China-Taiwan Tensions: TMI Lead Indicators Point To Escalating Risk Of Taiwan Vol Spike

Introducing TMI Data Science: Delivering Alpha With Custom NLP-Based Leading Indicators

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

Cross Asset Strategy

<ul>
<li>After a short period of optimism following the US elections, China-Taiwan tensions are escalating sharply again; we disaggregate the theme into multiple sub-components and geographic sources to find a spike in US coverage of Taiwan tensions at +2x STDEVs, a level last seen over a year ago</li>
<li>The spike in Taiwan coverage has been driven by multiple breaches of Taiwan's Air Defense Identification Zone by Chinese warplanes; a recent warning by US Asia Pacific Commander Philip Davidson that China could invade Taiwan "in the next 6 years"; recent developments in the Quadrilateral Security Dialogue; elevated US-Japan cooperation on "Taiwan emergency"; and a barrage of high-profile op-eds in recent weeks highlighting tensions over Taiwan</li>
<li>While 2020 did not see geopolitical risks factor into the performance of MSCI Taiwan or USD/TWD, the China-Taiwan tensions theme was strongly correlated with performance in 2018-2019</li>
</ul>


After a short period of optimism following the US elections, China-Taiwan tensions are escalating sharply again; we disaggregate the theme into multiple sub-components and geographic sources to find a spike in US coverage of Taiwan tensions at +2x STDEVs, a level last seen over a year ago
The spike in Taiwan coverage has been driven by multiple breaches of Taiwan's Air Defense Identification Zone by Chinese warplanes; a recent warning by US Asia Pacific Commander Philip Davidson that China could invade Taiwan "in the next 6 years"; recent developments in the Quadrilateral Security Dialogue; elevated US-Japan cooperation on "Taiwan emergency"; and a barrage of high-profile op-eds in recent weeks highlighting tensions over Taiwan
While 2020 did not see geopolitical risks factor into the performance of MSCI Taiwan or USD/TWD, the China-Taiwan tensions theme was strongly correlated with performance in 2018-2019


TMI Snapshots:  Taiwan Tensions Rising, Will Geopolitics Return to the Forefront in 2021?