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)

<ul>
<li>China Industrials attract further inflows from dedicated active China funds.</li>
<li>Machinery and Electrical Equipment industry groups dominate holdings within the sector.</li>
<li>Buying seen in <a href="https://www.smartkarma.com/entities/contemporary-amperex-techn-a" target="_blank" data-smartkarma-citation="entities:24404:1" rel="noopener">CATL (A) (300750 CH)</a>, <a href="https://www.smartkarma.com/entities/sany-heavy-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:20183:1" rel="noopener">Sany Heavy Industry (600031 CH)</a> and <a href="https://www.smartkarma.com/entities/ever-sunshine-lifestyle-services-group-limited" target="_blank" data-smartkarma-citation="entities:28932:1" rel="noopener">Ever Sunshine Lifestyle Services (1995 HK)</a>.  Selling in <a href="https://www.smartkarma.com/entities/zhuzhou-csr-times-electric-co-ltd" target="_blank" data-smartkarma-citation="entities:18:1" rel="noopener">Zhuzhou Csr Times Electric Co, Ltd. (3898 HK)</a> and <a href="https://www.smartkarma.com/entities/beijing-new-building-materials-plc" target="_blank" data-smartkarma-citation="entities:13910:1" rel="noopener">Beijing New Building Materials (000786 CH)</a>
</li>
<li>Industrials move to top sector overweight among active China funds.</li>
</ul>


China Industrials attract further inflows from dedicated active China funds.
Machinery and Electrical Equipment industry groups dominate holdings within the sector.
Buying seen in CATL (A) (300750 CH), Sany Heavy Industry (600031 CH) and Ever Sunshine Lifestyle Services (1995 HK).  Selling in Zhuzhou Csr Times Electric Co, Ltd. (3898 HK) and Beijing New Building Materials (000786 CH)

Industrials move to top sector overweight among active China funds.


China Funds Increase Industrials Exposure, Moves to Top Overweight

China Specialist, Auto and Industrial Specialist

Victoria Li

The exceptional 2020 is about to end. We expect China's construction machinery sales to record a new high for FY2020. However, would China's construction machinery sector continue growing at the same fast pace in 2021E? Probably not!
<ol>
<li>We believe excavators replacement demand probably peak this year.</li>
<li>Infrastructure demand might decline yoy in 2021E.</li>
<li>Property construction demand would turn weak soon, with the new starts of property floor space trends down.</li>
</ol>
<a href="https://www.smartkarma.com/entities/sany-heavy-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:20183" rel="noopener">Sany Heavy Industry (600031 CH)</a> would be affected first as its earnings mainly come from early stage machines. <a href="https://www.smartkarma.com/entities/zoomlion-heavy-industry-h" target="_blank" data-smartkarma-citation="entities:7817" rel="noopener">Zoomlion Heavy Industry H (1157 HK)</a> earnings growth is overtaking Sany's and might slow down in 2H2021. We suggest to switch from Sany Heavy to Zoomlion.

The exceptional 2020 is about to end. We expect China's construction machinery sales to record a new high for FY2020. However, would China's construction machinery sector continue growing at the same fast pace in 2021E? Probably not!

We believe excavators replacement demand probably peak this year.
Infrastructure demand might decline yoy in 2021E.
Property construction demand would turn weak soon, with the new starts of property floor space trends down.

Sany Heavy Industry (600031 CH) would be affected first as its earnings mainly come from early stage machines. Zoomlion Heavy Industry H (1157 HK) earnings growth is overtaking Sany's and might slow down in 2H2021. We suggest to switch from Sany Heavy to Zoomlion.

China Construction Machinery: Risks Rise in 2021E

HK/China Equity Long-Short

Osbert Tang, CFA

China's construction and infrastructure machinery sector maintained an encouraging momentum in Sep and close out 3Q20 with strengths. We see no signs of slowing down despite the rapid recovery in 2Q20. Sales of excavators and wheel loaders rose 64.8% YoY and 16.3% YoY in Sep, respectively; which is the strongest growth in the last two months. This is a reflection of the increase in infrastructure investments after the massive special purpose bonds issued by the local governments in the last four months.We expect the rise in infrastructure spending and recovery in export demand to drive the industry's positive outlook in the next 12 months, benefiting names including <a href="https://www.smartkarma.com/entities/lonking-holdings-ltd" target="_blank" data-smartkarma-citation="entities:3944:1" rel="noopener">Lonking Holdings (3339 HK)</a>, <a href="https://www.smartkarma.com/entities/sany-heavy-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:20183:1" rel="noopener">Sany Heavy Industry (600031 CH)</a>, <a href="https://www.smartkarma.com/entities/xcmg-construction-machin-a" target="_blank" data-smartkarma-citation="entities:426:1" rel="noopener">Xcmg Construction Machin A (000425 CH)</a> and <a href="https://www.smartkarma.com/entities/zoomlion-heavy-industry-h" target="_blank" data-smartkarma-citation="entities:7817:1" rel="noopener">Zoomlion Heavy Industry H (1157 HK)</a>.  Backed by an undemanding 0.82x P/B, catch up in unit sales and attractive dividend yield of 10.7%, Lonking <a href="https://www.smartkarma.com/entities/lonking-holdings-ltd" target="_blank" data-smartkarma-citation="entities:3944:1" rel="noopener"></a>stands out with particular favourable risk-return payoff, in our view.

China's construction and infrastructure machinery sector maintained an encouraging momentum in Sep and close out 3Q20 with strengths. We see no signs of slowing down despite the rapid recovery in 2Q20. Sales of excavators and wheel loaders rose 64.8% YoY and 16.3% YoY in Sep, respectively; which is the strongest growth in the last two months. This is a reflection of the increase in infrastructure investments after the massive special purpose bonds issued by the local governments in the last four months.We expect the rise in infrastructure spending and recovery in export demand to drive the industry's positive outlook in the next 12 months, benefiting names including Lonking Holdings (3339 HK), Sany Heavy Industry (600031 CH), Xcmg Construction Machin A (000425 CH) and Zoomlion Heavy Industry H (1157 HK).  Backed by an undemanding 0.82x P/B, catch up in unit sales and attractive dividend yield of 10.7%, Lonking stands out with particular favourable risk-return payoff, in our view.

China Construction Machinery: No Sign of Slowing Down

Equity Bottom-Up

Zoomlion Heavy Industry H / Equity Bottom-Up

YTD, Zoomlion's share price is up 18%, but has lagged  Sany Heavy's (600031.CH) 35% and its own A-share's 19.8%.  We believe this has happened mainly due to Zoomlion's relatively lagging earrings recovery since 2018. However, as we expected, Zoomlion's earnings recovery accelerated in 2Q2020 with market demand moving onwards to late cycle products. In 2Q2020, Zoomlion reported a 90% yoy growth of net profit, vs. 78% yoy growth of Sany's.Moreover, Zoomlion plans to use most of the proceeds from A-share private placement on excavator and related components. It plans to gain market share in excavators and targets to be one of Top 5 suppliers in 5 years. As we've seen, local excavator brands successfully gained market shares from global leaders in the past few years and improved sector concentration. This strengthens our conviction that Zoomlion's excavators would take some market share from smaller players and this will be an earnings driver in the next few years.We believe Zoomlion would outperform Sany Heavy in 2H2020, especially after A-share placement adjustment.

YTD, Zoomlion's share price is up 18%, but has lagged  Sany Heavy's (600031.CH) 35% and its own A-share's 19.8%.  We believe this has happened mainly due to Zoomlion's relatively lagging earrings recovery since 2018. However, as we expected, Zoomlion's earnings recovery accelerated in 2Q2020 with market demand moving onwards to late cycle products. In 2Q2020, Zoomlion reported a 90% yoy growth of net profit, vs. 78% yoy growth of Sany's.Moreover, Zoomlion plans to use most of the proceeds from A-share private placement on excavator and related components. It plans to gain market share in excavators and targets to be one of Top 5 suppliers in 5 years. As we've seen, local excavator brands successfully gained market shares from global leaders in the past few years and improved sector concentration. This strengthens our conviction that Zoomlion's excavators would take some market share from smaller players and this will be an earnings driver in the next few years.We believe Zoomlion would outperform Sany Heavy in 2H2020, especially after A-share placement adjustment.

Zoomlion (1157.HK): Time to Switch from Sany into Zoomlion

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

MSCI Emerging Markets Index / Technical Analysis

The MSCI EM index (local currency) remains in an uptrend and is testing all-time highs set in January 2018 near 65,800; as long as the index is above 60,000 we are constructive from a price perspective.  China (CSI 300, MSCI China) continues to offer many attractive setups and accounts for the vast majority of today’s recommendations. Taiwan (TAIEX) continues to be worthy of an overweight within the EM universe, while South Korea (KOSPI) and India (SENSEX) display improving price and RS trends -- add exposure.

The MSCI EM index (local currency) remains in an uptrend and is testing all-time highs set in January 2018 near 65,800; as long as the index is above 60,000 we are constructive from a price perspective.  China (CSI 300, MSCI China) continues to offer many attractive setups and accounts for the vast majority of today’s recommendations. Taiwan (TAIEX) continues to be worthy of an overweight within the EM universe, while South Korea (KOSPI) and India (SENSEX) display improving price and RS trends -- add exposure.

China

SANY Heavy Industry Co., Ltd manufactures and markets construction and engineering machinery and related parts. The Company produces and sells concrete pumps, concrete pump vehicles, road rollers, pavers, and other related products. Sany Heavy Industry markets its products worldwide.

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Sany Heavy Industry (600031 CH)

China Funds Increase Industrials Exposure, Moves to Top Overweight

Inflows in to Machinery and Electrical Equipment stocks push the Industrial sector to the top overweight among active China funds.

Steven Holden

China Construction Machinery: Risks Rise in 2021E

We expect China's construction machinery sales to record a new high for FY2020. However, would China's construction machinery sector continue...

Victoria Li

China Construction Machinery: No Sign of Slowing Down

Both excavator and wheel loader sales are good in Sep and show no sign of slowing down. We believe China construction machinery industry will stay...

Osbert Tang, CFA

Zoomlion (1157.HK): Time to Switch from Sany into Zoomlion

Since January, Zoomlion's share price rose by

Victoria Li

Remain Overweight EM Relative To EAFE

The MSCI EM index (local currency) remains in an uptrend and is testing all-time highs set in January 2018 near 65,800; as long as the index is...

Vermilion Research

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