Bell Ringing with MSCI President and HKEX CEO for A-Share Inclusion

Our CEO, Stephen Howard, attended the MSCI Bell Ringing Ceremony this morning with the President of MSCI. The event marked the historic inclusion of China A-shares at the Hong Kong Stock Exchange (HKEX).

Approximately 230 A-shares will be added to its emerging market benchmark in a move that is seen to connect the China market to the world.

To read more on the MSCI inclusion, you can read this article as featured on NY times: https://www.nytimes.com/reuters/2018/05/31/business/31reuters-china-stocks-msci.html?partner=IFTTT

A big thank you to Raymond Wong & Satyan Patel from the Market Development Team for the invitation!

Asia Pacific Buy-Side Summit 2018

The 2nd Annual Asia Pacific Buy-Side Summit 2018 was hosted by Thomson Reuters on April 17th, 2018. This year, the summit focused on the topic “Adapting to Disruption”. This event highlighted the impact of disruptive technologies in Asia’s asset management industry which is rapidly changing due to transformational technology.

Howard Trading CEO, Stephen Howard, was part of the panel discussion sharing his insight on Future Trends in Multi Asset Trading. The panel discussed the medium and long term developments in multi asset trading and what traders need to consider to capitalize on them.

Some key points from the panel discussion:

  • The largest challenges for cross asset trading are also its greatest opportunities namely talent and software
  • The importance of finding & recruiting appropriately skilled and motivated talent
  • Deploying software & hardware with a strong Machine Learning bias to support the trading business
  • Partnering with best in class providers rather than internal build accelerates time to market, however this is challenging for larger institutions.
  • No one solution fits all business requirements so it’s important to take a pragmatic stance.

A great event organised by Sanjeev and all the team at Thomson Reuters that brought together professionals from the financial industry to discuss innovative perspectives and ideas.

Rising Interest Rates

Federal Reserve Chairman Jerome Powell’s first testimony to Congress was completed earlier this week, the US 10 year Treasury rate is headed to 2.90% we wanted to get ahead of the curve and share some observations on rising interest rate environments.

Our team reviewed the past forty five years of market data and selected all six periods of rising US interest rates, applying the impact across a range of assets:

2004 to 2006

Global asset classes rallied significantly during the period. Copper (+155%), Brent Crude (+98%) and Emerging Markets (+65%) gained significantly while the exceptions were the Japanese Yen (-13%) and the VIX (-28%).

US Equity markets were driven by Energy (+82%), Utility (+39%), Industrials (+26%) and Technology (+9%) being the weakest performer.

1999 to 2000

Global asset classes gained during the period. Brent Crude (+100%), NASDAQ100 (+78%), CAC40 (+53% and the Hang Seng (+48%) reflected the largest gains while the VIX (-16%), Euro (-11%) and British Pound (-6%) declined.

US Equity markets were driven by Technology (+48%), Energy (+23%) while the Consumer Discretionary (-10%) and Materials (-10%) and Financials (-5%) declined.

1993 to 1995

Global asset classes gained during the period with most global equity markets posting ~18% gains. Notably Copper (+85%), NASDAQ100 (+40%) and Japanese Yen (22%) reflected the largest gains and the NIKKEI225 (-28%), US Dollar (-12%), CAC40 (-12%), VIX (-12%) and Brent Crude (-6%).

1988 to 1989

CAC40 (+72%), Emerging Markets (+63%) and the DAX (+47%) were the strongest gainers. While Gold (-23%), Japanese Yen (-17%) and British Pound (-17%) fell most significantly during this period.

1977 to 1981

Our dataset starts to thin at this juncture. All key markets demonstrated a rally during this time period, whether this is the Hang Seng (+295%), Gold (+198%), World Equity Markets (+68%) or the NIKKEI225 (+58%).

1972 to 1974

As the earliest component of our dataset, we reflect gains in Gold (+254%) NIKKEI225 (+70%) and losses in the S&P500 (-16%) and DAX (-16%).

Final Thoughts

The data demonstrates that at different times differing asset classes respond to rising rates with greater or lesser degrees of sensitivity.

While the geopolitical backdrop of the times differs (Oil Embargo’s, Middle Eastern conflict, Black Monday, German Reunification, Technology boom, Chinese reflation) and may provide a significant lever on one or multiple asset classes there are significant underlying themes that present themselves.

Contextually we must now consider how does low-interest rates and quantitative easing change this perspective. Good Hunting.!

2018 Forecasts

As we settle into the new year, take a look at some 2018 forecasts from the sell side companies who share insights on the challenges and opportunities to come this year.

Have a read on some key topics, global economy, and insights from the next generation of investors in Credit Suisse’s 2018 forecast. Click here to read the full forecast.

Goldman Sachs Asset Management shares their take on global expansion, the impact of the central bank policy and takes a look at some investment strategies for 2018. Click here to read

JPMorgan Asset Management shares some time-tested projections. 
Click here to read their 22nd edition of long-term capital market assumptions.

Morgan Stanley forecasts continued and broadening growth in 2018.
 Click here to take a look at their 2018 Global Economy insights:

Nomura shares a podcast detailing the key expectations for the global economy in 2018.
 Click here to listen.

UBS Asset Management takes an in-depth look into the challenges and opportunities in 2018. Click here to read.

Happy Trading!

China Macro Update

As debt is expected to climb to nearly 300% of GDP by 2022, authorities in Beijing are serious about deleveraging the Chinese economy. The amount of growth China is getting per unit of credit has fallen precipitously meaning that it would need more credit to maintain the growth. This article explores what the Chinese authorities are looking at doing in light of the Chinese economy cooling down further.

As we’ve had time to digest the message, tone and market reaction to the 19th Party Conference, the team at Saxo have curated their monthly report with this in mind. Click on the link to read the full report by Andrew Bresler of the Saxo Group: https://lnkd.in/fVxMqdf.

To round out your perspective on the Chinese economy going into 2018/19, listen to the Masters in Business Podcast by Barry Ritholtz of Bloomberg, who interviewed the legendary investor, Felix Zulauf. Click on the link to listen: https://lnkd.in/fe7jXp2.

CFTC Primer on Virtual Currencies

We would like to share this informative document from the CFTC on Virtual Currencies.

The document discusses topics such as: What is Virtual Currency, Bitcoins and Related Technologies, Potential Uses, CFTC’s role as well as the different risks associated with these virtual currencies.

To read the full document, click on the link: http://www.cftc.gov/idc/groups/public/documents/file/labcftc_primercurrencies100417.pdf

The Future is Bitcoin?

Our CEO shares his thoughts on Bitcoin’s expansions into the futures market.

He discusses issues concerning CME’s proposed listing of a futures contract and takes a look at some scenarios and outcomes of the futures listing process. He also touches on concerns around how it will play out in today’s environment where regulators are looking at Bitcoin offerings as traditional securities and clamping down on them.

Click here to read the article.

Quantitative Analyst Internship

We are searching for a Quantitative Analyst intern to join us for three months on a structured training program. You will receive one-to-one product training in the financial markets from a 20+ year markets veteran in a structured training plan.

 

Role Requirements:

-Financial literacy and a genuine interest in financial markets.

-Bachelors, Masters degrees or above in Business, Computer Science, Economics, Finance or Physics.

-Programming capability in Python and experience using MS Office platform (Excel, Word, Powerpoint).

-Self-motivated with an ability to work independently driven by curiosity, with strong communication skills in English and Cantonese.

-Ability to work in Hong Kong.

 

Please review our Job Posting on our company Linkedin page below or The South China Morning Post’s business recruitment section.

https://www.linkedin.com/company/13332550/

We offer competitive renumeration reflective of experience. Interested candidates please email your resume and intentions to intern@howard-trading.com

Equity Market Volatility

Our C.E.O. shares his thoughts on equity market volatility in a recent Linkedin article.

We cover the question of risk, consider appropriate products to reflect that risk and how the markets are currently pricing volatility. A lot of investors have been waiting for a sudden re-basing of volatility it is our expectation that we will experience a more gradual re-basing to a higher level, no doubt with some “fear of event” moves in the near term driven by Asian regional geo-policitics.

https://www.linkedin.com/pulse/volatility-we-going-discover-something-new-stephen-d-howard

New Breed of Trader?

Article posted on LinkedIn about the growth and sophistication of non bank liquidity providers.

If you are buy side then you need to be aware of your liquidity pools. If you are sell side then you need to understand those organisations that can help support your risk re-cycling.

Additional article from the team at Business Insider with a great graphic.
https://www.linkedin.com/pulse/new-breed-trader-stephen-d-howard