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>Allocations in Asian Financials stocks have fallen to all-time lows in Asia Ex-Japan active portfolios this year.</li>
<li>Fund managers move to underweight following $3bn in net outflows.</li>
<li>Managers exit ASEAN banks, weights drop in China banks. </li>
<li>On a stock level, <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> ,  <a href="https://www.smartkarma.com/entities/bank-rakyat-indonesia-persero" target="_blank" data-smartkarma-citation="entities:484:1" rel="noopener">Bank Rakyat Indonesia Persero (BBRI IJ)</a> (-7.2%) and <a href="https://www.smartkarma.com/entities/indusind-bank-ltd" target="_blank" data-smartkarma-citation="entities:1558:1" rel="noopener">Indusind Bank (IIB IN)</a> are the hardest hit.</li>
</ul>


Allocations in Asian Financials stocks have fallen to all-time lows in Asia Ex-Japan active portfolios this year.
Fund managers move to underweight following $3bn in net outflows.
Managers exit ASEAN banks, weights drop in China banks. 
On a stock level, ICICI Bank Ltd (ICICIBC IN) ,  Bank Rakyat Indonesia Persero (BBRI IJ) (-7.2%) and Indusind Bank (IIB IN) are the hardest hit.


China and US Equity Analyst

Roger Xie

Equity Bottom-Up

<ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> September ADT (Average Daily Turnover) remain strong. This in in contrast to usual weak seasonality in trading activities into Q4. For the first 9 months this year, HKEx ADT has reaccelerated the year-over-year growth rate to 38.9% , fueled by  IPO listings and investors' sanguine view on China. </li>
<li>HKEx had a busy month for the IPO market with 9 new listings in September. The most noticeable IPOs are <a href="https://www.smartkarma.com/entities/nongfu-spring" target="_blank" data-smartkarma-citation="entities:28955:1" rel="noopener">Nongfu Spring (9633 HK), </a><a href="https://www.smartkarma.com/entities/yum-china-holdings-inc-0533692c-6dae-4014-baa1-ed0b050638f2" target="_blank" data-smartkarma-citation="entities:29259:1" rel="noopener">Yum China Holdings Inc (9987 HK),</a><a href="https://www.smartkarma.com/entities/ming-yuan-cloud-group" target="_blank" data-smartkarma-citation="entities:29268:1" rel="noopener">Ming Yuan Cloud Group (909 HK)</a>, and <a href="https://www.smartkarma.com/entities/joy-spreader-interactive-technology" target="_blank" data-smartkarma-citation="entities:29271:1" rel="noopener">Joy Spreader Interactive Technology (6988 HK).</a> We expect mega IPO and Chinese ADR homecoming to reshape the landscape of Hong Kong capital market. And Ant Group has just won approval from the China Securities Regulatory Commission (CSRC) for its blockbuster initial public offering in Hong Kong.</li>
<li>Derivative volumes improved 19% quarter-over-quarter in 3Q, on the back of Heng Seng Index and China Enterprises Index futures. We expect volume will be boosted by MSCI suite of products and reach critical mass in the next 12 months. A-share futures should be the most important driver of HKEx derivative volume. We estimate that MSCI China A-share future could contribute additional 6% revenue for <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> after its launch. We remain bullish on <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> and reiterate TP of HKD 400. </li>
</ul>



HKEX (388 HK) September ADT (Average Daily Turnover) remain strong. This in in contrast to usual weak seasonality in trading activities into Q4. For the first 9 months this year, HKEx ADT has reaccelerated the year-over-year growth rate to 38.9% , fueled by  IPO listings and investors' sanguine view on China. 
HKEx had a busy month for the IPO market with 9 new listings in September. The most noticeable IPOs are Nongfu Spring (9633 HK), Yum China Holdings Inc (9987 HK),Ming Yuan Cloud Group (909 HK), and Joy Spreader Interactive Technology (6988 HK). We expect mega IPO and Chinese ADR homecoming to reshape the landscape of Hong Kong capital market. And Ant Group has just won approval from the China Securities Regulatory Commission (CSRC) for its blockbuster initial public offering in Hong Kong.
Derivative volumes improved 19% quarter-over-quarter in 3Q, on the back of Heng Seng Index and China Enterprises Index futures. We expect volume will be boosted by MSCI suite of products and reach critical mass in the next 12 months. A-share futures should be the most important driver of HKEx derivative volume. We estimate that MSCI China A-share future could contribute additional 6% revenue for HKEX (388 HK) after its launch. We remain bullish on HKEX (388 HK) and reiterate TP of HKD 400. 


HKEx (388.HK): September Trading Volume Indicated Strong Activities Trend into Q4

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

* Peak Value:So much value has been derived again on hope for the shares of Hong Kong Exchanges &amp; Clearing (388.HK) [HKEx], which included that on: southbound connect, futures markets,  structural reforms, and the change in CEO. Cash and derivative volumes are also higher on HKEx YOY by 39% and 5%, respectively. As such, we witnessed HKEx’s 2020 share performance of 45.1% that has resulted in a global exchange leading valuation of 9.7x P/BV; and* 3Q20 Results Will Be Telling: HKEx will release its 3Q earnings result on November 11, 2020. While its fund to hope and dream, the reality is that equity turnover velocity and volumes on HKEX have declined on the back of weaker price volatility. Cash equity ADTV has declined from a high of HKD 165 bn in July to HKD 135 bn in August to lower still at HKD 123 bn during September. The October figure to date has declined another 21.9% MOM to HKD 95 bn. Volume weakness was also seen in derivatives contracts from a July peak of 1.4 mn ADTV to 1.0 mn during Aug/Sep). To put these declines into perspective, volumes in the cash equity and derivatives amount to over 50% of HKEx's revenue.

* Peak Value:So much value has been derived again on hope for the shares of Hong Kong Exchanges &amp; Clearing (388.HK) [HKEx], which included that on: southbound connect, futures markets,  structural reforms, and the change in CEO. Cash and derivative volumes are also higher on HKEx YOY by 39% and 5%, respectively. As such, we witnessed HKEx’s 2020 share performance of 45.1% that has resulted in a global exchange leading valuation of 9.7x P/BV; and* 3Q20 Results Will Be Telling: HKEx will release its 3Q earnings result on November 11, 2020. While its fund to hope and dream, the reality is that equity turnover velocity and volumes on HKEX have declined on the back of weaker price volatility. Cash equity ADTV has declined from a high of HKD 165 bn in July to HKD 135 bn in August to lower still at HKD 123 bn during September. The October figure to date has declined another 21.9% MOM to HKD 95 bn. Volume weakness was also seen in derivatives contracts from a July peak of 1.4 mn ADTV to 1.0 mn during Aug/Sep). To put these declines into perspective, volumes in the cash equity and derivatives amount to over 50% of HKEx's revenue.

Hong Kong Exchanges & Clearing – Fully Discounted

Cross Asset Strategy

<ul>
<li>China securities watchdog revealed the latest reform on QFII/RQFII (Qualified Foreign Institutional Investor) scheme to further open up China domestic capital market. The new rule will become effective on Nov. 1, 2020. This is another milestone for China capital market reform and will boost up foreign fund inflow in the long-run. We have written the reform measures early this year: <a href="https://www.smartkarma.com/insights/china-a-share-strategy-r-qfii-quota-removal-to-offer-more-attractive-channel-to-invest-in-china" target="_blank" rel="noopener">China A-Share Strategy: R/​QFII Quota Removal to Offer More Attractive Channel to Invest In China</a>
</li>
<li>The most significant changes are the additional investment products that foreign fund managers can participate: 1) non-hedging purpose investments in index futures/options, 2) margin financing and securities lending for short-selling purpose, 3) private investment funds, 4) FICC derivatives in commodity exchanges and inter-bank market. We believe these reforms could offer comprehensive investment solutions to sophisticated institutional investors.</li>
<li>Foreign Funds' China A-share positions have accounted about 4% of A-share total market-cap, or 9% of A-share free-float market-cap by the end of 1H 2020. Nowadays, foreign investors have multiple channels to deploy their capital into China A-share market: QFII scheme, RMB-QFII scheme, or stock connect program via Hong Kong exchange (<a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a>).  Given the increasing weight of China A-share in global benchmark indices, we believe foreign funds' China A-share positions will continue to rise and will reach 10% of A-share total market-cap in next 10 years.</li>
</ul>


China securities watchdog revealed the latest reform on QFII/RQFII (Qualified Foreign Institutional Investor) scheme to further open up China domestic capital market. The new rule will become effective on Nov. 1, 2020. This is another milestone for China capital market reform and will boost up foreign fund inflow in the long-run. We have written the reform measures early this year: China A-Share Strategy: R/​QFII Quota Removal to Offer More Attractive Channel to Invest In China

The most significant changes are the additional investment products that foreign fund managers can participate: 1) non-hedging purpose investments in index futures/options, 2) margin financing and securities lending for short-selling purpose, 3) private investment funds, 4) FICC derivatives in commodity exchanges and inter-bank market. We believe these reforms could offer comprehensive investment solutions to sophisticated institutional investors.
Foreign Funds' China A-share positions have accounted about 4% of A-share total market-cap, or 9% of A-share free-float market-cap by the end of 1H 2020. Nowadays, foreign investors have multiple channels to deploy their capital into China A-share market: QFII scheme, RMB-QFII scheme, or stock connect program via Hong Kong exchange (HKEX (388 HK)).  Given the increasing weight of China A-share in global benchmark indices, we believe foreign funds' China A-share positions will continue to rise and will reach 10% of A-share total market-cap in next 10 years.


China A-Share Strategy: Deregulation in QFII/RQFII Scheme to Boost up Foreign Fund Inflow

*Weaker Futures Activity Continues: ASX Limited (ASX.AU) [ASX] remains a among the better listed exchanges globally, earnings fundamentals are likely to remain under pressure for the foreseeable future. During the September 2020 update, stronger capital markets activity was a positive surprise and velocity is tracking well. However, the weaker trend in futures activity continues its downward trend whilst costs continue to rise as ASX continues to invest in technology; and*Expect Consensus To Take Hatchet To EPS:  New revenue initiatives are also unlikely to add materially to growth in FY 2021. In our view, consensus forecasts remain beyond what is rational and significant EPS downgrades are inevitable.  In light of these headwinds, it’s pretty difficult to justify a P/E of 38x FY 2022 consensus forecasts.

*Weaker Futures Activity Continues: ASX Limited (ASX.AU) [ASX] remains a among the better listed exchanges globally, earnings fundamentals are likely to remain under pressure for the foreseeable future. During the September 2020 update, stronger capital markets activity was a positive surprise and velocity is tracking well. However, the weaker trend in futures activity continues its downward trend whilst costs continue to rise as ASX continues to invest in technology; and*Expect Consensus To Take Hatchet To EPS:  New revenue initiatives are also unlikely to add materially to growth in FY 2021. In our view, consensus forecasts remain beyond what is rational and significant EPS downgrades are inevitable.  In light of these headwinds, it’s pretty difficult to justify a P/E of 38x FY 2022 consensus forecasts.

ASX Limited – Softening Trends Continue

Hong Kong

Hong Kong Exchanges & Clearing Limited owns and operates the stock exchange, futures exchange, and their related clearing houses in Hong Kong.  The Company provides the trading platforms for a range of cash and derivatives products and the facilities for processing trades.

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HKEX (388 HK)

Asia Ex-Japan Financials: Long Drop

Allocations in Financial stocks drop to all-time lows in Asia Ex-Japan active funds. Financials now key underweight holding, led by selling in the...

Steven Holden

HKEx (388.HK): September Trading Volume Indicated Strong Activities Trend into Q4

We expect Hong Kong Exchange has strong trading activities in Q4, in contrast to usual weak seasonality. Now is a better time to go long on HKEx...

Roger Xie

Hong Kong Exchanges & Clearing – Fully Discounted

Hong Kong Exchanges & Clearing: Alot of Positives Surrounding China Opportunity Has Pushed Shares 45% Higher In 2020, But Recent Fundamentals Would...

Thomas J. Monaco

ASX Limited – Softening Trends Continue

*Weaker Futures Activity Continues: ASX Limited (ASX.AU) [ASX] remains a among the better listed exchanges globally, earnings fundamentals are...

Thomas J. Monaco

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Asia Ex-Japan Financials: Long Drop

Allocations in Financial stocks drop to all-time lows in Asia Ex-Japan active funds. Financials now key underweight holding, led by selling in the...

Steven Holden

HKEx (388.HK): September Trading Volume Indicated Strong Activities Trend into Q4

We expect Hong Kong Exchange has strong trading activities in Q4, in contrast to usual weak seasonality. Now is a better time to go long on HKEx...

Roger Xie

Hong Kong Exchanges & Clearing – Fully Discounted

Hong Kong Exchanges & Clearing: Alot of Positives Surrounding China Opportunity Has Pushed Shares 45% Higher In 2020, But Recent Fundamentals Would...

Thomas J. Monaco

China A-Share Strategy: Deregulation in QFII/RQFII Scheme to Boost up Foreign Fund Inflow

We believe foreign funds' China A-share positions will continue to rise and will reach 10% of A-share total market-cap in next 10 years.

Roger Xie

ASX Limited – Softening Trends Continue

*Weaker Futures Activity Continues: ASX Limited (ASX.AU) [ASX] remains a among the better listed exchanges globally, earnings fundamentals are...

Thomas J. Monaco