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Chart of the Week
Chart of the Week
Chart of the Week

Long duration CGB carries forward the momentum to 2024

  • Alex Chu
    Alex Chu

    Director and Portfolio Manager


Chinese long-duration government bonds’ bull run since 2018 shows no signs of cooling in 2024. The momentum will likely continue for the rest of 2024 as China plans to open up its repo markets to overseas investors, and PBOC may cut the policy rates as many as three times this year, according to local brokers’ forecasts. Over the past decade, policymakers have opened up the fixed-income market through the bond and swap connect program. Recently, they vowed to expand foreign access to the onshore repo market, allowing foreign traders to borrow and lend short-term funds using yuan bonds as collateral and gain exposure to CGB using leverage, increasing the foreign holdings of China bonds. On the policy front, the PBOC announced to cut RRR by 50bps, which is a more significant move than the regular practice of a 25bps cut and more than expected. Governor Pan mentioned in his statement that there’s still a gap “between the current price level and the expected price target”, a clear signal that the PBOC is concerned about deflationary pressures raising the market expectation of a cut in February. CITIC Securities even predicts that China needs three rate cuts this year to support the economic recovery. Investors interested in long-duration CGB for capital appreciation or portfolio diversification may look at our Premia China Treasury & Policy Bank Bond Long Duration ETF (2817.HK), which invests in a basket of CGBs and policy bank bonds with ten years or more tenor. We also offer a USD-hedged version (9177.HK) for investors concerned about currency movements.  


Feb 8, 2024


China bonds saw the largest monthly inflow

  • Research & Analytics
    Research & Analytics


Foreign investors put a net RMB 251.3 billion into China's domestic bond market in November, the largest monthly inflow since records began six years ago. Foreigners returned after backed away from the market for much of the past two years. Investors now think the Fed interest-rate hike has reached an end, encouraging them to look for dollar alternatives. The inflows could also signal optimism that Chinese policy makers will be able to shore up the economy and bets the central bank will ease monetary policy further to aid growth. CICC expects China to cut rate from the beginning to the middle of this year. LPR is estimated to be reduced by 20-30 bps. Chief economist with China Securities Finance Co. agreed that Chinese central bank may continue trimming interest rates and RRR this year, similar to what it did in 2023. China’s bond market rally has continued into 2024, the yield on 10-year CGB dropped to 2.50%, the lowest since April 2020. The yields of CGB may have more room to fall if those rate-cut expectations hold firm.



Jan 12, 2024


New energy vehicles continued to boost industry growth

  • Research & Analytics
    Research & Analytics


China passenger vehicle sales rose 26% YoY and 2.4% MoM, growing even faster in November after the traditional strong season in September and October. New energy vehicle (NEV) sales gave a boost to the industry, outperforming the market with growth rates of 39.8% YoY and 8.9% MoM. The penetration rate of NEV reached 40.4% in November, as compared with 36% at the same time last year. This ratio further climbed to 62.1% for the NEVs sales among the domestic independent brands. On one hand, automakers have stepped up promotion efforts to meet sales goals. On the other hand, a new package of tax breaks for NEV purchases through 2027 imposes caps on tax exemptions starting in 2024, which will add to the cost of higher-priced models and has served as a tailwind for year-end sales. All the leading domestic brands show significant growth in NEVs sales on a yearly basis in November, including BYD +20.9%, Geely +98.4%, Wuling +57.3%, and Changan Auto +71%. The recent strong NEV sales should bring a positive impact to the supply chain. Premia CSI Caixin China New Economy ETF (3173.HK) and Premia Asia Innovative Technology and Metaverse Theme ETF (3181.HK) both have about 15.7% exposure in NEV supply chain.


Dec 19, 2023


Outperformance of hardcore tech may continue

  • David Lai
    David Lai , CFA

    Partner, Co-CIO


Alibaba’s share price hit a one-year low after announcing the shutdown of its quantum computing research lab, a sign that the Chinese e-commerce giant is considering more cutbacks in non-core businesses. The lab is part of the DAMO Academy, which is positioned as the group’s moonshot division, responsible for exploring and delivering cutting-edge technologies. Investors were already disappointed by the shocking decision of Alibaba to cancel the planned spinoff of its cloud division earlier last month. Analysts see the outlook for domestic e-commerce growth has weakened and the amount of value-unlocking capital market activities has decreased. Jack Ma even urged Alibaba employees to help the company correct its course. These highlight the challenges involved for the Chinese internet platforms to transform their business model despite the reducing scrutiny from Beijing. Indeed, the internet sector was not performing well in the stock market, while the policy-supported semiconductor plays outperformed significantly. The divergence may continue as long as the Chinese government determines to promote the domestic development of advanced hardcore technologies.


Dec 8, 2023


China's economic restructuring is happening

  • Research & Analytics
    Research & Analytics


The rebalancing of the Chinese economy is happening, aligning the government’s intention in allocating resources from speculative sectors to manufacturing and high-tech sectors. Outstanding loans to the property sector fell RMB 100 billion to RMB 53 trillion at the end of September from a year earlier, the first decline on record. In contrast, lending to the industrial sector surged by almost RMB 5 trillion in the same period. Despite the historic drop in loans, the PBOC said that the overall slowdown in property loans has stabilized, adding that the pace of declines remained unchanged. With more supportive policies such as lower downpayment requirements and reducing mortgage rates, the property sector saw a soft-landing last month. Value of new home sales among the 100 biggest real estate companies in October fell 27.5% YoY to RMB 406.7 billion, narrowing from a 29.2% decline in September, according to China Real Estate Information Corp. On the corporate front, Vanke said it will repay its debts on time after getting signals of support from a local regulator and its biggest shareholder last week, driving a strong rebound in its dollar bonds. Our Premia CSI Caixin China New Economy ETF (3173.HK) offer a diversify universe to capture the opportunities from the economic rebalancing in China, with ~21% invested in industrials and ~27% in information technology. Besides, our Premia China USD Property Bond ETF would be an efficient instrument bottom fish the USD property bonds issued by Chinese developers.


Nov 13, 2023


Digital banking growing rapidly in Indonesia

  • Alex Chu
    Alex Chu

    Director and Portfolio Manager


According to Bloomberg, Indonesia's digital banking sector might grow quicker than most countries in Southeast Asia and reach USD 8.6 billion by 2025. Traditional banks, such as Bank Rakyat, have high incentives to adopt digital banking as the government requires them to allocate 30% of lending to micro, small and mid-sized business (MSME) and to provide banking services to 90% of the population by the end of 2024. Given the country's unique landscape of more than 6,000 islands, digital banking would be the best option for traditional banks to meet the government's requirements and goals. Bloomberg sees the country's digital financial services revenue could see a 34% compound average growth rate in 2019-25. Bank Central Asia's Blu recorded 205% loan growth 1H vs 1H22, while Bank Mandiri Persero's Livin' saw its user base growth of 55% in a year. Our Premia Dow Jones Emerging ASEAN Titans ETF (2810.HK) has significant exposure to Indonesian banks, more than 15% including the above-mentioned names, which may be a good tool for investors looking not only to participate in the growth of digital banking in Indonesia but also the long-term economic growth in the region.


Oct 16, 2023


The long-awaited green shoots finally emerging in China

  • David Lai
    David Lai , CFA

    Partner, Co-CIO


China’s economy finally saw some modest pickups in manufacturing activities with China's official manufacturing purchasing managers' index (PMI) for September came in at 50.2, up 0.5 points from the previous month. This is an encouraging sign that factory activities finally recorded an expansion. In addition, the overall industrial profits surged 17.2% YoY in August, marked the first increase since the second half of 2022. Profits improved for 30 of 41 major industrial sectors during the period, with the losses in the raw material manufacturing industry narrowing significantly on rising commodity prices and recovered demand. Economists believe the reversal was mainly driven by the rebound in market demand, improved prices of industrial products, the implementation of macro-support policies, and the low base effect. Investors should monitor closely with the consumption data during the upcoming Golden Week holidays, which may help further boost investors’ confidence in Chinese assets.

Oct 3, 2023


Retail interests returning to Vietnam stocks

  • David Lai
    David Lai , CFA

    Partner, Co-CIO


Vietnam equity performance remained resilient whilst market turnover continued to climb. The 30-day moving average daily turnover more than doubled from the level seen early this year to reach around USD 850 million in September. Analysts suggested the rising liquidity was driven by local individual investors. SSI Securities believe there are three key elements leading the return of retail interests: (1) Deposit rates offered by state-owned banks have dropped by 30-50 basis points in August alone, back to a low range since 2021. (2) The implementation of Circular 06 in September allows the refinancing of mortgages, which may help boost liquidity in the stock market. (3) The latest meeting of Vietnam State Securities Commission revealed that the authorities have strong desire to help upgrade the stock market to the emerging market status via key reforms on settlements and companies’ foreign ownership. Following the recent visit of President Biden in Hanoi, the enhanced bilateral relationship between Vietnam and the US may bring enormous business opportunities for Vietnamese companies. Fundamentally, the market is trading at an estimated PE of 13.9x in 2024 with 29.6% in earnings growth.


Sep 21, 2023


Golar solar capacity surges on rapid installation in China

  • David Lai
    David Lai , CFA

    Partner, Co-CIO


BloombergNEF has recently increased its annual forecast of global solar power installation this year to 391,871MW from 343,745MW that was estimated a few months ago. The upward revision is mainly driven by the acceleration in China, which is expected to complete 96% more in capacity this year as compared with 2022’s level. China is rolling out policies to secure healthy development of the solar market, including green electricity certificates. The government is also clarifying regulations on what land can be used for solar. A recent update to the Renewable Portfolio Standards raises targets for most provinces. Provincial solar markets are developing in different ways. Hubei and Yunnan, where land is plentiful, are building a lot of utility-scale while southeastern provinces like Henan, Shandong, Anhui and Jiangsu are building residential and commercial solar. Some governments are already taking steps to make the rooftop solar boom more sustainable, by increasing the barriers to getting approval or grid connection or by requiring small solar projects to have attached storage.


Sep 4, 2023


China's sales new-energy vehicles stay robust

  • David Lai
    David Lai , CFA

    Partner, Co-CIO


China’s sales of new-energy vehicles (NEV), including pure battery electric vehicles and plug-in hybrids, went up 31.9% YoY in July to reach 641k units despite the overall auto market fell 2.6% YoY to 1.79m units. The NEV penetration rate is standing at a record 35.8% last month, on track to achieve 35% for the full year and about 50% in 2025. During the first half of this year, sales of China-produced NEVs reached 3.65 million, up 48% YoY and accounting for more than 60% of the global NEV market, according to China Passenger Car Association. Indeed, data from China's General Administration of Customs showed that China exported 2.34m vehicles in the first six months, while Japan exported 2.02mn vehicles, according to the Japan Automobile Manufacturers Association. This is the first time China has overtaken Japan in automobile export at the half-year mark. Industry analysts said that the strong momentum will persist in the following months, so it is highly probable that China will become the world’s largest exporter of all types of vehicles in 2023.


Aug 17, 2023