Reflections on the week ending September 26, 2010

The business model and share price of Wealth Management companies are typically correlated with, and amplify, the overall market.  On September 25, 2010, Bloomberg had the following headline, “U.S. Stocks Rise for Fourth Week as Economic Concerns Ease” (http://www.bloomberg.com/news/2010-09-25/u-s-stocks-rise-for-fourth-week-as-goods-demand-eases-economic-concerns.html).  And while the S&P 500 rose 2.1% on the week, wealth manager Invesco Limited rose approximately 3.8%.  We continue to believe that, notwithstanding the potential for turbulence in the near term, the market will experience a recovery.  And, investors stand the risk of missing the recovery as they are holding record levels of cash and investing in low return income and balanced funds.  For conservative investors who want to stay overallocated to cash and low return fixed income investments, investing in wealth managers can help them not miss out in a recovery scenario.

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During the week, the following news items were of relevance to some of the companies we follow and in which we may have an economic interest:

Financial Technologies (India) Limited, a developer of capital markets infrastructure in India and other Asian markets, received a setback towards the end of the week when the Indian regulator declined their application to operate a stock exchange in India.  The company continues to have leading positions in many areas of Indian capital markets infrastructure and recently operationalized the Singapore Mercantile Exchange.  Accordingly, we continue to be optimistic on the profit and growth prospects for the company.  Nonetheless, as this is a highly regulated sector, we are closely monitoring the company’s response to the latest regulatory ruling.