In today’s briefing:
- GEM Fund Performance. April Compounds Woes for Active Managers
- BoE: Keeping Pace Until August
- Asia Ex-Japan: MediaTek, Sea Ltd and China Banks Weigh on Performance
- Treasury Shares as % of Total Outstanding Shares: Screening for Potential Activist Candidates
- India’s “Surprise” Rate Hike Was Overdue
- Local Governments Again Break Out the Coupons to Boost Consumer Spending
- CX Daily: Five Things To Know About China’s Draft Rules On Local Financial Institutions
- CX Daily: How the War in Ukraine Is Rattling China’s Energy Transition
GEM Fund Performance. April Compounds Woes for Active Managers
- Average returns among GEM active managers came in at -7.02% for April, lower than the MSCI EM Index by -1.46% with 21.2% of funds outperforming.
- This year’s underperformance of -3.69% ranks as the worst start to the year for over a decade, worse than the first 4 months of both 2009 (-2.70%) and 2015 (-2.71%).
- Russian Financials (overweight) and Saudi Arabian Financials (underweight) accounted for nearly 1% of the performance deficit, with Singapore Comm’ Services, Taiwan Technology and Indian Utilities further dragging on relative returns.
BoE: Keeping Pace Until August
- The BoE delivered another 25bps rate hike to 1.0%, as widely expected. Not only did all members vote for a hike, as we thought, but three dissented for 50bps.
- Some MPC members were unhappy with maintaining hawkish guidance. However, most were, and with three already backing 1.25%, we now expect another hike on 16 June.
- Forecasts appear inconsistent with maintaining this sequential pace. Forthcoming asset sales in September now make that likely to be the month gradualism slows the pace.
Asia Ex-Japan: MediaTek, Sea Ltd and China Banks Weigh on Performance
- April was another tough month for active Asia Ex-Japan managers. Average returns of -6.18% lagged the MSCI Asia Ex-Japan index by -1.02%, with just 27.8% of funds beating the benchmark.
- On the year so far, more than 80% of Asia Ex-Japan funds are underperforming the benchmark. Returns are largely correlated to Style, with Value outperforming Growth by +6.5%.
- Overweights in both Mediatek Inc and Sea Ltd have been the most costly on the year, in addition to a number of underweights in the key state run China banks
Treasury Shares as % of Total Outstanding Shares: Screening for Potential Activist Candidates
- In this insight, we provide a ranking of all the KOSPI 200 stocks, in terms of their treasury shares as a percentage of total outstanding shares.
- We highlight 29 companies whose treasury shares/outstanding shares are more than 10%. These companies’ values could be improved significantly if treasury shares are cancelled.
- The potential implementation of compulsory tender offer in the next 2-3 years is likely to put increased focus on Korean companies with especially large levels of treasury shares/total outstanding shares.
India’s “Surprise” Rate Hike Was Overdue
- The Reserve Bank of India roiled the market yesterday with an unexpected inter-meeting policy rate increase, leading to rates moving higher across the curve.
- I have been arguing for a few months that the RBI needs to start raising rates based on the high inflation and narrowing rate differential with the US.
- Despite the move higher in rates in India, I continue to like paying rates in India, particularly against receivers in other countries to hedge against the volatile US rates.
Local Governments Again Break Out the Coupons to Boost Consumer Spending
- China’s local governments have begun offering billions of yuan worth of coupons to boost consumer spending, in an effort to help businesses feeling the pain of China’s Covid-19 outbreaks over the past two months.
- The measure comes as China’s economy faces some of the greatest strain it has experienced since the initial wave of outbreaks in early 2020 as strict lockdowns across the country have disrupted business and everyday life
- This time, local governments have also chosen coupons or vouchers as the form of their demand-side stimulus policy. The coupons will be good for discounts on products like cars and electronics, as well as services such as admission into local tourist sites.
CX Daily: Five Things To Know About China’s Draft Rules On Local Financial Institutions
Five things to know about China’s draft rules on local financial institutions
Beijing shortens quarantines for inbound travelers, close contacts
Shrinking capital investment drags down Caixin New Economy Index
CX Daily: How the War in Ukraine Is Rattling China’s Energy Transition
In Depth: How the war in Ukraine is rattling China’s energy transition
Regional bank under corruption probe faces more trouble after online savings accounts frozen
China’s services sector slumps further as Covid battle intensifies, Caixin PMI shows
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