Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Technical Analysis

iShares MSCI Emerging Markets / Technical Analysis

<p>In our next Webinar, we welcome back Insight Provider <a href="https://www.smartkarma.com/profiles/thomas-schroeder" target="_blank" data-smartkarma-citation="accounts:381" rel="noopener">Thomas Schroeder</a> who will take us through a timely update on Asian technicals using his unique chart-based analysis.</p>
<h3>The webinar was hosted on Wednesday, 31 March 2021, 17:00 SGT/HKT.</h3>
<p>Watch the session:</p>
<p><iframe src="https://www.youtube.com/embed/Jt5cCFCKtP0" width="560" height="315" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe></p>
<p>Or subscribe to listen on the go:</p>
<p><iframe src="https://open.spotify.com/embed/episode/57zeB5b1tzWn3DYwBwAFWE" width="100%" height="232" frameborder="0" allowtransparency="true" allow="encrypted-media"></iframe></p>
<p>Thomas Schroeder started using charts and trading in the FX markets in 1989 and entered the equities arena in 1992 with Deutsche Bank as a fundamental analyst, but found himself relying more on inter-market cycles and charts. In 1994, he became the Asian head of Technical Research for UBS Securities in Hong Kong and in 1997 he was charged with heading the Global Technical Research team for SG Securities. In July of 2003, Chart Partners Group Limited was formed, providing clients with timely and accurate progressive trading strategies in a truly global context.</p>

In our next Webinar, we welcome back Insight Provider Thomas Schroeder who will take us through a timely update on Asian technicals using his unique chart-based analysis.
The webinar was hosted on Wednesday, 31 March 2021, 17:00 SGT/HKT.
Watch the session:

Or subscribe to listen on the go:

Thomas Schroeder started using charts and trading in the FX markets in 1989 and entered the equities arena in 1992 with Deutsche Bank as a fundamental analyst, but found himself relying more on inter-market cycles and charts. In 1994, he became the Asian head of Technical Research for UBS Securities in Hong Kong and in 1997 he was charged with heading the Global Technical Research team for SG Securities. In July of 2003, Chart Partners Group Limited was formed, providing clients with timely and accurate progressive trading strategies in a truly global context.

Smartkarma Webinar | Asian Market Technicals - Cycle Tops Forming

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)

<p>Utilities are the smallest sector allocation among global EM managers.  Average weights stand at 1.45%, or underweight -0.41% versus the <a href="https://www.smartkarma.com/entities/ishares-msci-emerging-markets" target="_blank" data-smartkarma-citation="entities:438:1" rel="noopener">iShares MSCI Emerging Markets (EEM US)</a> portfolio.  Only 66.8% of the EM funds in our analysis have any exposure at all, with 29.5% positioned as overweight.</p><p><a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a> and <a href="https://www.smartkarma.com/entities/china-longyuan-power-group-corp-ltd" target="_blank" data-smartkarma-citation="entities:14215:1" rel="noopener">China Longyuan Power Group Corp (916 HK)</a> are the few brightspots in an otherwise very lightly held sector.</p><p>With continued underperformance of the MSCI EM Utilities sector, a weight in the benchmark MSCI Emerging Markets index of sub 2% and an average active fund weight of 1.45%, EM managers must question whether Utilities stocks have a place in EM portfolios at all.</p>

Utilities are the smallest sector allocation among global EM managers.  Average weights stand at 1.45%, or underweight -0.41% versus the iShares MSCI Emerging Markets (EEM US) portfolio.  Only 66.8% of the EM funds in our analysis have any exposure at all, with 29.5% positioned as overweight.ENN Energy (2688 HK) and China Longyuan Power Group Corp (916 HK) are the few brightspots in an otherwise very lightly held sector.With continued underperformance of the MSCI EM Utilities sector, a weight in the benchmark MSCI Emerging Markets index of sub 2% and an average active fund weight of 1.45%, EM managers must question whether Utilities stocks have a place in EM portfolios at all.

Quantitative Analysis

<p>A negative feedback loop of poor sentiment, managers selling down positions leading to big underperformance has caused allocations in China banks to more than halve over the past 2-years.  An exodus out of the four major state banks has occurred across GEM, Asia Ex-Japan and China managers as the narrative has focused on growth over value.  </p><p>From an ownership perspective, there are signs that this is bottoming out.  Underweights are being closed, funds are moving back in and weights are moving higher.  Whilst inflows remain skewed towards the higher growth and premium valuation stocks of <a href="https://www.smartkarma.com/entities/ping-an-bank-co-ltd-a" target="_blank" data-smartkarma-citation="entities:681:1" rel="noopener">Ping An Bank Co Ltd A (000001 CH)</a> and <a href="https://www.smartkarma.com/entities/china-merchants-bank-co-ltd-3388a037-4214-4997-b45d-520518cfdb57" target="_blank" data-smartkarma-citation="entities:10987:1" rel="noopener">China Merchants Bank H (3968 HK)</a> , ownership levels have moderated in the big four state banks.</p><p>Against a backdrop of huge underperformance and low ownership levels, the majority of the active managers in our analysis are still positioned underweight in the China banks.  If the growth over value narrative does change, China Banks are one of the places you want to be.</p><p></p><p><em>Analysis taken from our China fund universe, covering 114 active strategies with combined AUM of $62bn.</em></p>

A negative feedback loop of poor sentiment, managers selling down positions leading to big underperformance has caused allocations in China banks to more than halve over the past 2-years.  An exodus out of the four major state banks has occurred across GEM, Asia Ex-Japan and China managers as the narrative has focused on growth over value.  From an ownership perspective, there are signs that this is bottoming out.  Underweights are being closed, funds are moving back in and weights are moving higher.  Whilst inflows remain skewed towards the higher growth and premium valuation stocks of Ping An Bank Co Ltd A (000001 CH) and China Merchants Bank H (3968 HK) , ownership levels have moderated in the big four state banks.Against a backdrop of huge underperformance and low ownership levels, the majority of the active managers in our analysis are still positioned underweight in the China banks.  If the growth over value narrative does change, China Banks are one of the places you want to be.Analysis taken from our China fund universe, covering 114 active strategies with combined AUM of $62bn.

<p>EM Energy allocations are at record lows.  A big exodus in the first half of 2020 pushed allocations to their lowest levels since our records start in 2008.   The aggressive scaling back of positioning had a dramatic effect on prices, with the MSCI EM Energy sector suffering one of the worst 12 month periods of underperformance in nearly 2 decades.  But the ownership picture is beginning to stabilize.  </p><p>On a stock level, <a href="https://www.smartkarma.com/entities/lukoil-pjsc-2bfe0130-461e-4ff3-af12-93bec12e6325" target="_blank" data-smartkarma-citation="entities:27148:1" rel="noopener">LUKOIL (LKOH RM)</a> appears to be the GOAT, with its backing of almost half of the funds in our analysis, well spread across the style spectrum in addition to being a net overweight.  <a href="https://www.smartkarma.com/entities/reliance-industries-ltd" target="_blank" data-smartkarma-citation="entities:198:1" rel="noopener"> Reliance Industries (RIL IN)</a> is also a high conviction stock, held by fewer funds than Lukoil but in greater size.  It also represents a significant underweight to many EM investors.  The most depressed stock of the larger holdings is <a href="https://www.smartkarma.com/entities/cnooc-ltd" target="_blank" data-smartkarma-citation="entities:175:1" rel="noopener">CNOOC Ltd (883 HK)</a> , once held by over 60% of the funds in our analysis, now by just 24%.</p><p><em>Analysis taken from our EM research, covering the collective allocations of 242 Global Emerging Market active funds, with combined AUM of $460bn</em></p>

EM Energy allocations are at record lows.  A big exodus in the first half of 2020 pushed allocations to their lowest levels since our records start in 2008.   The aggressive scaling back of positioning had a dramatic effect on prices, with the MSCI EM Energy sector suffering one of the worst 12 month periods of underperformance in nearly 2 decades.  But the ownership picture is beginning to stabilize.  On a stock level, LUKOIL (LKOH RM) appears to be the GOAT, with its backing of almost half of the funds in our analysis, well spread across the style spectrum in addition to being a net overweight.   Reliance Industries (RIL IN) is also a high conviction stock, held by fewer funds than Lukoil but in greater size.  It also represents a significant underweight to many EM investors.  The most depressed stock of the larger holdings is CNOOC Ltd (883 HK) , once held by over 60% of the funds in our analysis, now by just 24%.Analysis taken from our EM research, covering the collective allocations of 242 Global Emerging Market active funds, with combined AUM of $460bn

EM Energy: Big Underperformance - Positioning at Record Lows, but Stabilizing.

<div><p>In this report, we screen for the largest overweight Country/Sectors across Global EM by analysing the allocations of long-only active Emerging Market funds.</p></div><div>
<p>In part 3 of the series, we focus on the Taiwan Information Technology sector:</p>
<ul>
<li>Taiwan Tech allocations are at their peak, both in terms of absolute fund weights, relative weights, investment breadth and AUM.</li>
<li>The largest overweight stock position is <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a> , with an average weight of 6.1%, representing a 0.21% overweight vs benchmark.</li>
<li>The largest underweights are <a href="https://www.smartkarma.com/entities/hon-hai-precision-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:745:1" rel="noopener">Hon Hai Precision Industry (2317 TT) </a> and <a href="https://www.smartkarma.com/entities/yageo-corporation" target="_blank" data-smartkarma-citation="entities:13212:1" rel="noopener">Yageo Corporation (2327 TT)</a>
</li>
<li>Profit taking evident in H2 among some managers as Taiwan Tech contributes to outperformance among active managers in 2020.</li>
<li>Foundation of Taiwan Tech investment appears strong, with both Value, Growth and Income funds well exposed.</li>
</ul>
</div><div><p><em>Our Emerging Market fund universe consists of 242 Global Emerging Market active long-only funds, with combined AUM of $450bn.</em></p></div>

In this report, we screen for the largest overweight Country/Sectors across Global EM by analysing the allocations of long-only active Emerging Market funds.
In part 3 of the series, we focus on the Taiwan Information Technology sector:

Taiwan Tech allocations are at their peak, both in terms of absolute fund weights, relative weights, investment breadth and AUM.
The largest overweight stock position is TSMC (2330 TT) , with an average weight of 6.1%, representing a 0.21% overweight vs benchmark.
The largest underweights are Hon Hai Precision Industry (2317 TT)  and Yageo Corporation (2327 TT)

Profit taking evident in H2 among some managers as Taiwan Tech contributes to outperformance among active managers in 2020.
Foundation of Taiwan Tech investment appears strong, with both Value, Growth and Income funds well exposed.

Our Emerging Market fund universe consists of 242 Global Emerging Market active long-only funds, with combined AUM of $450bn.

Emerging Market Overweights Series.  Part 3:  Taiwan Tech

United States

iShares MSCI Emerging Markets ETF is an exchange-traded fund incorporated in the USA. The ETF tracks the performance of the MSCI TR Emerging Markets Index. The ETF holds emerging market stocks that can predominantly be classified as large and mid-cap. It weights the holdings using a market capitalization methodology and rebalances quarterly.

iShares MSCI Emerging Markets (EEM US)

Smartkarma Webinar | Asian Market Technicals - Cycle Tops Forming

On 31 March, 5pm SGT, we welcome back Insight Provider Thomas Schroeder who will take us through a timely update on Asian technicals using his...

Smartkarma Research

EM Utilities: Bailing Out

With continued underperformance of the MSCI EM Utilities sector, EM managers must question whether Utilities stocks have a place in EM portfolios...

Steven Holden

China Banks: Bottoming Out

China and HK banks have seen a large scale exodus from active China investors over the past 2 years. Managers now find themselves underweight and...

Steven Holden

EM Energy: Big Underperformance - Positioning at Record Lows, but Stabilizing.

EM Energy exodus drives worst performance of EM Energy sector in over 15 years. EM active funds are now at their lowest ever exposure to EM Energy...

Steven Holden

Emerging Market Overweights Series. Part 3: Taiwan Tech

Taiwan Technology stocks have seen allocations skyrocket in active EM portfolios. We analyse the drivers behind the move, the key conviction...

Steven Holden