In recent years this commitment has seen us travel to the USA on multiple study tours and more recently to Hong Kong. And before any cynicism kicks in. These are no junkets… they’re intense conferences with back to back presentations from finance professionals around the world. 

Hewison Director and financial adviser, Nathan Lear, and I travelled to Hong Kong in June to attend two conferences. You might have read Nathan’s report on the Morningstar Institutional Conference in last week’s blog. This week I cover the Sohn Investment Conference. 

The Sohn Investment Conference has been referred to as the “super bowl” of investment conferences. Founded in 2006 to raise money for medical research, the conference brings together investors and hedge fund managers who present their views and ideas about investing.

Such is the popularity of this event that it has not been uncommon for stock prices or investment themes to react almost immediately as experts announce their ideas.

Of particular interest was the growing impact of ‘short selling’ in global markets. 

•    Short selling involves the sale of a security that is not owned by the seller and is motivated by the belief that the stock price will decline, enabling it to be bought back at a lower price.  While often frowned upon for its ability to drag down the stock prices of companies and ultimately lead to their demise, Martin Wheatley the former head of Hong Kong’s security regulator stated that the bearish bets can add discipline to the market and stated that it was short sellers who were first to identify the misleading conduct of many US and UK banks prior to the collapse of the market in October 2007. For example, UK Bank Northern Rock was the most short sold stock nine months prior to its eventual collapse.

•    Presentations by Carson Block and Dan David, both short-sellers, provided a different perspective on stock research and investment decision making. While traditional investment involves analysing companies and identifying those that may be trading at a discount to fair value, both Carson and David explained in detail the forensic analysis undertaken by them to identify anomalies and sometimes fraudulent financial reporting by companies.

Although particular attention was given to short positions, the majority of the presenting financial fund managers had a preference for ‘long’ positions.

Other emerging themes were…

•    The continued urbanisation and growing middle class in China. As incomes grow China will make up in excess of 30% of all international travel within ten years. According to Eashwar Anwin, CEO of Tybourne Capital, this bodes well for a company like Rolls Royce which has around a 50% market share of the jet engine market and is one of only two major players in the global market. 

•    Further, China now has an automobile market that is 40% larger than the US. Local car manufacturers dominate the local market and vehicle quality has improved exponentially in recent years. Six out of the top ten selling SUVs are Chinese brands. In addition, while 85% of funding for vehicles is currently with cash, an expected increase in motor vehicle financing in the future is likely to increase the frequency of upgrades.

•    The opportunity in Indian property was another theme discussed by more than one speaker. The Modi Government in India has recently introduced a number of reforms to target the very complicated and fragmented property development industry and has set a target of ten million homes a year over the next six years.

This conference was extremely thought provoking and highlighted the need to be kept informed of investment trends and opportunities globally. More than anything it highlighted the importance of staying abreast of developments within our region. Asia is fast developing into the engine room for global growth. And the region is right on our doorstep. To ignore its economic and political influence would be foolhardy.  

Hewison Private Wealth are Melbourne based, independent financial planners with over 30 years of experience. We are entirely independent. We do not accept commissions or kickbacks. We are specialists in financial planning, investment advice and self managed super funds (SMSF). Contact us on 03 8548 4800, email [email protected] or visit www.hewison.com.au