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

China allocations among Global active managers have fallen to below pre 2017 levels.  Average holding weights among the 381 funds in our analysis dropped to 3.76%, underweight the MSCI All Country World index by -1.18% with just 28.3% overweight the benchmark. This allocation drop is in stark contrast to what is occurring in the USA, with allocations powering to all-time highs of 53.70%.  The difference between US and China weights are at all-time wides.The most widely held stocks are <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US), </a><a href="https://www.smartkarma.com/entities/aia-group-ltd" target="_blank" data-smartkarma-citation="entities:14895:1" rel="noopener">AIA Group Ltd (1299 HK)</a> and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, with the trio accounting for 40.6% of total China allocations.  If Global managers are to increase weights in China, they will likely have to broaden their investment horizons.  Comparing Global stock holdings in China with their Global Emerging Market peers suggests a number of stocks that could enter the radar of Global investors.  We highlight <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a> , <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> and <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a> as stocks lightly held by Global managers but well invested by EM active funds.

China allocations among Global active managers have fallen to below pre 2017 levels.  Average holding weights among the 381 funds in our analysis dropped to 3.76%, underweight the MSCI All Country World index by -1.18% with just 28.3% overweight the benchmark. This allocation drop is in stark contrast to what is occurring in the USA, with allocations powering to all-time highs of 53.70%.  The difference between US and China weights are at all-time wides.The most widely held stocks are Alibaba Group (BABA US), AIA Group Ltd (1299 HK) and Tencent (700 HK), with the trio accounting for 40.6% of total China allocations.  If Global managers are to increase weights in China, they will likely have to broaden their investment horizons.  Comparing Global stock holdings in China with their Global Emerging Market peers suggests a number of stocks that could enter the radar of Global investors.  We highlight Ping An Insurance (H) (2318 HK) , Meituan (3690 HK) and JD.com Inc (ADR) (JD US) as stocks lightly held by Global managers but well invested by EM active funds.

Global Funds China Fall:  Gap to US Largest in History

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

In our weekly HK Connect Flow series, we aim to highlight key stocks and sectors which the mainland investors traded via the southbound Hong Kong Connect, as analyzed by our proprietary data engine. Since the opening of Hong Kong Connect scheme in 2014, southbound Chinese money started to play an increasingly important role in the Hong Kong stock market. In a Hong Kong exchange report released in July 2019, the exchange highlighted that flows from mainland China accounted for 12% of the total trading volume in the market and is ahead of the US investors' 10% and UK investors' 7% share respectively.  We split the stocks eligible for the Hong Kong Connect trade into three groups: HSCEI component stocks, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion. In this insight, we will highlight inflows into China Mobile Limited (941 HK), and Geely Automobile Holdings Limited (175 HK), as well as outflows from Wuxi Biologics (Cayman) Inc. (2269 HK), Tencent Holdings Limited (700 HK), and Xiaomi Corporation (1810 HK).

In our weekly HK Connect Flow series, we aim to highlight key stocks and sectors which the mainland investors traded via the southbound Hong Kong Connect, as analyzed by our proprietary data engine.  Since the opening of Hong Kong Connect scheme in 2014, southbound Chinese money started to play an increasingly important role in the Hong Kong stock market. In a Hong Kong exchange report released in July 2019, the exchange highlighted that flows from mainland China accounted for 12% of the total trading volume in the market and is ahead of the US investors' 10% and UK investors' 7% share respectively.   We split the stocks eligible for the Hong Kong Connect trade into three groups: HSCEI component stocks, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.  In this insight, we will highlight inflows into China Mobile Limited (941 HK), and Geely Automobile Holdings Limited (175 HK), as well as outflows from Wuxi Biologics (Cayman) Inc. (2269 HK), Tencent Holdings Limited (700 HK), and Xiaomi Corporation (1810 HK).

Hong Kong Connect Flows: Wuxi Biologics, Tencent, Xiaomi Led Outflows

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Hang Seng China Enterprises Index / Event-Driven

Most Chinese companies will announce their half yearly results in the next couple of weeks. Some will announce their interim dividends as well.With most of the dividends for 2021 having already gone ex, we see little upside/downside in the HSCEI 2021 dividend futures contract.The HSCEI 2022 dividend futures are another story though. There are a lot of potential events that could change the fair value of the futures. Taking into account all the changes expected to take place by the December rebalance, we see the current dividend futures market trading around 6 index points higher than our fair value. In terms of future events, we find a lot more potential negative catalysts as compared to positive catalysts.We recommend selling the HSCEI 2022 dividend futures at 245 or higher (equivalent to around -25 on the HSCEI 2021/22 dividend steepener) and buying the dividend futures at 230 or lower. These estimates will change as the CNYHKD fx rates move around and some of the catalysts come to pass.

Most Chinese companies will announce their half yearly results in the next couple of weeks. Some will announce their interim dividends as well.With most of the dividends for 2021 having already gone ex, we see little upside/downside in the HSCEI 2021 dividend futures contract.The HSCEI 2022 dividend futures are another story though. There are a lot of potential events that could change the fair value of the futures. Taking into account all the changes expected to take place by the December rebalance, we see the current dividend futures market trading around 6 index points higher than our fair value. In terms of future events, we find a lot more potential negative catalysts as compared to positive catalysts.We recommend selling the HSCEI 2022 dividend futures at 245 or higher (equivalent to around -25 on the HSCEI 2021/22 dividend steepener) and buying the dividend futures at 230 or lower. These estimates will change as the CNYHKD fx rates move around and some of the catalysts come to pass.

HSCEI Dividend Futures: Fair Value & Catalysts Point to Downside for 2022

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<a href="https://www.smartkarma.com/entities/china-telecom-corp-ltd-h" target="_blank" data-smartkarma-citation="entities:1015:1" rel="noopener">China Telecom Corp Ltd (H) (728 HK)</a> has <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0806/2021080600069.pdf" target="_blank" rel="noopener">priced</a> its US$7.3bn offering of A-shares at RMB 4.53/share. That is not far from what I suggested might be an appropriate pricing in <a href="https://www.smartkarma.com/insights/china-mobile-941-hk-it-could-have-been-done-better-but-it-ain-t-bad-for-hs" target="_blank" data-smartkarma-citation="insights:52018" rel="noopener">China Mobile (941 HK) - It Could Have Been Done Better, But It Ain't Bad for Hs</a> and <a href="https://www.smartkarma.com/insights/china-telecom-728-hk-ups-div-payout-policy-there-s-a-plan-here-expect-china-mobile-to-follow" target="_blank" data-smartkarma-citation="insights:53355" rel="noopener">China Telecom (728 HK) Ups Div Payout Policy - There's a Plan Here. Expect China Mobile to Follow</a>.It was also an 87% premium to the current H-share price. As discussed in those previous insights, there are obligations on the China Telecom parent, and a promise of a higher payout ratio NOW and even higher payout ratio LATER. Normally, I would suggest taking profits on an H-share which had rallied in the run-up to an A-share offering. But....... There is more below the fold.

China Telecom Corp Ltd (H) (728 HK) has priced its US$7.3bn offering of A-shares at RMB 4.53/share. That is not far from what I suggested might be an appropriate pricing in China Mobile (941 HK) - It Could Have Been Done Better, But It Ain't Bad for Hs and China Telecom (728 HK) Ups Div Payout Policy - There's a Plan Here. Expect China Mobile to Follow.It was also an 87% premium to the current H-share price. As discussed in those previous insights, there are obligations on the China Telecom parent, and a promise of a higher payout ratio NOW and even higher payout ratio LATER. Normally, I would suggest taking profits on an H-share which had rallied in the run-up to an A-share offering. But....... There is more below the fold.

China Telecom A-Share IPO Prices; H-Share Discount Wide; Buy China Mobile

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

Equity Bottom-Up

<ul class="">
<li>The State Administration for Market Regulation orders Tencent (700 HK) to terminate exclusive music copyrights.</li>
<li>However, independent musician is exempted from the ban on exclusive contracts.</li>
<li>Cloud Village has already got some copyright usage rights that TME exclusively owned before 2020.</li>
<li>The real problems are the mature market and the time competition from short video.</li>
</ul>


The State Administration for Market Regulation orders Tencent (700 HK) to terminate exclusive music copyrights.
However, independent musician is exempted from the ban on exclusive contracts.
Cloud Village has already got some copyright usage rights that TME exclusively owned before 2020.
The real problems are the mature market and the time competition from short video.


Tencent Music (TME): Penalty Not Fatal, But Music Market Bad Enough

Hong Kong

China Mobile Limited, through its subsidiaries, provides cellular telecommunications and related services in the People's Republic of China and Hong Kong SAR.

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China Mobile Ltd Spon Adr (CHL US)

Global Funds China Fall: Gap to US Largest in History

China allocations among Global active funds have fallen to below pre 2017 levels. Average holding weights among the 381 funds in our analysis...

Steven Holden

Hong Kong Connect Flows: Wuxi Biologics, Tencent, Xiaomi Led Outflows

We highlight top three stocks that led the outflows last week were Wuxi Biologics (2269 HK), Tencent (700 HK), and Xiaomi (1810 HK).

Ke Yan, CFA, FRM

HSCEI Dividend Futures: Fair Value & Catalysts Point to Downside for 2022

We see around 6 points of downside on the HSCEI 2022 dividend futures from the last traded price. There are more negative catalysts for the 2022...

Brian Freitas

Tencent Music (TME): Penalty Not Fatal, But Music Market Bad Enough

The authorities order Tencent to terminate exclusive music copyrights. However, independent musician is exempted. The real problems are the mature...

Ming Lu

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Global Funds China Fall: Gap to US Largest in History

China allocations among Global active funds have fallen to below pre 2017 levels. Average holding weights among the 381 funds in our analysis...

Steven Holden

Hong Kong Connect Flows: Wuxi Biologics, Tencent, Xiaomi Led Outflows

We highlight top three stocks that led the outflows last week were Wuxi Biologics (2269 HK), Tencent (700 HK), and Xiaomi (1810 HK).

Ke Yan, CFA, FRM

HSCEI Dividend Futures: Fair Value & Catalysts Point to Downside for 2022

We see around 6 points of downside on the HSCEI 2022 dividend futures from the last traded price. There are more negative catalysts for the 2022...

Brian Freitas

China Telecom A-Share IPO Prices; H-Share Discount Wide; Buy China Mobile

China Telecom has priced its A-share IPO at an 87% premium to the H. To get to the same 2021e DivYield, China Mobile will have to be 20+ higher,...

Travis Lundy

Tencent Music (TME): Penalty Not Fatal, But Music Market Bad Enough

The authorities order Tencent to terminate exclusive music copyrights. However, independent musician is exempted. The real problems are the mature...

Ming Lu