Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

A-SHARE QUICKNOTE |   A Bag-Holding Exercise Has Begun

A-Share Margin:  Selloff Hits Individuals, Tech Shares HOW...... Will It End?

A-Shares Commentary:   To Equanimity And Beyond!

Quiddity Advisors

Quantitative Analysis

Monday morning 6 July, the China Securities Journal carried an <a href="http://www.cs.com.cn/xwzx/jr/202007/t20200706_6073460.html" target="_blank" rel="noopener">editorial</a> which was widely reported to stoke bullish fervour.
<ul>
<li>The FT said the editorial "talked up the prospect of a “healthy” bull market. The article said investors could look forward “to the wealth effect of the capital markets”. 
</li>
<li>Bloomberg said the editorial said "fostering a “healthy” bull market after the pandemic is now more important to the economy than ever."</li>
<li>The WSJ quoted it as saying "fostering a “healthy bull market” is important given China’s increasingly complicated international relations, intense financial and technological competition, and the challenge of controlling internal financial risks."
</li>
</ul>
The editorial is quoted <a href="http://www.cs.com.cn/xwzx/jr/202007/t20200706_6073460.html" target="_blank" rel="noopener">here</a> in Chinese. If anything, it probably is more bullish-minded than the foreign media give it credit for. Importantly, with today's editorial, the CSJ launched a new series of contributor articles based on the theme "新机, 新局, 新股市" which might be translated to New Mechanism, New Direction, New Stock Market (新局 = 新局面). Any retail investor will tell you that if the China Securities Journal is about to launch a series of articles which will all be represented under a slogan which is designed to elicit bullishness, they think the powers that be pointing at something. To be sure, there are words of wisdom - i.e. "take the long view" amid the positive aspects of significant capital market reform, and moving the economy towards technology, science, digitalization, and the cloud, but the conclusion uses a metaphor to describe the opportunity - "despite the downward pressure on the economy the signs of recovery in June seemed to spark a single match to the woodpile creating a fire to illuminate the road forward for China's economy."
<div class="content-highlight">
Code words such as "new direction", "new stock market", "technology", "digitalization", "cloud", "spark a match", "light a fire" are not exactly subtle. 
People understood that.
</div>
It is notable that all the China-based analysts and fund managers quoted in the each of the articles take pains to say that this time is different than 2014-2015 because China's monetary policy is prudent, and China is wary of creating another bubble and bust like in 2015.
But they also all say they are max long or buying.
This looks like a setup. It is not quite summer 2014, but it is not not that, either. Investors will need to watch what the "official" guidance looks like in terms of speeches and front page contributor editorials in the CSJ. They will also need to watch the CSRC pages to see if there are warnings, like there were in February 2019, and in spring of 2015 in the big runup. 
What Next? It helps to look into the data to see who the players are, what they CAN do, what they WANT to do, and what they NEED to do at different points in time. And then we can look at the plumbing to see how that could or will impact things. It may also help to look at the past, and a series of insights from spring through about mid-late July 2015 looking at the drivers and attributes of the last run-up as it was happening are shown below.
<hr>
When things got interesting in spring of 2015, I wrote a whole series of articles about China's bull market and the drivers - especially retail leverage - and the microstructure and behavioural aspects which encouraged the bull move, which in turn helped set the conditions for a fall. If you want a not so quick history of the event from the aspect of leverage, market microstructure, and policy reaction, an hour spent reading most of these in order would probably provide a decent guide.
<table class="table table-striped">
<tbody>
<tr>
<td colspan="2" style="width: 724px;">
The Series of Insights on the Rise, Fall, and Subsequent Policy Manoeuvrings
</td>
</tr>
<tr>
<td style="width: 119px;">Date</td>
<td style="width: 584px;">Title</td>
</tr>
<tr>
<td style="width: 119px;">15 April 2015</td>
<td style="width: 584px;">
<a href="https://www.smartkarma.com/insights/a-shares-margin-investors-are-not-marginal" target="_blank" data-smartkarma-citation="insights:641" rel="noopener">A-SHARES: Margin Investors are NOT marginal!</a> </td>
</tr>
<tr>
<td style="width: 119px;">18 April 2015</td>
<td style="width: 584px;">
<a href="https://www.smartkarma.com/insights/a-share-leverage-umbrella-trusts-and-margin" target="_blank" data-smartkarma-citation="insights:660" rel="noopener">A-SHARE LEVERAGE: Umbrella Trusts and Margin</a> </td>
</tr>
<tr>
<td style="width: 119px;">3 May 2015</td>
<td style="width: 584px;">
<a href="https://www.smartkarma.com/insights/a-share-margin-gorillas-and-grandfather-clocks" target="_blank" data-smartkarma-citation="insights:724" rel="noopener">A-Share Margin: Gorillas and Grandfather Clocks</a> </td>
</tr>
<tr>
<td style="width: 119px;">7 May 2015</td>
<td style="width: 584px;">
<a href="https://www.smartkarma.com/insights/a-shares-leverage-index-adjustment-can-t-be-avoided-in-the-short-term-xinhua" target="_blank" rel="noopener">A-SHARES &amp; LEVERAGE - “Index Adjustment Can’t Be Avoided in the Short-Term”? (Xinhua)</a>
</td>
</tr>
<tr>
<td style="width: 119px;">22 June 2015</td>
<td style="width: 584px;">
<a href="https://www.smartkarma.com/insights/a-shares-margin-investors-are-still-not-marginal" target="_blank" data-smartkarma-citation="insights:942" rel="noopener">A-SHARES: Margin Investors are STILL not Marginal!</a> </td>
</tr>
<tr>
<td style="width: 119px;">27 June 2015</td>
<td style="width: 584px;">
<a href="https://www.smartkarma.com/insights/a-share-quicknote-a-bag-holding-exercise-has-begun" target="_blank" data-smartkarma-citation="insights:974" rel="noopener">A-SHARE QUICKNOTE | A Bag-Holding Exercise Has Begun</a> </td>
</tr>
<tr>
<td style="width: 119px;">8 July 2015</td>
<td style="width: 584px;">
<a href="https://www.smartkarma.com/insights/a-share-margin-selloff-hits-individuals-tech-shares-how-will-it-end" target="_blank" data-smartkarma-citation="insights:1012" rel="noopener">A-Share Margin: Selloff Hits Individuals, Tech Shares HOW...... Will It End?</a> </td>
</tr>
<tr>
<td style="width: 119px;">13 July 2015</td>
<td style="width: 584px;">
<a href="https://www.smartkarma.com/insights/ad1b442a-5674-4c4d-bfb8-4b812a6e2dc2" target="_blank" data-smartkarma-citation="insights:984" rel="noopener">A-Shares Commentary: To Equanimity And Beyond!</a> </td>
</tr>
<tr>
<td style="width: 119px;">19 July 2015</td>
<td style="width: 584px;">
<a href="https://www.smartkarma.com/insights/china-a-shares-1-2-3-trillion-rmb" target="_blank" data-smartkarma-citation="insights:1066" rel="noopener">China A-Shares - 1, 2, 3 (trillion RMB)</a> </td>
</tr>
</tbody>
</table>

Monday morning 6 July, the China Securities Journal carried an editorial which was widely reported to stoke bullish fervour.

The FT said the editorial "talked up the prospect of a “healthy” bull market. The article said investors could look forward “to the wealth effect of the capital markets”. 

Bloomberg said the editorial said "fostering a “healthy” bull market after the pandemic is now more important to the economy than ever."
The WSJ quoted it as saying "fostering a “healthy bull market” is important given China’s increasingly complicated international relations, intense financial and technological competition, and the challenge of controlling internal financial risks."


The editorial is quoted here in Chinese. If anything, it probably is more bullish-minded than the foreign media give it credit for. Importantly, with today's editorial, the CSJ launched a new series of contributor articles based on the theme "新机, 新局, 新股市" which might be translated to New Mechanism, New Direction, New Stock Market (新局 = 新局面). Any retail investor will tell you that if the China Securities Journal is about to launch a series of articles which will all be represented under a slogan which is designed to elicit bullishness, they think the powers that be pointing at something. To be sure, there are words of wisdom - i.e. "take the long view" amid the positive aspects of significant capital market reform, and moving the economy towards technology, science, digitalization, and the cloud, but the conclusion uses a metaphor to describe the opportunity - "despite the downward pressure on the economy the signs of recovery in June seemed to spark a single match to the woodpile creating a fire to illuminate the road forward for China's economy."

Code words such as "new direction", "new stock market", "technology", "digitalization", "cloud", "spark a match", "light a fire" are not exactly subtle. 
People understood that.

It is notable that all the China-based analysts and fund managers quoted in the each of the articles take pains to say that this time is different than 2014-2015 because China's monetary policy is prudent, and China is wary of creating another bubble and bust like in 2015.
But they also all say they are max long or buying.
This looks like a setup. It is not quite summer 2014, but it is not not that, either. Investors will need to watch what the "official" guidance looks like in terms of speeches and front page contributor editorials in the CSJ. They will also need to watch the CSRC pages to see if there are warnings, like there were in February 2019, and in spring of 2015 in the big runup. 
What Next? It helps to look into the data to see who the players are, what they CAN do, what they WANT to do, and what they NEED to do at different points in time. And then we can look at the plumbing to see how that could or will impact things. It may also help to look at the past, and a series of insights from spring through about mid-late July 2015 looking at the drivers and attributes of the last run-up as it was happening are shown below.

When things got interesting in spring of 2015, I wrote a whole series of articles about China's bull market and the drivers - especially retail leverage - and the microstructure and behavioural aspects which encouraged the bull move, which in turn helped set the conditions for a fall. If you want a not so quick history of the event from the aspect of leverage, market microstructure, and policy reaction, an hour spent reading most of these in order would probably provide a decent guide.




The Series of Insights on the Rise, Fall, and Subsequent Policy Manoeuvrings



Date
Title


15 April 2015

A-SHARES: Margin Investors are NOT marginal! 


18 April 2015

A-SHARE LEVERAGE: Umbrella Trusts and Margin 


3 May 2015

A-Share Margin: Gorillas and Grandfather Clocks 


7 May 2015

A-SHARES &amp; LEVERAGE - “Index Adjustment Can’t Be Avoided in the Short-Term”? (Xinhua)



22 June 2015

A-SHARES: Margin Investors are STILL not Marginal! 


27 June 2015

A-SHARE QUICKNOTE | A Bag-Holding Exercise Has Begun 


8 July 2015

A-Share Margin: Selloff Hits Individuals, Tech Shares HOW...... Will It End? 


13 July 2015

A-Shares Commentary: To Equanimity And Beyond! 


19 July 2015

China A-Shares - 1, 2, 3 (trillion RMB) 




China Merchants Securities Co Ltd (A) (600999 CH)

Semiconductor Manufacturing International Corp (SMIC) (981 HK)

Semiconductor Manufacturing International Corp (SMIC)

中国フロー：バブル、バブル、苦労、そしてトラブル（売上高、マージン、余剰を観察）