Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.</li>
<li>SOUTHBOUND's consecutive buying streak ended on Monday 25-March, then started again. 20 days straight net buying. NORTHBOUND saw big inflows Friday. A record day I believe.</li>
<li>HK stocks bounced VERY hard. Seemed like big allocation trade. HSCEI +8.7% vs CSI300 +1.2%. In H/A Pairs, liquid pairs saw Hs outperform their A by 4+% on average.</li>
</ul>


The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND's consecutive buying streak ended on Monday 25-March, then started again. 20 days straight net buying. NORTHBOUND saw big inflows Friday. A record day I believe.
HK stocks bounced VERY hard. Seemed like big allocation trade. HSCEI +8.7% vs CSI300 +1.2%. In H/A Pairs, liquid pairs saw Hs outperform their A by 4+% on average.


A/H Premium Tracker (To 26 Apr 2024):  Best Week in a LONG Time for Hs Vs As - Time To Get Long H/A

Founder of Antler Capital

Stanley Tsai, CFA

Thematic (Sector/Industry)

In the spirit of the long-awaited UEFA Euro 2020, we present our inaugural "China Financials: Silver Linings Playbook", which summarizes our views on the names that are best positioned to navigate an environment of progressively slower credit growth, tighter liquidity and rising defaults. 
Our screen consists of 100+ stocks in the A/H share universe, as well as a select number of international / non-traditional names that have significant exposures to China's financial system. We have a preference for larger-cap and liquid names, which are then filtered by our opinions on their fundamentals, value, momentum and recent trading volumes. We also try to make our selections versatile and less vulnerable to single-factor movements.
Each player's position on the pitch and the team formation itself convey incremental information about our thoughts on the sector's performance over a three to six-month horizon. To the extent possible, we intend to update our ideas on a periodic basis. This provides a feedback loop with our other ongoing research on the industry.
However, our team selections are not investment recommendations. Instead, they are meant to give structure to our analysis. The playbook allows us to articulate our views on the sector in a timely, concise manner. Our objective is to ensure we don't throw the baby out with the bathwater as sentiments on the sector remain bleak.
With that out of the way, the following is our starting XI. We will dive deeper into our rationale for our selections in the remainder of this insight (Exhibit 1).
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 726.047px;">Exhibit 1: China Financials | Silver Linings Playbook</td>
</tr>
<tr>
<td style="width: 726.047px;">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/213/768/original/image_768460236451623962508577.png?1623962508" class="editor-image img-responsive" data-smartkarma-image-id="213768"></figure>

Source: Our analysis
</td>
</tr>
</tbody>
</table>
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In the spirit of the long-awaited UEFA Euro 2020, we present our inaugural "China Financials: Silver Linings Playbook", which summarizes our views on the names that are best positioned to navigate an environment of progressively slower credit growth, tighter liquidity and rising defaults. 
Our screen consists of 100+ stocks in the A/H share universe, as well as a select number of international / non-traditional names that have significant exposures to China's financial system. We have a preference for larger-cap and liquid names, which are then filtered by our opinions on their fundamentals, value, momentum and recent trading volumes. We also try to make our selections versatile and less vulnerable to single-factor movements.
Each player's position on the pitch and the team formation itself convey incremental information about our thoughts on the sector's performance over a three to six-month horizon. To the extent possible, we intend to update our ideas on a periodic basis. This provides a feedback loop with our other ongoing research on the industry.
However, our team selections are not investment recommendations. Instead, they are meant to give structure to our analysis. The playbook allows us to articulate our views on the sector in a timely, concise manner. Our objective is to ensure we don't throw the baby out with the bathwater as sentiments on the sector remain bleak.
With that out of the way, the following is our starting XI. We will dive deeper into our rationale for our selections in the remainder of this insight (Exhibit 1).



Exhibit 1: China Financials | Silver Linings Playbook





Source: Our analysis




Related Insights
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Glut and Famine: We Might See Snow in China This Summer 
China Macro: PPI Peaks, while CPI Eases Tightening Fears 
China Macro: Exports Disappoint, but It's Still Early in the Game 
Glut and Famine: China's Monetary Conditions a Notch Tighter in May 
ICBC: The Bond Identity | A Zero-Growth Dividend Discount Story 
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China Financials: Silver Linings Playbook

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>Many have missed out on the 14%, or 2,300 points, rally of the HSI in the last 9 trading days. There are still several stocks that look interesting now.</li>
<li>
<a href="https://www.smartkarma.com/entities/li-auto-inc-3dbe6187-544f-40dd-b9f9-72fba9c0110e" target="_blank" data-smartkarma-citation="entities:33811:1" rel="noopener">Li Auto (2015 HK)</a>, <a href="https://www.smartkarma.com/entities/link-reit" target="_blank" data-smartkarma-citation="entities:872:1" rel="noopener">Link REIT (823 HK)</a>, <a href="https://www.smartkarma.com/entities/china-mengniu-dairy-co" target="_blank" data-smartkarma-citation="entities:354:1" rel="noopener">China Mengniu Dairy Co (2319 HK)</a>, <a href="https://www.smartkarma.com/entities/hang-lung-properties-ltd" target="_blank" data-smartkarma-citation="entities:49:1" rel="noopener">Hang Lung Properties (101 HK)</a> and <a href="https://www.smartkarma.com/entities/galaxy-entertainment-group-limited" target="_blank" data-smartkarma-citation="entities:806:1" rel="noopener">Galaxy Entertainment Group (27 HK)</a> are massive laggards YTD.</li>
<li>As they have only experienced limited rebounds from the 19-Apr trough, they are set to catch up. Also, their earnings prospects look positive this year. </li>
</ul>


Many have missed out on the 14%, or 2,300 points, rally of the HSI in the last 9 trading days. There are still several stocks that look interesting now.

Li Auto (2015 HK), Link REIT (823 HK), China Mengniu Dairy Co (2319 HK), Hang Lung Properties (101 HK) and Galaxy Entertainment Group (27 HK) are massive laggards YTD.
As they have only experienced limited rebounds from the 19-Apr trough, they are set to catch up. Also, their earnings prospects look positive this year. 


HK Strategy: Where Are the Short-Term Opportunities?

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

<ul>
<li>Industrials and Consumer Staples Remain Top Overweights, Though Sentiment Fragile for Both.</li>
<li>Energy sector shows signs of a turnaround from long-term decline, whilst Financials remain unloved by China investors.</li>
<li>Real Estate allocations have hit record lows, with average holdings at just 2.93%, while Consumer Discretionary sector approaches all-time highs.</li>
</ul>


Industrials and Consumer Staples Remain Top Overweights, Though Sentiment Fragile for Both.
Energy sector shows signs of a turnaround from long-term decline, whilst Financials remain unloved by China investors.
Real Estate allocations have hit record lows, with average holdings at just 2.93%, while Consumer Discretionary sector approaches all-time highs.


Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

<ul>
<li>Nearly 90% through the review period, we see 6 potential adds and 5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.</li>
<li>We estimate a one-way turnover of 5.07% at the June rebalance leading to a one-way trade of CNY 3.97bn. Index arb activity could add to the impact on the stocks.</li>
<li>The potential adds have outperformed the potential deletes by 17% over the last month and by 21% over the last two months.</li>
</ul>


Nearly 90% through the review period, we see 6 potential adds and 5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.
We estimate a one-way turnover of 5.07% at the June rebalance leading to a one-way trade of CNY 3.97bn. Index arb activity could add to the impact on the stocks.
The potential adds have outperformed the potential deletes by 17% over the last month and by 21% over the last two months.


SSE50 Index Rebalance Preview: BIG Outperformance Over the Last Month

China

China Life Insurance Company Ltd. offers a wide range of life, accident, and health insurance products and services.

China Life Insurance Co H (2628 HK)

A/H Premium Tracker (To 26 Apr 2024): Best Week in a LONG Time for Hs Vs As - Time To Get Long H/A

AH Premia have finally turned a corner. Weeks of bouncing back and forth has led to lower premia, especially on average as wider spreads narrow...

Travis Lundy

China Financials: Silver Linings Playbook

Our Silver Linings Playbook outlines our views on the China financials names that are most likely to remain resilient in the face of macro...

Stanley Tsai, CFA

HK Strategy: Where Are the Short-Term Opportunities?

Li Auto, Link REIT, China Mengniu, Hang Lung Properties, and Galaxy Entertainment are massive laggards YTD but the recent rebound from the trough...

Osbert Tang, CFA

China Macro: Sector Positioning Update

Sector positioning among active China Funds. Industrials and Consumer Staples Remain Top Overweights, Energy shows signs of a turnaround, whilst...

Steven Holden

SSE50 Index Rebalance Preview: BIG Outperformance Over the Last Month

There could be 5 changes for the SSE50 in June. Estimate one-way turnover is 5.07% and the one-way trade is CNY 3.97bn. The potential adds have...

Brian Freitas