Quarterly - local CFA Societies

Russell Napier is an Edinburgh-based consultant for CLSA Asia Pacific Markets,who writes about issues impacting the global equity markets. With more than twodecades in the industry, Russell has contributed to the development and scopeof CLSA’s equity research.Russell is a director of the Scottish Investment Trust and the Mid Wynd InternationalInvestment Trust, and his book Anatomy of a Bear - Learning from Wall Street’sFour Great Bottoms has been published to critical and commercial acclaim. Heruns a course for finance professionals at the Edinburgh Business School calledA Practical History of Financial Markets.He began his career in investment at Baillie Gifford in Edinburgh, before joiningCLSA in May 1995 as an Asian equity strategist in Hong Kong. Until 1999he remained in that post and was ranked No.1 for Asian strategy in both theAsiamoney and Institutional Investor polls from 1997 to 1999.WHERE MR NAPIERPUTS HIS MONEY"I have lots of my own money inSingapore where I get absolutelyno return on it in governmentdebt. My next-door neighbor, onthe other hand, may have lotsof money playing the UK stockmarket.Let’s say he makes 20% overthe next year and I make 3% or4% (on currency appreciation orinterest from government debt).My neighbor should outperformme, but with capital controlsand things like this, his moneyis subject to manipulation by thegovernment. They can beginto put it anywhere they want it,not where he wants to have it.And I’ve only got that 3% or 4%but my money is flexible to gowherever it wants to go.If I wanted to bring it back tothe UK, it will be welcomedwith open arms. And one day Imight want to do that becauseequities might be really cheapon a cyclically adjusted basis.In Singapore, capital has theoption to go anywhere it wantsto be in the world.In the UK, America, France orGermany, very soon it’s notgoing to have that option. Andthe beautiful thing is when I sellmy Singapore dollars and bringmy capital back to the UK (andsubject it to the capital controls,that is, I agree to bring it to theUK with a view of not expatriatingthe funds again), the equities aregoing to be so cheap there’s justgoing to be a wonderful return.When I make that decision whichis entirely fuelled by my view ofhow much money I have to make,I will get very cheap equities andmay even get knighted by theBritish government at the sametime. Now if on the other hand,I leave the money in the UK andthey bring the capital controls in,and then I remove it, I may haveto go to prison!"Russell NapierPage 17