Investment

Notz Stucki Investment Conference

by James Macpherson

Notz Stucki Investment Conference – June 26th 2018

Gavekal’s presentation considered the rising rivalry of the US and China. In recent months tensions have risen, which so far have been expressed through a relatively minor increase in tariffs. But the competition between the world’s two largest countries will be permanent and the roots of the problem extend well before President Trump’s inauguration. However his belligerent escalation of the tensions mean that we could be at a dangerous point. If the US go ahead and do what they say they will do then the global economy is in for a rough ride. In that scenario the risks for markets are on the downside.

Part of the reason that we have reached this point is that China has succeeded far better than was ever expected to build a strong, competitive economy. In early 2016 the world worried that China’s growth model was coming unstuck, but they have succeeded in stabilising it, and it should grow comfortably at 5-6% for the next decade, underpinned by its competent, technocratic government. President Xi has consolidated his power to an unprecedented degree and he is expected to be in charge for the next ten years. So on both economic and political fronts there is stability in China. Increasingly China is looking to project its power internationally, hence the rising tension with the US which is the current hegemon.

Arthur Kroeber during Notz Stucki Investment Conference in Geneva

China has announced three major targets. The elimination of poverty by 2021 (anniversary of the Communist Party’s founding). To complete the Great Rejuvenation (i.e. the return of China to the status of a great global power) by 2049 (anniversary of the Communist Party’s accession to power). And to create an industrial-military power on a par with the US. As a result the US is being seriously challenged, and US anxiety on this runs deep across their defence and foreign policy departments. The US military sees China as a strategic rival and they are determined to maintain US superiority, and constrain China. The US Trade Department is concerned about China’s technology ambitions, and wants to get rid of rules whereby trade and intellectual property are traded for market access. Meanwhile China’s Made in China 2025 policy aims to turn China into a global technology leader. This initiative targets a wide range of areas from aerospace to biomedicine to new energy vehicles to robotics. There is a clear intent by China to replace foreign production with domestic production. The Belt and Road Initiative is a plan for an economic integration of the region (and ultimately the world?) under Chinese leadership. It can be seen as a Chinese version of the US’s Marshall Plan after 1945. It manifests itself in infrastructure projects, but it is also China’s way to project its power on to the world. The building of infrastructure creates a community of economically linked shared interests controlled by China.

What will happen next? One would have thought that the US should be getting together with its natural allies, like Europe, to counter China, but this isn’t happening. Instead Trump seems to be attacking everyone, and waging trade wars on all fronts. The picture will be clearer at the end of this week but the likelihood is that there will be more restrictions on US investments in China, and limitations on Chinese investments in the US, so the fight will extend from trade flows to capital flows. So far Trump’s bark has been worse than his bite, but what is concerning is that US tariffs have fallen steadily since 1945 to the great advantage of the world. Trump is threatening to reverse the steady liberalisation of the last seventy years. If, as has been mooted, cars are targeted next then that would take the trade wars to much more significant levels. Trump might even pull out of NAFTA ahead of the mid-term elections. The market would not like these sort of moves at all.

Nonetheless one shouldn’t draw too grim a picture of the outlook. Kerr Neilson outlined two areas that look promising: Emerging Markets and the energy/metals sector. For most of the last ten years the Emerging Markets equity performance has lagged the Developed ones. This could be about to change. India, for example, has produced a compound economic growth of 6% for twenty years, despite labouring under one of the most obstructive legal and government systems in the world. As Modi’s reforms kick in this growth rate can lift to 7-8%, which together with a recovering banking system will give opportunities similar to what China has offered over the last 10 – 15 years. In SE Asia 1.8 billion people are on the cusp of an income level where real spending power comes through, creating a host of opportunities. Strong growth in EM will lead to strong demand for commodities. This is at a time when energy and metal companies are being ignored by most investors. Measured as a percentage of the S&P they are at the lowest level for a decade. While it is near impossible to draw conclusions on what will happen with the trade talks over the next few months, investors should not ignore some of the excellent long term opportunities on offer.

 

Through their presentations, our guest speakers shared their views on the macroeconomic outlook, global equities and how technology will shape our lives.

Notz Stucki Investment Conference June 2018
Notz Stucki Investment Conference June 2018 – From left to right: Arthur Kroeber, Kerr Neilson, Sal Matteis

Please click here to access the speakers’ presentations.

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Antonio Mira
CHIEF FINANCIAL OFFICER, MEMBER OF THE EXECUTIVE COMMITTEE

Antonio Mira joined NS Partners in 2006 as Group Chief Financial Officer. He heads the corporate functions and is involved in coordinating and implementing the decisions of the Executive Committee.
An experienced bank auditor, Antonio started his career in 1995 with Arthur Andersen, where he worked for some 7 years before joining Ernst & Young in 2002 as a Senior Manager.
Antonio is a Swiss chartered accountant and a Business graduate of Lausanne University (HEC).

Sébastien Poiret
DEPUTY HEAD OF WEALTH MANAGEMENT

Sébastien Poiret joined NS Partners in 2008 and manages funds of hedge funds and private client mandates. He also oversees the development of the Group’s offices in Mauritius.

Prior to joining NS Partners, he served as a Trader, Head of Manager research and Portfolio Manager in the USA and Switzerland for a single hedge fund (1998-2004) and for Optimal (2004-2008), Grupo Santander’s fund-of-hedge funds operations.

Sébastien holds a Bachelor’s degree in Corporate Finance from the ESPEME Business School (EDHEC Group) and an MBA in Finance and Economics from the Institute of Business Administration, both in Nice.

Abir Oreibi
BOARD DIRECTOR

Abir Oreibi joined the Board of the NS Partners Group in 2018, where she brings her truly international perspective and rich experience.
Among many other ventures, Abir set up Alibaba.com’s first European office. After living and working in Shanghai, Hong Kong, Bangkok and London, she now lives in Geneva, where she is CEO of Lift Events, an organization that identifies technology trends, their business and social impact through the organization of events and open innovation programs. Issues related to the challenges and opportunities created by new technologies as well as the strategic responses from organizations are at the heart of Lift’s activities.
Abir holds a BA in Political Sciences from the University of Geneva. She is an investor, and member of advisory and innovation boards.

Romain Pidoux, CAIA

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Romain Pidoux joined NS Partners in 2011 and heads the Group’s Risk Management.
He started his financial career in 2005 as Head of Quantitative Analysis for a Swiss Family Office, selecting funds and managing portfolio allocation. In 2008, he switched to the alternative world and joined Peak Partners as hedge funds analyst.
He is a Chartered Alternative Investment Analyst (CAIA) and holds a Master’s degree in international relations from the Graduate Institute of International Studies at Geneva University.

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