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)

Allocations in the Financials sector have broken below the decade long range.  In their place are increased exposures in Technology and Consumer Discretionary companies.  At the moment, allocations within the sector are consolidating, with Asia Ex-Japan funds actively increasing weights, but still remaining a long way below previous levels. In this analysis, we look at the mechanics of the downturn, identifying the countries and stocks hardest hit.  We then look at the extent to which Financials stocks have consolidated and moved towards the early stages of a recovery.

Allocations in the Financials sector have broken below the decade long range.  In their place are increased exposures in Technology and Consumer Discretionary companies.  At the moment, allocations within the sector are consolidating, with Asia Ex-Japan funds actively increasing weights, but still remaining a long way below previous levels. In this analysis, we look at the mechanics of the downturn, identifying the countries and stocks hardest hit.  We then look at the extent to which Financials stocks have consolidated and moved towards the early stages of a recovery.

Asia Ex-Japan Financials.  Slowly Regaining the Faith.

Specialist in Indian Banking and Economic Research

Hemindra Hazari

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/icici-bank-ltd" target="_blank" data-smartkarma-citation="entities:547:1" rel="noopener">ICICI Bank Ltd (ICICIBC IN)</a> posted strong results for 4QFY2021 with standalone net profits up 260% yoy, but 11% down qoq to Rs 44 bn. While the analyst consensus and the capital market may view the results as a positive, investors need to monitor the bank’s focus on mortgages, which it has used to drive asset growth. As compared with the industry, ICICI Bank has accelerated its mortgages from 3QFY2021, and this has further spurted in 4QFY2021. Within mortgages, the loan against property portfolio needs to be carefully monitored, as such loans can result in higher losses when there is a downturn. Although mortgages are secured, the asset value can plummet when lenders sell the security to realise the loan.  It is interesting to observe that, while <a href="https://www.smartkarma.com/entities/hdfc-bank-ltd-4b6b7a92-9087-468d-9dbe-ab169e77f014" target="_blank" data-smartkarma-citation="entities:558:1" rel="noopener">HDFC Bank (HDFCB IN)</a> is de-emphasising retail loans, ICICI Bank still continues to aggressively grow retail. Like HDFC Bank, however, it has continue to increase its net deferred taxes (DTA), thereby inflating its net profits.

ICICI Bank Ltd (ICICIBC IN) posted strong results for 4QFY2021 with standalone net profits up 260% yoy, but 11% down qoq to Rs 44 bn. While the analyst consensus and the capital market may view the results as a positive, investors need to monitor the bank’s focus on mortgages, which it has used to drive asset growth. As compared with the industry, ICICI Bank has accelerated its mortgages from 3QFY2021, and this has further spurted in 4QFY2021. Within mortgages, the loan against property portfolio needs to be carefully monitored, as such loans can result in higher losses when there is a downturn. Although mortgages are secured, the asset value can plummet when lenders sell the security to realise the loan.  It is interesting to observe that, while HDFC Bank (HDFCB IN) is de-emphasising retail loans, ICICI Bank still continues to aggressively grow retail. Like HDFC Bank, however, it has continue to increase its net deferred taxes (DTA), thereby inflating its net profits.  

ICICI Bank: Go Corporate-Heavy in a Corporate Slump, Retail-Heavy in a Pandemic

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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.

Equity Capital Markets

Sona Blw Precision Forgings Lt / Equity Capital Markets

Sona Comstar (Sona) aims to raise around US$800m in its Indian IPO. The company is backed by Blackstone, which held a 66.2% stake prior to listing.Sona is an automotive technology company, designing, manufacturing and supplying highly engineered, mission critical automotive systems and components to automotive OEMs across US, Europe, India and China, for both electrified and non-electrified powertrain segments.Sona delivered a steady performance in 2019 with revenue up 16.6% and PAT up 24.1%. However, its revenue fell by 14.5% in FY20, although it still managed to grow its PAT by 4%. In addition, its 9M21 performance was propped by a single EV customer. While the company enjoys a long customer relationship, its largest customers haven’t consistently grown their contribution to revenue over the past few years.

Sona Comstar (Sona) aims to raise around US$800m in its Indian IPO. The company is backed by Blackstone, which held a 66.2% stake prior to listing.Sona is an automotive technology company, designing, manufacturing and supplying highly engineered, mission critical automotive systems and components to automotive OEMs across US, Europe, India and China, for both electrified and non-electrified powertrain segments.Sona delivered a steady performance in 2019 with revenue up 16.6% and PAT up 24.1%. However, its revenue fell by 14.5% in FY20, although it still managed to grow its PAT by 4%. In addition, its 9M21 performance was propped by a single EV customer. While the company enjoys a long customer relationship, its largest customers haven’t consistently grown their contribution to revenue over the past few years.

Sona Comstar Pre-IPO - Inconsistent Growth, Patchy Disclosures

India Financials

Saumya Agarwal

ICICI Bank, India’s second largest private sector Bank, reported its Q4FY21 results today.In what appears to be an interesting contrast, India’s two largest private sector Banks have been driving growth in two diametrically opposite directions. ICICI bank continues to be a retail-dominant bank and drive growth in the Retail segment while its competitor and India’s largest private sector Bank (HDFC Bank) has transformed into a corporate-focused bank amid the pandemic, while driving growth in the Corporate segment.  However, Profits increased manifold for ICICI bank, in Q4FY21, led by strong revenue drivers and moderation in credit costs. Asset quality of the Retail portfolio remains manageable even as the Bank has built ample provision cover.

ICICI Bank, India’s second largest private sector Bank, reported its Q4FY21 results today.In what appears to be an interesting contrast, India’s two largest private sector Banks have been driving growth in two diametrically opposite directions. ICICI bank continues to be a retail-dominant bank and drive growth in the Retail segment while its competitor and India’s largest private sector Bank (HDFC Bank) has transformed into a corporate-focused bank amid the pandemic, while driving growth in the Corporate segment.  However, Profits increased manifold for ICICI bank, in Q4FY21, led by strong revenue drivers and moderation in credit costs. Asset quality of the Retail portfolio remains manageable even as the Bank has built ample provision cover. 

ICICI Bank Q4FY21- India’s Two Largest Private Sector Banks Driving Growth in 2 Different Directions

<a href="https://www.smartkarma.com/entities/citigroup-inc" target="_blank" data-smartkarma-citation="entities:279:1" rel="noopener">Citigroup Inc (C US)</a>’s decision to <a href="https://www.citigroup.com/citi/investor/data/qer121.pdf?ieNocache=351" target="_blank" rel="noopener">withdraw</a>  from consumer banking in 13 geographies, including India, and focus instead on corporate/institutional banking, is a lesson in missed opportunities, at least in the case of India. Citi India was the pioneer in consumer banking, in products such as mortgages and credit cards, but it flourished when there were only government banks. The post-1991 entry of the new private banks in India which concentrated on the retail and corporate customers of foreign banks, and the post-Lehman crisis in 2008, heralded the decline of foreign banks in India. The present market capitalisation of the new private banks, and their significant footfall in retail banking in India, highlight the missed opportunity by foreign banks like Citi. The Reserve Bank of India (RBI) provided the foreign banks an opportunity from <a href="https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/IEPR936SC1113.pdf" target="_blank" rel="noopener">2013</a>  to set up Indian subsidiaries which could unfetter their network shackles and expand their branches, which is necessary for consumer banking, but the foreign banks preferred not to get tied down by the other regulatory and social commitments. Instead they focused on hiring direct sales agents to grow their consumer book. Although Citi developed a premium retail clientele franchise, the lack of a broader retail network and intense competition impeded their growth in retail. They preferred to remain focused on the corporate portfolio where, using their global balance sheet, creating structured products and handling treasury and foreign exchange transactions, they managed a lucrative business. Citi’s 5% market share in credit cards remains the jewel in its retail consumer franchise in India, and its monthly credit card spends per customer are at the top of the league, and close to HDFC Bank. Many players are eyeing Citibank’s market share in credit cards and it remains to be seen whether Citi offloads it on a standalone basis, or sells it with its other retail franchise in India, or sells all 13 geographies to a global player.

Citigroup Inc (C US)’s decision to withdraw  from consumer banking in 13 geographies, including India, and focus instead on corporate/institutional banking, is a lesson in missed opportunities, at least in the case of India. Citi India was the pioneer in consumer banking, in products such as mortgages and credit cards, but it flourished when there were only government banks. The post-1991 entry of the new private banks in India which concentrated on the retail and corporate customers of foreign banks, and the post-Lehman crisis in 2008, heralded the decline of foreign banks in India. The present market capitalisation of the new private banks, and their significant footfall in retail banking in India, highlight the missed opportunity by foreign banks like Citi. The Reserve Bank of India (RBI) provided the foreign banks an opportunity from 2013  to set up Indian subsidiaries which could unfetter their network shackles and expand their branches, which is necessary for consumer banking, but the foreign banks preferred not to get tied down by the other regulatory and social commitments. Instead they focused on hiring direct sales agents to grow their consumer book. Although Citi developed a premium retail clientele franchise, the lack of a broader retail network and intense competition impeded their growth in retail. They preferred to remain focused on the corporate portfolio where, using their global balance sheet, creating structured products and handling treasury and foreign exchange transactions, they managed a lucrative business. Citi’s 5% market share in credit cards remains the jewel in its retail consumer franchise in India, and its monthly credit card spends per customer are at the top of the league, and close to HDFC Bank. Many players are eyeing Citibank’s market share in credit cards and it remains to be seen whether Citi offloads it on a standalone basis, or sells it with its other retail franchise in India, or sells all 13 geographies to a global player.   

India

HDFC Bank Ltd. offers a wide range of services to the global corporate sector. The Bank provides corporate banking and custodial services and is active in the treasury and capital markets. HDFC also markets project advisory services and capital market products such as Global Deposit Receipts, Euro currency loans, and Euro currency bonds.

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HDFC Bank (HDFCB IN)

Asia Ex-Japan Financials. Slowly Regaining the Faith.

Active Asia Ex-Japan managers move back in to the Financials sector after a period of heavy rotation, however allocations remain well below...

Steven Holden

ICICI Bank: Go Corporate-Heavy in a Corporate Slump, Retail-Heavy in a Pandemic

While ICICI Bank’s results are impressive, its growing emphasis on retail, especially at a time when the pandemic is expected to engulf retail,...

Hemindra Hazari

Sona Comstar Pre-IPO - Inconsistent Growth, Patchy Disclosures

Sona Comstar (Sona) aims to raise around US$800m in its Indian IPO. The company is backed by Blackstone, which held a 66.2% stake prior to listing.

Sumeet Singh

ICICI Bank Q4FY21- India’s Two Largest Private Sector Banks Driving Growth in 2 Different Directions

In what appears to be an interesting study of contrast, India’s two largest private sector Banks are driving growth in two different directions,...

Saumya Agarwal

While Citi Slept

Citi's decision to withdraw from consumer banking in 13 geographies, including India, and focus on corp./institutional banking, is a lesson in...

Hemindra Hazari

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