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  1. #1
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010

    [EN] Beneath the market rally: a lot less trading

    Trading Sinks, Stoking Fears

    Low volatility, rise of passive funds and lack of market-moving news have kept many investors on sidelines

    Riva Gold
    Oct. 19, 2017

    Stocks continue to hit record highs, yet those pushing them there are trading less and less.

    The number of stocks and exchange-traded products changing hands in the U.S. and Europe has fallen steadily in recent months as ultralow volatility, a lack of market-moving news and the rising popularity of passive investment funds have kept many investors on the sidelines.

    Some investors are mulling what the drop-off says about a global equity rally that has lifted many markets, including in the U.S., to new highs. The muted trading could signal that investors are holding back amid skepticism that stocks have further to climb—or that they are so confident they feel no need to sell.

    Either way, the decline in equity volumes is another piece of bad news for banks, already beset by a steep falloff in fixed-income trading revenues.

    This month, the average daily trading volume across the NYSE, Nasdaq , NYSE American and NYSE Arca has fallen roughly 12% relative to this year’s average and is down by around 22% from the average in 2016.

    Trading in exchange-traded funds has also dropped off, with average daily volume for U.S. ETFs down 8.5% from a year ago, according to research and advisory firm XTF. Trading volume on the MSCI Europe index—which tracks companies across 15 developed countries in Europe—has fallen to its lowest in five years, according to Morgan Stanley

    Ed Campbell, a portfolio manager at QMA, a multi-asset business of PGIM, said he spent most of the summer holding a bit more cash, ready to buy stocks on an anticipated dip in the market that never materialized.

    “Things looked overextended and due for a pause…but summer came and went and that never really happened,” he said. In September, QMA decided to give in to the onslaught of upbeat economic data and slowly add more positions in banks and small-cap stocks instead of embarking on a bigger buying spree.

    The collapse in trading volumes is closely tied to the recent fall in volatility, where measures of daily stock price movements have plumbed multiyear lows. When markets aren’t moving, there are typically fewer people scrambling to protect their portfolios against further losses or seizing an opportunity to buy things that look cheap.

    The S&P 500 hasn’t experienced a daily drop of 1% or more in two months, while the CBOE Volatility Index, known as Wall Street’s fear gauge, earlier this month fell to its lowest reading in over 20 years.

    Volatility is so low now that, this October, the S&P 500 is on pace for its tightest monthly trading range since January 2007, when the index stayed within a range of 37.64 points, according to FactSet data.

    “Volumes and volatility go hand and glove,” said Phil Orlando, chief equity strategist at Federated Investors. With U.S. indexes rising modestly for eight consecutive quarters, “there’s no need to make radical adjustments in your portfolio, so as a result you’re just sort of riding on what you have,” he said.

    The sort of major events that tend to drive big trading volumes, including elections, government policy changes and central bank shifts, have been few and far between this year. There have been elections in Europe, but the results of those have largely eased fears of political instability in the region. Meanwhile, economic data across emerging and developed markets has been remarkably resilient, while investors say the Federal Reserve has telegraphed its intentions to markets fairly consistently.

    “The major views in our equity portfolios haven’t changed much because the macro-environment hasn’t changed significantly,” said David Lafferty, chief market strategist at Natixis Global Asset Management.

    The muted trading could also suggest a lack of investor confidence among those with cash to invest, as solid quarterly earnings and a growing economy are offset by rising valuations and fears the bull market can’t last much longer. The S&P 500 is currently trading at 18 times forward earnings, compared to 16.9 at the start of the year.

    Given the lack of optimism, “it’s a rally that hasn’t felt like a rally,” said Antoine Lesne, head of SPDR ETF Strategy and research at State Street Global Advisors.

    The rise of passive investing—relative to money pouring into active managers and hedge funds—may also be exacerbating the sedate trading.

    “There’s still a very strong trend of people doing indexing, and when you invest in index funds you don’t need to trade as often because they’re not as volatile,” said Randy Frederick, vice president of trading & derivatives at the Schwab Center for Financial Research.

    BlackRock Inc. and Vanguard Group, which have the largest stable of ETFs by assets, now manage about $10.7 trillion combined.

    Meanwhile, “Many people are already in the market, and if things they own are going up and making money, there’s no reason to sell,” Mr. Frederick said. “And if you were sitting on cash, coming in now is pretty late to the game.”

    The falloff in trading volume isn’t good news for banks who generate fees when investors trade.

    Last Thursday, J.P. Morgan Chase & Co. reported a 4% fall in revenue from equity trading in the third quarter. Goldman Sachs Group Inc.’s equity-trading revenue fell 7% over that period, the company said Tuesday.

    For many, though, the glacial activity in equity markets may still be an encouraging sign.

    “We are seeing strong drivers for growth and that is driving investor confidence in Europe, and driving more into long-term positions rather than short-term trades,” said Ankit Gheedia, equity strategist at BNP Paribas.

  2. #2
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010

    Asian Companies Sell Most Stock in U.S. Since Alibaba's IPO

    Alex Barinka and Crystal Tse
    October 20, 2017

    Investors are getting plenty of chances this month to tap one of the best-performing segments of the year’s initial public offerings: Asia-based companies listing in the U.S.

    Fifteen Asian companies have raised $3.2 billion in U.S.-listed IPOs and seen their shares climb 46 percent since their listings this year, according to weighted-average share price data compiled by Bloomberg. That compares to an 11 percent climb for the 105 U.S. businesses that listed domestically and raised a combined $23.6 billion.

    There’s more on the way. Some of Asia’s biggest private companies priced U.S. IPOs this week, driving October’s trans-Pacific share sales to a level not seen since Alibaba Group Holdings Inc.’s record $25 billion IPO in September 2014.

    In this year’s fourth-biggest U.S. IPO, Chinese online lender Qudian Inc. raised $900 million Tuesday. Its shares are up 38 percent since its debut, giving the company a market value of $10.9 billion.

    Two more Asia-based companies with U.S. trading debuts on Friday helped boost the tally.

    Sea Ltd., the owner of the Garena gaming platform, raised $884 million, increasing the size of the offering to 59 million shares from 49.7 million and pricing the stock $1 above the marketed range at $15. Shares of southeast Asia’s most valuable startup rose as much as 13 percent and were up 2.5 percent to $15.38 at 12:50 p.m. in New York.

    China’s Rise Education Cayman Ltd. raised $160 million after pricing its shares at $14.50. The stock climbed 19 percent at 12:50 p.m. in its debut to $17.26, valuing the English-language schooling company at $948 million.

    Combined with other listings, those three have put October on track to be the biggest month of the year for U.S. IPOs. The $29 billion raised in 2017 has already outpaced the $15.2 billion in stock offered by new U.S.-listed companies through this time last year, according to data compiled by Bloomberg. That excludes special purpose acquisition companies, funds and real estate investment trusts.

    Attracting Talent

    Qudian Chief Financial Officer Carl Yeung said the visibility and the size of the investor ecosystem that comes with a U.S. listing were deciding factors for picking the venue.

    “We believe we will get good liquidity, as well as people who can appreciate what a tech company can achieve in the U.S. markets,” he said in an interview. “As a high-profile company in the market, we can attract the best talent in the world.”

    Still, not all of the Asian companies’ shares have scored big returns. Last year’s crop is up and average of only 12 percent, bogged down by the underwhelming performance of the biggest IPO of 2016: ZTO Express Inc. The Chinese delivery service that gets most of its business from Alibaba is down 21 percent after raising $1.4 billion last October.

    The two previous years may give investors more cause for optimism. The 13 Asian companies that raised a combined $1 billion in 2015 are up 117 percent, beating the 19 percent rise for U.S.-based companies that had domestic listings that year. In 2014, 20 Asian companies including Alibaba raised a combined $30 billion. Those stocks are up 152 percent on average. The $50 billion in U.S.-based companies’ shares sold that year have climbed only 35 percent.

    Appetites Whetted

    For the most recent listings, investors’ appetites have been whet by the companies’ future potential in their respective industries, said Bruce Wu, co-head of Citigroup Inc.’s Greater China equity capital markets group and vice chairman of Japan capital markets origination.

    “Growth is definitely the main theme underlying the most recent wave of transactions,” Wu said. “These companies are enjoying a relatively issuer-friendly market environment.”

    — With assistance by Yoolim Lee

  3. #3
    WHT-BR Top Member
    Data de Ingresso
    Dec 2010

    Some ‘Fee-Only’ Advisers Charge Commissions Too

    You might expect that the 'fee-only' description for an adviser would be pretty straightforward. It's not.

    Jason Zweig
    Oct 20, 2017

    In mid-October, the Certified Financial Planner Board of Standards disciplined six financial advisers for allegedly claiming to be “fee only” when they also received commissions.

    That’s a reminder of how loosely investors — and many advisers — understand one of the most popular and alluring terms in the financial-advice industry.

    As a 2013 investigation in The Wall Street Journal showed, up to 11% of certified financial planners working at big brokerage firms described themselves on the CFP Board’s own website as “fee only” when they also could get commissions.

    The CFP Board has since “taken steps to prevent” planners who are registered at brokerage firms from claiming they are fee only on its website, says its general counsel, Leo Rydzewski. “It becomes a concern for us when someone is representing their method of compensation in a way that’s inaccurate.”

    A commission is a payment by the client — or a third party — for a specific transaction, typically to trade a stock, bond, fund or insurance. Fees, which may be hourly, annual or a percentage of assets, are paid only by the client for advice and services rather than transactions.

    You might expect that a “fee-only” adviser would never charge commissions. It isn’t that simple, as the Journal reported in February. And financial planners use the term in baffling ways.

    There is no official regulatory or legal definition of “fee only.” The CFP Board permits certified financial planners to use that term “if, and only if,” all their compensation comes from the clients as fees, not commissions.

    According to a new analysis of Securities and Exchange Commission disclosures by my colleague Andrea Fuller, almost 3,900 firms described themselves as offering both investment management and financial planning to individual clients as of March 31. More than 90% declared to the SEC that they don’t charge commissions.

    Some, however, state in one disclosure filing that they do charge commissions — while claiming, on another SEC form, to be “fee only.”

    Consider Mediqus Asset Advisors, a Chicago-based firm that managed $790 million as of March.

    The firm’s Form ADV on file with the SEC declares that Mediqus takes commissions. On the other hand, the firm’s official brochure, also filed with the SEC, states that its investment-advisory services are fee only.

    On still another hand, the official brochure adds that Mediqus ​or its advisers “may receive a commission from the purchase or sale of publicly traded stocks, bonds, mutual funds, unit investment trusts, REITs or other publicly traded securities or insurance products” by clients not using “our fee-only investment advisory services.”

    A disclosure on file with the Financial Industry Regulatory Authority says Mediqus’s president, Joel Blau, spends approximately five to 10 hours per month selling life insurance and fixed annuities.

    “If it says five to 10 hours, we have to correct that,” says Mr. Blau. “That’s definitely not correct. There’s no way we do anywhere near that much.”

    Ronald Paprocki, chief executive of Mediqus, says commissions probably account for less than 1% of its business. Yet because Mediqus is affiliated with a brokerage, he says, it must disclose that it may take commissions even though all its investment advice is fee only.

    “That’s ​a dilemma,” says Mr. Paprocki. “The whole reason we’re talking to you about this is because it probably is confusing.”

    Certified Advisory Corp., a financial-planning and investment firm in Altamonte Springs, Fla., manages about $1.3 billion in assets. The firm repeatedly describes itself as “fee only” on its website.

    Certified’s official SEC brochure says the firm is “‘fee only,’” but its representatives “may or may not be characterized as ‘fee only.’”

    ​About ​3% of the total revenue generated from Certified’s clients has come from sales of insurance and securities on a commission, says its president, Joseph Bert. Those commissions aren’t earned by Certified, he says, but by representatives the firm retains as independent contractors.

    Mr. Bert says the commissions are fully disclosed and derive from occasional, “one-off transactions” outside the usual scope of the firm’s practice, such as buying long-term care insurance or setting up a gift account for a client’s child.

    The term “fee only” can be a marketing magnet. “People are commission-averse,” Mr. Bert says, “and we’re trying to separate ourselves from all the other firms out there that are just trying to sell a product and call it financial planning.”

    Confusing? You bet. If you want to hire a financial planner who charges only fees, you will have to ask probing questions. Start with these: Are you a fiduciary, who must always act in my best interests? Will you put that in writing? Does anybody else ever pay you to advise me and, if so, do you earn more to recommend certain products or services?

    If the answer to the last question is yes, “fee only” is just talk, and you should walk.

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