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

Thematic (Sector/Industry)

Utilities are the smallest sector allocation among global EM managers.  Average weights stand at 1.45%, or underweight -0.41% versus the <a href="https://www.smartkarma.com/entities/ishares-msci-emerging-markets" target="_blank" data-smartkarma-citation="entities:438:1" rel="noopener">iShares MSCI Emerging Markets (EEM US)</a> portfolio.  Only 66.8% of the EM funds in our analysis have any exposure at all, with 29.5% positioned as overweight.<a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a> and <a href="https://www.smartkarma.com/entities/china-longyuan-power-group-corp-ltd" target="_blank" data-smartkarma-citation="entities:14215:1" rel="noopener">China Longyuan Power Group Corp (916 HK)</a> are the few brightspots in an otherwise very lightly held sector.With continued underperformance of the MSCI EM Utilities sector, a weight in the benchmark MSCI Emerging Markets index of sub 2% and an average active fund weight of 1.45%, EM managers must question whether Utilities stocks have a place in EM portfolios at all.

Utilities are the smallest sector allocation among global EM managers.  Average weights stand at 1.45%, or underweight -0.41% versus the iShares MSCI Emerging Markets (EEM US) portfolio.  Only 66.8% of the EM funds in our analysis have any exposure at all, with 29.5% positioned as overweight.ENN Energy (2688 HK) and China Longyuan Power Group Corp (916 HK) are the few brightspots in an otherwise very lightly held sector.With continued underperformance of the MSCI EM Utilities sector, a weight in the benchmark MSCI Emerging Markets index of sub 2% and an average active fund weight of 1.45%, EM managers must question whether Utilities stocks have a place in EM portfolios at all.

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Hang Seng Indexes have announced the conclusions of the market consultation on the "Proposal to enhance the Hang Seng Index as regards continuing to serve as the most representative and important benchmark of the Hong Kong stock market".The main changes to the index are:<ul>
<li>Increase the number of constituents to 80 by mid-2022 and ultimately to have 100 stocks in the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a>. </li>
<li>To have a more balanced representation of the Hong Kong stock market, the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> constituents will be selected from seven Industry Groups. The target is to achieve a market cap coverage of not less than 50% for each Industry Group.</li>
<li>To provide flexibility for the timely addition of new listings, the listing history requirement will be lowered to 3 months.</li>
<li>There will be 20-25 'Hong Kong companies' in the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> and this number will be evaluated at least every 2 years.</li>
<li>All index constituents, including Secondary Listings and WVR Securities, will be subject to a weighting cap of 8%. The 8% cap will be applied to the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> constituents as well.</li>
</ul>There is no mention of the tranched inclusion of stocks in the index. This leads us to believe that 5 stocks (net) could be included in the index at each review, starting in June 2021 and concluding in June 2022.With a change in the Industry groups and a reduction in the target coverage (in terms of market cap) from 80% to 50% for each Industry group, we refresh our list of potential inclusions into and exclusions from the index.

Hang Seng Indexes have announced the conclusions of the market consultation on the "Proposal to enhance the Hang Seng Index as regards continuing to serve as the most representative and important benchmark of the Hong Kong stock market".The main changes to the index are:
Increase the number of constituents to 80 by mid-2022 and ultimately to have 100 stocks in the Hong Kong Hang Seng Index (HSI INDEX). 
To have a more balanced representation of the Hong Kong stock market, the Hong Kong Hang Seng Index (HSI INDEX) constituents will be selected from seven Industry Groups. The target is to achieve a market cap coverage of not less than 50% for each Industry Group.
To provide flexibility for the timely addition of new listings, the listing history requirement will be lowered to 3 months.
There will be 20-25 'Hong Kong companies' in the Hong Kong Hang Seng Index (HSI INDEX) and this number will be evaluated at least every 2 years.
All index constituents, including Secondary Listings and WVR Securities, will be subject to a weighting cap of 8%. The 8% cap will be applied to the Hang Seng China Enterprises Index (HSCEI INDEX) constituents as well.
There is no mention of the tranched inclusion of stocks in the index. This leads us to believe that 5 stocks (net) could be included in the index at each review, starting in June 2021 and concluding in June 2022.With a change in the Industry groups and a reduction in the target coverage (in terms of market cap) from 80% to 50% for each Industry group, we refresh our list of potential inclusions into and exclusions from the index.

HSI Market Consultation: BIG Changes Coming

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Last Week in Event SPACE: Beijing Jingneng, Maeda Road, Justbon, Tencent, Intouch, JCCC/​Astra

Index Rebalance

Country Garden Services / Index Rebalance

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 26 February. The constituent changes will be effective after the close of trading on 12 March.For the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a>, there are 2 inclusions and 4 exclusions. This brings the number of index constituents back down to 50.The inclusions are <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> and <a href="https://www.smartkarma.com/entities/nongfu-spring" target="_blank" data-smartkarma-citation="entities:28955:1" rel="noopener">Nongfu Spring (9633 HK)</a>, while the exclusions are <a href="https://www.smartkarma.com/entities/china-conch-venture-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19943:1" rel="noopener">China Conch Venture Holdings (586 HK)</a>, <a href="https://www.smartkarma.com/entities/petrochina-co-ltd-h" target="_blank" data-smartkarma-citation="entities:262:1" rel="noopener">PetroChina (857 HK)</a>, <a href="https://www.smartkarma.com/entities/hengan-intl-group-co-ltd" target="_blank" data-smartkarma-citation="entities:29:1" rel="noopener">Hengan Intl Group (1044 HK)</a> and <a href="https://www.smartkarma.com/entities/china-resources-gas-group-ltd" target="_blank" data-smartkarma-citation="entities:20525:1" rel="noopener">China Resources Gas (1193 HK)</a>.One-way turnover is estimated at 5.62% and will result in a one-way trade of HK$4.10bn. The highest impact is on <a href="https://www.smartkarma.com/entities/china-conch-venture-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19943:1" rel="noopener">China Conch Venture Holdings (586 HK)</a> at 3.5 days of ADV to sell from passive funds, while <a href="https://www.smartkarma.com/entities/china-resources-gas-group-ltd" target="_blank" data-smartkarma-citation="entities:20525:1" rel="noopener">China Resources Gas (1193 HK)</a> has almost 3 days of ADV to sell.There are only 10 trading days to implementation of the changes, but the changes were largely expected. We had <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a> as a lower probability inclusion and <a href="https://www.smartkarma.com/entities/china-conch-venture-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19943:1" rel="noopener">China Conch Venture Holdings (586 HK)</a> as a lower probability deletion, and there could be a larger impact on these two stocks.The conclusions of the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> market consultation are scheduled to be announced on Monday, 1 March. Depending on the increase in number of index constituents and the changes to the index methodology, some of the HSCEI inclusions/ exclusions could be added to/ deleted from the HSI at the June review and could result in additional same way flow on the stocks.

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 26 February. The constituent changes will be effective after the close of trading on 12 March.For the Hang Seng China Enterprises Index (HSCEI INDEX), there are 2 inclusions and 4 exclusions. This brings the number of index constituents back down to 50.The inclusions are Country Garden Services Holdings (6098 HK) and Nongfu Spring (9633 HK), while the exclusions are China Conch Venture Holdings (586 HK), PetroChina (857 HK), Hengan Intl Group (1044 HK) and China Resources Gas (1193 HK).One-way turnover is estimated at 5.62% and will result in a one-way trade of HK$4.10bn. The highest impact is on China Conch Venture Holdings (586 HK) at 3.5 days of ADV to sell from passive funds, while China Resources Gas (1193 HK) has almost 3 days of ADV to sell.There are only 10 trading days to implementation of the changes, but the changes were largely expected. We had Country Garden Services Holdings (6098 HK) as a lower probability inclusion and China Conch Venture Holdings (586 HK) as a lower probability deletion, and there could be a larger impact on these two stocks.The conclusions of the Hong Kong Hang Seng Index (HSI INDEX) market consultation are scheduled to be announced on Monday, 1 March. Depending on the increase in number of index constituents and the changes to the index methodology, some of the HSCEI inclusions/ exclusions could be added to/ deleted from the HSI at the June review and could result in additional same way flow on the stocks.

HSCEI Index Rebalance: Two In, Four Out Brings Us Back to 50; HSI Consultation Could Increase Flow

China Resources Beer Holdings / Index Rebalance

Last evening, Hang Seng Indexes announced that the conclusions of the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> market consultation will be released on 1 March. This means that the implementation of the changes using the new methodology will begin at the June 2021 review and conclude at the March 2022 review.With the results of the March 2021 review scheduled to be announced post market close tomorrow (26 February), the review will follow the current methodology. But with the leeway afforded to the index committee to decide on the stocks to be included/ excluded, stocks could be selected based on whether they will make the cut for inclusion based on the future methodology. This will also reduce the turnover at future reviews.The <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> already has 52 constituents and we expect this to increase further at the March review. We expect only inclusions and the number of stocks in the index could increase to 55-56. This too will reduce the turnover at future reviews. The stocks included at the March review will see a big impact since they will be included in one shot, as opposed to stocks included at the June review where the implementation will most likely occur in 4 tranches.Potential inclusions are <a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a>, <a href="https://www.smartkarma.com/entities/china-resources-beer-holdings" target="_blank" data-smartkarma-citation="entities:399:1" rel="noopener">China Resources Beer Holdings (291 HK)</a>, <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services Holdings (6098 HK)</a>. Outside possibilities are <a href="https://www.smartkarma.com/entities/haidilao-international-holding-ltd" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao (6862 HK)</a>, <a href="https://www.smartkarma.com/entities/china-gas-holdings-ltd" target="_blank" data-smartkarma-citation="entities:14315:1" rel="noopener">China Gas Holdings (384 HK)</a> and <a href="https://www.smartkarma.com/entities/longfor-properties" target="_blank" data-smartkarma-citation="entities:8149:1" rel="noopener">Longfor Properties (960 HK)</a>.

Last evening, Hang Seng Indexes announced that the conclusions of the Hong Kong Hang Seng Index (HSI INDEX) market consultation will be released on 1 March. This means that the implementation of the changes using the new methodology will begin at the June 2021 review and conclude at the March 2022 review.With the results of the March 2021 review scheduled to be announced post market close tomorrow (26 February), the review will follow the current methodology. But with the leeway afforded to the index committee to decide on the stocks to be included/ excluded, stocks could be selected based on whether they will make the cut for inclusion based on the future methodology. This will also reduce the turnover at future reviews.The Hong Kong Hang Seng Index (HSI INDEX) already has 52 constituents and we expect this to increase further at the March review. We expect only inclusions and the number of stocks in the index could increase to 55-56. This too will reduce the turnover at future reviews. The stocks included at the March review will see a big impact since they will be included in one shot, as opposed to stocks included at the June review where the implementation will most likely occur in 4 tranches.Potential inclusions are ENN Energy (2688 HK), China Resources Beer Holdings (291 HK), Country Garden Services Holdings (6098 HK). Outside possibilities are Haidilao (6862 HK), China Gas Holdings (384 HK) and Longfor Properties (960 HK).

HSI March Index Rebalance Preview - Last One Before New Methodology Kicks In

China

ENN Energy Holdings Ltd. distributes natural gas in China.  The Company, through its subsidiaries, invests in, operates, and manages gas pipelines, and sells and distributes piped and bottled gas in China.

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ENN Energy (2688 HK)

EM Utilities: Bailing Out

With continued underperformance of the MSCI EM Utilities sector, EM managers must question whether Utilities stocks have a place in EM portfolios...

Steven Holden

HSI Market Consultation: BIG Changes Coming

Hang Seng Indexes has announced the conclusions of the market consultation and the HSI is going to look different in a years time. Financials see a...

Brian Freitas

Last Week in Event SPACE: Beijing Jingneng, Maeda Road, Justbon, Tencent, Intouch, JCCC/Astra

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

HSCEI Index Rebalance: Two In, Four Out Brings Us Back to 50; HSI Consultation Could Increase Flow

There are 2 adds and 4 deletes to the HSCEI. Some stocks have decent impact in the 10 days to implementation. There could be additional flow...

Brian Freitas

HSI March Index Rebalance Preview - Last One Before New Methodology Kicks In

HSIL will announce the changes to the HSI post market close tomorrow. With the conclusions of the market consultation being announced on 1 March,...

Brian Freitas

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52-week Range

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P/E

Dividend (Yield)

EM Utilities: Bailing Out

With continued underperformance of the MSCI EM Utilities sector, EM managers must question whether Utilities stocks have a place in EM portfolios...

Steven Holden

HSI Market Consultation: BIG Changes Coming

Hang Seng Indexes has announced the conclusions of the market consultation and the HSI is going to look different in a years time. Financials see a...

Brian Freitas

Last Week in Event SPACE: Beijing Jingneng, Maeda Road, Justbon, Tencent, Intouch, JCCC/​Astra

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

HSCEI Index Rebalance: Two In, Four Out Brings Us Back to 50; HSI Consultation Could Increase Flow

There are 2 adds and 4 deletes to the HSCEI. Some stocks have decent impact in the 10 days to implementation. There could be additional flow...

Brian Freitas

HSI March Index Rebalance Preview - Last One Before New Methodology Kicks In

HSIL will announce the changes to the HSI post market close tomorrow. With the conclusions of the market consultation being announced on 1 March,...

Brian Freitas

Last Week in Event SPACE: Beijing Jingneng, Maeda Road, Justbon, Tencent, Intouch, JCCC/Astra