Cross-Asset Strategist & Quantitative Analyst, Pennock Idea Hub

Cam Hui

Cam Hui has been professionally involved in the financial markets since 1985 in a variety of roles, both as a quantitative equity portfolio manager and as a sell-side analyst. He graduated with a degree in Computer Science from the University of British Columbia in 1980 and obtained his CFA Charter in 1989.

Cross-Asset Strategist & Quantitative Analyst

Ant IPO/ Imports/ Plenum/ US-China/ Census

Pennock Idea Hub

We are creators of independent equity research. The Pennock Idea Hub team are veterans of the investment industry. Much of our team has spent their careers at Merrill Lynch, Deutsche Bank, RBC Capital Markets and Wood Gundy. We have taken every aspect of research back to the studs and returned to first principles. The Pennock Idea Hub marries the interests of the sell and buy side. 

We offer the best research for institutional investors by:

-Only publishing research from veteran analysts
-Eliminate the inherent conflicts of the traditional sell and buy side relationship
-Ensure our team is always accessible; collaboration with clients nurtures our collective success

Cross-Asset & Quantitative Research

Cross Asset Strategy

Multiple Countries / Cross Asset Strategy

We are not in the habit of peddling conspiracy theories, but a new geopolitical tail-risk is materializing for investors and for global stability. China’s People’s Daily recently published a “Letter to Taiwan’s Intelligence Organs” warning Taiwanese intelligence agencies against supporting President Tsai Ing-wen’s resistance to China’s unification efforts (article in <a href="http://paper.people.com.cn/rmrb/html/2020-10/15/nw.D110000renmrb_20201015_3-07.htm" target="_blank" rel="noopener">Chinese</a>; Facebook summary in <a href="https://www.facebook.com/188625661189259/posts/message-to-taiwans-intelligence-agencies-peoples-dailypeoples-daily-on-thursday-/3728571967194593/" target="_blank" rel="noopener">English</a>).The warning was little noticed by most Western media. What was ominous was the phrase, “Don’t say I didn’t warn you” (勿谓言之不预也). Similar language was used by China when it launched military offensives in the past. It used that phrasing when it issued a “surrender or die” ultimatum to the nationalist garrison in Beijing in 1949; it warned American-led forces in Korea not to approach its Yalu River border in 1950; it warned India before attacking in 1962; and it issued a similar warning before the invasion of Vietnam in 1978.For investors, the consequence of a Chinese invasion of Taiwan would be a horrific risk-off episode. However, hedging against such an outcome can be problematic. The behaviour of conventional risk-off havens such as the USD, JPY and gold is dependent on how any potential conflict unfolds. The JPY may not be a safe haven in light of Japan’s geographic proximity. USD assets, such as Treasuries, may serve as a counterweight to risky assets to stocks, but it depends on the level of American involvement in the conflict. Similarly, gold prices may spike during wartime, but it tends to be inversely correlated to the USD, and a USD rally could pose a headwind for gold prices.We believe a better hedging vehicle that acts well in a war, but may not create a drag on portfolio returns, is the Aerospace and Defense industry.

We are not in the habit of peddling conspiracy theories, but a new geopolitical tail-risk is materializing for investors and for global stability. China’s People’s Daily recently published a “Letter to Taiwan’s Intelligence Organs” warning Taiwanese intelligence agencies against supporting President Tsai Ing-wen’s resistance to China’s unification efforts (article in Chinese; Facebook summary in English).The warning was little noticed by most Western media. What was ominous was the phrase, “Don’t say I didn’t warn you” (勿谓言之不预也). Similar language was used by China when it launched military offensives in the past. It used that phrasing when it issued a “surrender or die” ultimatum to the nationalist garrison in Beijing in 1949; it warned American-led forces in Korea not to approach its Yalu River border in 1950; it warned India before attacking in 1962; and it issued a similar warning before the invasion of Vietnam in 1978.For investors, the consequence of a Chinese invasion of Taiwan would be a horrific risk-off episode. However, hedging against such an outcome can be problematic. The behaviour of conventional risk-off havens such as the USD, JPY and gold is dependent on how any potential conflict unfolds. The JPY may not be a safe haven in light of Japan’s geographic proximity. USD assets, such as Treasuries, may serve as a counterweight to risky assets to stocks, but it depends on the level of American involvement in the conflict. Similarly, gold prices may spike during wartime, but it tends to be inversely correlated to the USD, and a USD rally could pose a headwind for gold prices.We believe a better hedging vehicle that acts well in a war, but may not create a drag on portfolio returns, is the Aerospace and Defense industry.

Emerging Tail-Risk: An Invasion of Taiwan