieldYates) September 3, 2015</p> <p>#tombrady didnt see his shadow (may not even have 1) either way, 4 more weeks of coworkers hacky, deflated balls, jokes<br /> — Dolph Ziggler (@HEELZiggler) September 3, 2015</p> <p>Tom Brady is a hall of fame quarterback, but when someone asks to see his phones he's like https://t.co/3nNlAydy7R</p> <p>— Eric Rosenthal (@ericsports) September 3, 2015</p> <p>Celebs have reacted to:</p> <p>A stoned Snoop Dogg is not thrilled about Tom Brady's overturned suspension: http://t.co/vs4qzt87w4 pic.twitter.com/ACtPZoEOTA<br /> — SB Nation (@SBNation) September 3, 2015<br /> But Pats fans, of course, couldn't be happier. </p> <p>This is all I have to say. #TomBrady pic.twitter.com/2tIIbWNjLF</p> <p>— Mary Georgantopoulos (@marygeorgant) September 3, 2015</p> <p>Tom Brady out here like https://t.co/vwXgF9EfCg<br /> — FutureHendrixs (@AINTTHATSHAWN) September 3, 2015</p> <p>God bless the American Justice System #PatsNation pic.twitter.com/hwlsa9gxHE</p> <p>— JTE (@SchmoesJTE) September 3, 2015</p>