premia-parnters logo
Premia 观点洞察
Premia 观点洞察
分享投资见解、洞察行业热点、探讨学术研究

精选观点 & Webinar

科技驱动创新:衝击重塑亚洲成长
insight科技驱动创新:衝击重塑亚洲成长

亚洲科技公司迅速掘起,并持续以颠覆性的创新衝击全球传统产业。以前提起科技创新,最先想到的是美国五大科技龙头FAANG(脸书、亚马逊、苹果、网飞、谷歌),而现在许多投资者已经将眼光移至中国互联网三巨头BAT(百度、阿里巴巴、腾讯)。事实上,科技创新对我们生活已经带来了巨大的改变 —— 在这个日新月异的变革时代,我认为「重塑」比「冲击」这个词语更贴切,因为许多创新和所谓的「破坏性衝击 (Disruption)」早已潜移默化渗透进我们的日常生活中。例如,在〈亚洲「数字革命」如何改变我们的生活〉一文中提到,数位科技几乎每分每秒存在于我们四周,而我们的生活也已经离不开许多数位科技产品。大数据、人工智能(AI)和物联网(IoT)的飞速进展,成就了互联网和信息技术之外很多具深远影响的创新变革。在这篇文章中,我们将以下列主题探讨亚洲科技创新:• 亚洲创新发展现况 • 科技创新对哪些行业影响最大? • 科技创新如何颠覆传统行业分类、影响投资策略?亚洲创新发展现况亚洲目前拥有50%的全球互联网用户、18亿社交媒体活跃用户,以及市值约750亿美元的新创独角兽公司。根据联合国教科文组织统计数据,世界前5大研发投入国中有3个是亚洲国家——排名第二的中国、排名第三的日本和排名第五的韩国,这3个国家的研究人员合计佔全球约40%。此外,这3个国家也都是全球前五大的机器人市场。资料来源: 联合国教科文组织根据《哈佛商业评论》报告,很多全球领先的公司看中亚洲的创新动能及专业的技术人才,纷纷到亚洲来开发新产品、新服务和新商业模式,甚至许多公司已经在亚洲建立其创新研发的生态系统。在创新发展的进程中,亚洲之所以能在世界各地区脱颖而出,主要因素被认为包括:1)亚洲经济成长速度高于西方发达国家;2)各种各样大量的製造商和快速成长的中产消费阶级,成就了亚洲强劲且不断扩张的消费需求;3)政府对创新行业的发展高度重视并积极支持。科技创新对哪些行业影响最大?儘管信息技术本身即属一门行业类别的称呼,但随著科技革新和时代发展,技术不再只是一种单独的行业,而是一种赋能的工具。不论是提高产量还是降低成本,几乎每个行业都可以利用创新技术获益。除了传统的信息技术行业(如软件,硬件等)外,以下行业预期将在亚洲科技驱动的迅速成长趋势下受到最大的影响:零售业:随著互联网的迅速发展与普及,线上购物以及线上到线下(O2O)的营销模式所带来的便捷与实惠,使电子商务愈受衝击并取代传统零售业成为消费者的首选。这种衝击来自互联网技术为企业带来较低的成本结构及较高效的物流配送。在〈亚洲「数位革命」如何改变我们的生活〉文章中,我们也谈到中国两大电子商务平台阿里巴巴天猫和京东缔造出的惊人的销售额,一次次刷新全球零售史上的纪录。此外,无论是电子商务或传统零售业,愈来愈多企业正在利用人工智能及大数据来分析消费趋势并预测顾客的消费偏好与需求。工业:在亚洲,物联网发展及人工智能应用的最前沿体现在机器人和工业自动化上。随著机械手臂变得愈敏捷俐落再结合人工智能,机器人技术的进步将创造出更具智慧、更有能耐的工业机器人,以补充或取代许多领域因作业环境危险或是人口老化而短缺的人力资源。此外,科技的进展也推动了操作流程优化、预测性维护等工业领域实现更好的表现。在〈人工智能和机器人技术领域领先企业〉一文中我们会深入举例一些在人工智能以及工业机器人领域领先的应用案例。医疗保健:亚洲人口老化趋势以及快速成长中产阶级催生了对医疗保健产品的巨大需求,2017年亚洲生命科学项目筹集投资金额高达约400亿美元。先进的数据分析技术已为製药公司的药物研发及临床实验带来巨大效益,如生理模拟可以加速药物产品的开发,基于3D打印或虚拟实境的组织建模可以协助评估潜在风险,而人工智能也已应用于诊断成像和机器人手术。此外,医疗保健的创新发展也使患者更具医疗知识且充分瞭解自身状况,如数位药丸或纳米机器人可以进入患者的身体(和血液),透过智能设备检查并提供即时数据给患者和医生。交通运输:交通运输领域正在以多种不同的形式发生变革,并影响许多分支行业。在空中,具有智能传感器和精确全球定位系统的无人机,已经实现了新的物流配送和农地耕作的形式;在路上,得益于电池储能、图像传感和人工智能算法等技术的提升,电动车和无人驾驶技术也在不断进展。此外,物联网时代也促进了交通运输中从汽车到自行车的共享经济概念。科技创新如何颠覆传统行业分类、影响投资策略? 接近20年前,标准普尔及摩根士丹利公司联合推出目前全球最常用的全球行业分类标准,即GICS®;此套分类标准目前正在进行一次大规模的更新,并预计在今年9月生效。该修订是为了使分类能更准确反映现代公司的主要运营业务,但随之也伴随著一些问题,例如:电子商务公司如亚马逊或阿里巴巴,是否该归类为非必需消费品?美国科技龙头FANG(脸书、亚马逊、网飞、谷歌)中,网飞是否应归类为非必需消费品,而脸书、谷歌则与及其他媒体业者如迪士尼等一起归类为电信服务业?基于GICS分类的信息技术主题ETF一直是捕捉该领域成长的常见投资方法,随著科技创新的广泛应用,几乎所有行业都因著科技赋能创新与成长。因此,说以「GICS = 信息技术」来投资科技领域已经过时或者被颠覆并不为过,理性精明的投资者早已将资金从传统定义的科技ETF转向更定制化的主题型 ETF,特别是在人工智能、机器人自动化、社群媒体、半导体及生物科技等领域。儘管仍有许多ETF投资经理人以广泛GICS或行业分类基准(ICB)建构其投资组合,越来越多ETF发行商,包括我们 (Premia Partners) ,已经与指数供应商合作,重新定义行业分类标准,特别是在面临传统产业分类还无法有效描述新型经济结构下的颠覆性创新主题的情况下。我们已推出的亚洲创新科技主题ETF正是与领先数据供应商FactSet合作,用其特有的精细行业分类层级辨别相关公司收入来源的具体运营业务是否属于创新科技范畴。 在〈Targeting Asian Growth Through Innovation〉文章中,我们详细讨论了指数建构的方法,而您也可以在产品详情页面上了解更多有关Premia 亚洲创新科技ETF(3181 HK)的信息

Aug 13, 2018

How much further can renminbi depreciate?
insightHow much further can renminbi depreciate?

Every investor is worried about a new round of depreciation of renminbi (Yes, again!). Seems this topic is always an easy sell among news headlines. Renminbi began to weaken, dropping from an exchange rate (USD/CNY) of 6.24 in late March to 6.82 as of July 24, since the breakout of a trade conflict between the US and China. The latest proposal from China central bank to incentivize banks to expand lending to companies created another worry among investors on monetary easing. The million-dollar question will be how far the depreciation can go. Let’s examine this matter from a few different perspectives and get a better understanding of the current situation.

Aug 02, 2018

新兴东盟:亚洲经济增长新驱动力
insight新兴东盟:亚洲经济增长新驱动力

东南亚国家联盟(Association of Southeast Asian Nations, 简称“东盟”)是由10个东南亚会员国共同组成的经济体,包括印度尼西亚、新加坡、泰国、菲律宾、马来西亚、文莱、越南、老挝、缅甸和柬埔寨。 目前,东盟成员国已涵盖了东南亚地区超过6亿的人口,合计国内生产总值约2.8万亿美金,位列全球第六大经济体。资料来源: 大华银行 (2018年5月)投资东盟市场的机遇与挑战全球许多投资者都在不断寻找高成长市场。继中国与印度的成长故事变得广为人知,增速也逐渐趋向平缓之后,东盟是逐渐进入视线的下一个高成长市场。我们将通过以下几点深入阐述东盟市场的投资机遇与挑战:1. 人口红利与城市化程度提高2. 经济增长正处于加速转折点3. “一带一路”促进贸易与投资4. 成员国发展差异带来的启示1.人口红利与城市化程度提高东盟已超越欧盟成为世界第三大人口地区,仅次于中国及印度。更值得一提是,东盟人口的平均年龄不到29岁,是全球最年轻的地区之一 (相比于中国与美国约37-38岁的平均年龄)。 此外,东盟的平均都市化程度不到55%,而每年增长率却高达6%。大量年轻人口带来的持续劳动力增长,以及城市化水平的提高都将对东盟未来五至十年的发展产生巨大推动作用。此外,东盟目前大约有6千万中产阶级家庭具有可自由支配支出的能力,即消费阶层。有统计预测这个数字将会在2025年增加一倍,达到约1.25亿,这将使东盟成为除中国以外最具成长潜力的消费市场,而城市化及生活水平提高也将会带来显著的消费升级趋势。资料来源: 世界银行 (截至2017年12月)2.经济增长正处于加速转折点东盟中大多数国家的国内生产总值(GDP)还处于一个较低的水平。除新加坡和文莱外,其余8个东盟国家的人均国内生产总值皆低于1万美元。然而,东盟整体的人口、技术、经济发展与中国过去几年趋同。很多时候历史总是惊人的相似,如果我们代入中国的经济发展历程,在下图中可以看到,很多东盟国家现在的人均GDP水平好比处在10多年前的中国,而这样的增长速度正是一个经济即将或正在快速崛起的转折点!资料来源: 世界银行 (截至2017年12月)3. “一带一路” 促进贸易与投资东盟地区2017年的全球贸易达到2.6万亿美元,位列全球第四,其中有近8成来自于东盟成员国以外的国家或地区。随着“一带一路”计划的发展,中国及“一带一路”其它沿线国在东南亚地区的投资及贸易往来也将持续增长。资料来源: 大华银行 (2018年5月)中国作为“21世纪海上丝绸之路”的第一站,与东盟各成员国自“一带一路”倡议以来在基础设施、商贸等多个领域都在展开合作, 其中包括约52亿美元的中泰铁路工程、约10亿美元的中国越南经济贸易合作区等。 除了政府间合作项目,私募投资在东盟地区也迅猛增长。不同于零售投资者受限于投资工具与投资门槛,很多机构投资者已经通过战略并购或者私募股权的方式抢先布局东南亚市场投资机遇。2017年东盟地区获私募股权投资总额较5前年成长了182%,达到了200亿美元的历史新高点,其中也包括许多中国企业参与的项目。例如电商巨头阿里巴巴在对东南亚最大电商平台Lazada持股增加到83%后,对印尼本土最大电商Tokopedia也注资了11亿美元投资,此外阿里与软银共同投资了东南亚打车平台Grab; 腾讯除了收购泰国媒体公司Sanook之外,也与京东、谷歌、淡马锡等共同投资了印尼共享出行平台Go-Jek。4. 成员国发展差异带来的启示虽然东盟有强大的经济增长潜力,但投资者也应当注意到,东盟各成员国在经济发展水平、人口规模及重要经济领域等方面还是存在不少差异。例如:新加坡的城市化水平达到100%,且属于发达国家行业;经济体量上,已经属于MSCI新兴市场定义的马来西亚、泰国、印尼、菲律宾以及前沿市场的越南都已经在2000-3000亿美元左右,而文莱、老挝、柬埔寨都不到200亿美元;行业方面,较为落后的老挝、缅甸、柬埔寨仍然以自然资源与农业为主,而其他国家则已经趋于制造业、消费品行业主导的经济结构。资料来源: 安永 (2017年4月)综合东盟市场的整体机遇以及成员国间存在的差异,我们认为对于投资者而言,最适合的“新兴”东盟市场为马来西亚、泰国、印尼、菲律宾以及越南。这五个发展中国家在经济发展水平与经济体量上相对较为成熟,在制造业、消费品行业上的发展也更有机会带来增长驱动力。相关投资策略:Premia 道琼斯新兴东盟顶尖100ETF (2810 HK)其它相关文章:Emerging ASEAN - Finding Economic Growth Beyond China and India

Jul 10, 2018

精确捕捉亚洲创新科技机会
insight精确捕捉亚洲创新科技机会

创新逐渐成为经济增长的关键要素——"中国山寨"成功转型为"中国制造",而亚洲地区的整体趋势亦如是。然而,目前为止,市场上仍缺乏简单有效的方法投资亚洲创新机遇。本篇文章,我们将讨论亚洲创新发展的现况即行业影响,并介绍Premia与FactSet合作推出的亚洲创新科技策略,亚洲创新科技指数为投资者系统化、精确地捕捉亚洲创新科技大趋势——数位转型、生物科技与医疗创新、人工智能与机械自动化。

Jun 29, 2018

First rebalance – how does it look?
insightFirst rebalance – how does it look?

The indices followed by our 2 Premia China A-shares ETFs (2803.HK and 3173.HK ) went through their first rebalance since the ETFs launched late last year. In this post, we recap the rebalance, the resulting exposure, the newest additions and everything else you need to know.

Jun 15, 2018

The 10 Myths Behind A-shares Avoidance
insightThe 10 Myths Behind A-shares Avoidance

MSCI China A-shares inclusion is happening this week, but there are still a lot of global investors who hesitate to add China A to their portfolios. Over the last 12 months we’ve heard multiple reasons cited for this aversion to A-shares. In this post, we debunk the 10 most popular myths and highlight why the rational investor not only can, but should, allocate to A-shares, perhaps even ahead of MSCI’s multi-year inclusion plan.The 10 myths behind A-shares avoidance:1. China exposure is already covered via Chinese equities in HK & the US (offshore)2. All quality companies are listed offshore3. A-shares are trading at a premium to offshore Chinese equities4. A-shares have poor corporate governance5. A-shares are mainly SOEs whose interests do not align with shareholders6. A-shares add volatility only, without producing any long-term performance7. Renminbi is too volatile and always depreciates8. Rational investors should steer clear due to A-shares’ massive retail participation9. A-shares investment requires quotas and other complex processes 10. There isn’t enough research coverage.1. China exposure is already covered via Chinese equities in HK & the USFirst, the A-shares market has 3x the number of stocks available offshore. The daily turnover is 5x greater than both H-shares (HK) and ADRs (US) combined. In other words, the onshore market is the primary market, no matter what the global community may think. Some sub-sectors are even unique to the A-shares market only, namely aerospace and defense, Chinese distillers, entertainment & publishing, cable & satellite, precious metals, and many others. They are listed only onshore and include companies that many investors should be reviewing as part of their allocation to China in the 21st century. Conclusion: MythSource: Bloomberg as of May 21, 20182. All quality companies are listed offshoreFirst and foremost, this doesn’t hold up to scrutiny. China A-shares score similarly to many other global markets on metrics such as profit margin, ROA, ROE and current ratio. In fact, on all but ROA, China A-shares have a bigger quality exposure than MSCI World. In addition, many industry leaders are only listed in either Shanghai or Shenzhen, not offshore: Jiangsu Hengrui (pharmaceuticals), Midea (home appliances), Kweichow Moutai (beverages), China International Travel Services (leisure), and Shenzhen Inovance (automation), etc. If investors keep excluding A-shares from their radar screens, then they exclude many of the most recognized domestic consumer brands. Beyond the existing onshore listings, the launch of China Depositary Receipts (CDRs) in the coming months will encourage some offshore listed national champions to return home. In addition, the China Securities Regulatory Commission (CSRC) is speeding up IPOs of qualified unicorn companies in biotechnology, cloud computing, artificial intelligence, and high-end manufacturing. By then, the domestic markets will look even more complete and attractive. Conclusion: MythSource: Bloomberg as of May 21, 20183. A-shares are trading at a premium to offshore Chinese equitiesA-shares are trading at a premium? Yes, but only if looking at dual-listed A/H shares (the companies that are listed both onshore and offshore). The overall premium of dual-listed A-shares is ~20% over their dual-listed H-shares counterparts. But that is only part of the story.When looking at the overall market, the story is quite different. CSI 300, the main benchmark for China A, is trading at ~13.0x of forward PER versus MSCI China, the main benchmark for offshore Chinese equities, which is trading at ~13.4x. A-shares have a lower Price to Book and a higher Dividend Yield as well. Basically, both onshore and offshore China plays are trading at similar valuations. But that’s assuming mainstream benchmarks. At Premia, we follow the CSI Caixin Rayliant Bedrock Economy Index for our traditional economy ETF, 2803 HK (product page). A-shares investment looks even more attractive from a valuation point of view, when utilizing our approach. Conclusion: Partial MythHere’s another way to look at the dispersion. Mid/small-caps are currently trading in the ~10th-20th percentile in valuations relative to their own history. In contrast, mega/large-caps are trading in the 50th-60th percentile vs the last 10 years. Over a shorter horizon, mega-caps in particular look rich in the 75th-85th percentile vs the last 3-5 years.Source: Bloomberg as of May 21, 2018; China A: CSI300; Offshore China: MSCI China; Bedrock China A: CSI Caixin Rayliant Bedrock Economy4. A-shares have poor corporate governanceCorporate governance issues are not new or unique to China. They exist in every emerging market and developed market. Think about the recent global scandals such as Facebook’s leak of personal data, Samsung’s bribery issues resulting in the heir going to jail, the collapse of Lehman Brothers and AIG during the financial crisis, etc. The Chinese government and regulators have been stepping up efforts to ensure that a fit and proper corporate governance is in place for listed companies. A cumulative voting mechanism to protect minorities’ interests, a minimum proportion of independent directors and International Financial Reporting Standards have all been gradually introduced in the past. Even now, one could argue that corporate governance in China is no worse than in other EM markets, and is in fact getting better as the government has made tackling the issue a priority. Increasing foreign ownership can only help push the market in the right direction. Conclusion: Partial Myth5. A-shares are mainly SOEs whose interests do not align with shareholdersA-shares are mainly SOEs whose interests do not align with shareholdersAmong 3,608 listed companies in Shanghai and Shenzhen, there are only ~1,000 central or local SOEs, accounting for less than one-third of the total number of A-shares. Investors have plenty of choice when putting their money in non-SOE companies. That said, it is also overly simplistic to say that all SOEs are in bad shape, mismanaged or over-geared without proper due diligence. Corporate governance goes hand in hand with SOE reform, a priority for the government going forward. Some SOEs like Gree and Shanghai Auto already deliver good operating results and manage to outperform the broader market. Effective screening tools for selecting the right stocks is important, regardless of their SOE or non-SOE status. For more info on our approach, click here. Conclusion: Myth6. A-shares add volatility only, without producing any long-term performanceGiven the nature of emerging markets, China A-shares do have higher volatility compared to most developed markets such as the US, Europe and Japan. However, A-shares have also outperformed those markets over the last ~15 years. So while the volatility is higher, so too is long-term return, in line with modern portfolio theory. More recently, volatility has decreased and we expect it to trend down as the market becomes more institutionally driven. Besides, looking at volatility only without considering correlations is a largely irrelevant asset allocation exercise. Adding A-shares into one’s portfolio helps increase diversification due to the low correlation of A-shares with other markets. Conclusion: MythSource: Bloomberg, Premia Partners, as of December 31, 20177. Renminbi is too volatile and always depreciatesFollowing the internationalization of the renminbi, the IMF voted to designate the renminbi as one of several main world currencies, thus including it in the basket of special drawing rights. An ongoing renminbi devaluation for the sake of increased exports is a misleading accusation. China is in the middle of transforming its economy from being export-oriented to domestically focused. Currency depreciation does not make long-term sense in that context. This is one of the reasons why the basket of currencies maintained by the State Administration of Foreign Exchange has been expanded to all their trading partners, rather than just USD. But all these points pale in comparison to an even simpler way of proving this concern false – the data. The renminbi appreciated by more than 7.4% in USD term in the past 12 months. Conclusion: MythSource: Bloomberg as of May 21, 20188. Rational investors should steer clear due to A-shares’ massive retail participation90% of daily turnover comes from individual investors in China A whilst less than 10% in the US. This is true. Similar to individual investor behavior in developed markets, retail flows in China lean toward stocks that are small, growth biased, lottery in nature and high beta, etc. These elements lead to higher volatility and unpredictability. That said, retail investors in China offer opportunities for professional investors to outperform, just like in developed markets. Inefficiency and behavioral errors create opportunity for capturing alpha, both through capable active management and through well-researched smart beta strategies. Conclusion: Partial MythSource: Rayliant Global Advisors, Premia Partners as of May 31, 20179. A-shares investment requires quotas and other complex processesForeign investors used to invest in China A through either Qualified Foreign Institutional Investors (QFII) or Renminbi QFII. Each institution had to apply for its own quota to trade physical A-shares. But as Chinese regulators decided to open their capital markets to global investors, the Stock Connect program was introduced in November 2014. It is a more flexible scheme that does not require individual investor quotas. No applications or complex processes are required – a total of 1,485 A-shares listed in either Shanghai or Shenzhen is available for trading through Stock Connect on the Hong Kong Stock Exchange. Conclusion: Myth10. There isn’t enough research coverageThere are 3,608 A-shares listed in either Shanghai or Shenzhen with most of the names not recognizable by many foreign investors. Given the above concerns, it’s understandable that global investors wouldn’t be satisfied with a passive approach and prefer active management instead. But with so many stocks, it’s easy to get lost without investing material resources in research. This is where Premia can step in and help. 7 months ago we built two solutions to tap into different segments in China whilst capturing excess return. The Bedrock Economy strategy (2803 HK) focuses on stocks that are the backbone of the Chinese economy whilst the New Economy strategy (3173 HK) taps into the future growth story of China including consumption upgrades, technological advancement and aging population. Both strategies not only focus on those two different aspects of China A-shares, but then screen each universe to identify stocks that offer long-term excess return. Bedrock focuses on value, quality, low size and low volatility companies while New Economy prioritizes asset-light, quality and R&D focused firmsComparing the latest disclosure of the 234 index constituents for MSCI China A Inclusion, the following is an analysis of index correlation, stock and sector overlap with the underlying indexes of Bedrock Economy and New Economy. Bedrock Economy (2803 HK) has a much higher correlation and more stock overlap with MSCI China A Inclusion. If you’re aiming for excess return vs MSCI China A Inclusion but don’t want to deviate significantly from that benchmark, the 2803 HK would be the right choice. On the other hand, New Economy (3173 HK) offer a drastically different exposure, focusing more on Information Technology, Consumer Discretionary and Healthcare sectors. If you’re aiming to steer clear from large-cap SOEs and to prioritize China’s future rather than today’s economy, than 3173 HK may be the exposure for you. Conclusion: Partial MythSource: Bloomberg as of May 21, 2018Out of 10 common reasons for not investing in A-shares, we score 6 as complete myths, not based on current facts about A-shares. The other 4 are partial myths, where choices of data drive the outcome or where the facts are true, but the implication isn’t. In our view, gone are the days when A-shares as a market can be ignored. Investors need to allocate to A-shares in their portfolios, or risk decreasing their diversification and leaving opportunities for alpha on the table.Regards,David

May 28, 2018

Do Chinese firms innovate?
insightDo Chinese firms innovate?

Much has been made of the “copied in China” story over the last 1-2 decades. That perception is starting to shift, but ever so slowly with a lot more to be done. In this note, I take a look at the status of innovation in China, China’s ranking vs global peers, and how our ETF, 3173 HK, takes aim directly at China’s R&D and innovation companies (product page here and overview page here).

May 16, 2018

Q1 2018 China A-shares wrap-up
insightQ1 2018 China A-shares wrap-up

The first quarter of 2018 was a story of 2 halves. January was an aggressive move up in global markets, including A-shares across the board. It was essentially a continuation of 2017, with many of the same factor and sector performance dynamics. The correction from early February onward put a stop to that momentum trade, with A-shares seeing a wholesale rotation to different factor/sector results. Our New Economy and Bedrock ETFs underperformed in January but made up significant ground in February and March, so much so that New Economy (3173 HK) was one of the few A-shares strategies to deliver positive returns in Q1. Q1 overallChiNext led the market with a positive of 8.5% whilst FTSE A50 was down by 4.2%. A complete reversal of 2017. The A-shares market overall trended down with other global markets and the mega-cap rally ran out of steam. Sector wise, new economy sectors such as health care and information technology managed to have a positive return of 10.1% and 1.3%, respectively. All other sectors were negative, with telecom and consumer staples leading at -13.2% and -8.0%. All of this happened in February and March, with January looking like a continuation of 2017 – strong performance from financials and mega-caps. Momentum was king. But as the global correction got under way, it was the recent leaders that fell first. Investors began to take profit on their winners and refocused allocations to new economy and mid/small-cap stocks. The movement was in sync with policy agenda at the Two Sessions, held in March, emphasizing a shift in the economic growth model to focus on quality instead of quantity of growth. It was also in line with increased trade tariff rhetoric – new economy and smaller stocks are less exposed to global trade dynamics. Q1 performance by market cap Source: Bloomberg, as of 2 April 2018 Q1 performance by sector Source: Bloomberg, as of 2 April 2018 Factor resultsGoing forward, thanks to our friends at Rayliant, we will also include comments on factor patterns as well as traditional sector and macro drivers of returns. During the quarter, factor returns were subject to the same January vs February/March dynamic. January was led by Value and Low Risk, while Size suffered. This is in line with FTSE A50 outperformance, given mega-cap financials are not overly rich and score well on low volatility given their one-way performance in recent years. February and March witnessed completely different factor dynamics, with Value and Low Vol retreating into negative return territory by quarter-end. Instead, Quality and Growth ended the quarter positive and Size recovered nearly all of its January losses. Source: Rayliant Global Advisors, as of 10 April 2018 What will we see in the rest of 2018? January or February/March?Given the starkly different dynamics, many clients asked for our thoughts on which version of A-shares we expect to see going forward. Should we position for January or for February & March. Wihle there is no crystal ball to answer this question, we do have some compelling long-term data that points to February & March being the norm. Below are data points for Jan, Feb/Mar, 2017 and 10Y returns through the lens of market cap and sector allocations.Market cap – 10Y returns point to 2017 & January mega-cap outperformance being an outlier: we expect broader market cap exposures to continue to outperform. Source: Bloomberg, Premia Partners, as of 26 Jan 2018 Sectors – the last 10Y have been led by healthcare, consumer and technology stocks. It’s not lost on us that this is the exact composition of 3173 HK, though we have to admit we are a bit embarrased not to have built this chart earlier on. Source: Bloomberg, as of 2 April 2018 Relative Value in Large vs SmallThe biggest shift of the quarter was of course in the small vs large trade. We’ve been talking about this for a while, pointing out that both valuations and recent performance suggest that it might be time to underweight mega-caps. To recap, mid/small-caps retrenched from their 2015 peak to a PE sub 30x while mega and large-caps continued to trend up (left chart). The gap in large/small valuations is close to all-time tights – you can barely see the February/March correction in relative valuations (right chart). There is still more room for this relative value trade to run. PE Ratios Source: Bloomberg, Premia Partners, as of 2 April 2018 Here’s another way to look at the dispersion. Mid/small-caps are currently trading in the ~10th-20th percentile in valuations relative to their own history. In contrast, mega/large-caps are trading in the 50th-60th percentile vs the last 10 years. Over a shorter horizon, mega-caps in particular look rich in the 75th-85th percentile vs the last 3-5 years. Relative Historical Valuations Source: Bloomberg, Premia Partners, as of 2 April 2018 Premia A-shares ETFsIn terms of our ETFs, now that we have our first full quarter behind us, we can start to look back at their behavior. Here’s a quick summary of what you need to know:Summary statistics at quarter-end (in US$) – slow but steady growth in AUM and turnover. We saw multiple creates in both ETFs and an improvement in turnover from January to March. Source: Bloomberg, Premia Partners, as of 2 April 2018 Premium/Discount relative to other ETFs – despite launching less than 6 months ago, both 2803 HK and 3173 HK held their own in terms of premium/discount levels vs the more established ETFs. 2803 HK and 3173 HK averaged -0.28% and -0.05% in discount since inception. Don’t worry if you can’t spot the Premia ETFs immediately without looking at the legend. That’s the point – their premium/discounts are in line with the leading A-shares ETFs. Source: Bloomberg, Premia Partners, as of 2 April 2018 Index Return vs mainstream indices – The CSI Caixin Rayliant New Economic Engine Index (the index used by 3173 HK) outperformed all 3 of the major benchmarks (FTSE China A50 Index, CSI 300 Index, MSCI China A Inclusion Index) while the CSI Caixin Rayliant Bedrock Economy Index outperformed two of the three. Unsurprisingly, relative performance tracked the earlier-mentioned dynamics – underperformance during January and outperformance in February and March. Source: Bloomberg, as of 2 April 2018 3173 HK Performance Drivers – 2 things dominated returns: strong performance from its key sector exposures and its overall exposure to smaller stocks given its all-cap universe. Below is a Bloomberg attribution of returns for 3173 HK over 1Q18. Source: Bloomberg, as of 11 April 2018 The single biggest contributor was selection within the tech sector. Note that even though the overweight was high, it wasn’t the allocation to the sector that drove returns, but the selection of stocks, i.e. both our smart beta application and our all-cap approach (tech stocks not available in CSI 300). The financials underweight and healthcare overweight benefited performance, though selection from both sectors had a muted impact. Lastly, the consumer discretionary overweight and selection also contributed to returns.2803 HK Performance Drivers – the story is quite different for 2803. It underperformed slightly vs CSI 300 during the quarter, but the drivers were quite widespread. The average over/under-weight for each sector was ~2%, which resulted in minimal performance impact from allocation. Security selection in real estate, healthcare and consumer discretionary, however, hurt returns. A stronger impact from selection makes sense for 2803, given its active share of 48% vs CSI 300 and only 154 stock overlap. Source: Bloomberg, as of 11 April 2018 ********* Apologies for the long read. This was our first quarterly update and we’ll get better at them. Hopefully it was useful, and as always, should you have any questions, don’t hesitate to ask.

Apr 11, 2018

Let’s be optimistic:
insightLet’s be optimistic:

The topic of “trade war” seems to be dominating the market headlines lately with global equities weakening on poor sentiment. Should everyone simply sell their holdings and take a long vacation? It’s certainly important to be cautious and to consider downside risks. It might not be the worst decision for those who can take profit from the strong rally late last year and early this year, especially if there is no benchmark to worry about. However, adopting such a pessimistic approach and setting “risk avoidance at all cost” as a primary investment focus may result in many great opportunities missed. Indeed, even in today’s negative climate, we find some interesting movement in China A-shares that may help investors generate positive returns while overall markets are flat or down. On 22 Mar 2018, Trump signed an executive memorandum that would impose tariffs on up to USD 60 billion in Chinese imports. Global markets reacted with fear of a potential slowdown in the global economy with major indexes dropping the next day. The A-Shares market was no exception. Intriguingly, mega-to-large caps and mid-to-small caps reacted differently since then. Mega-to-large caps (FTSE A50 and CSI 300) fell immediately and continued down afterward whilst mid-to-small caps (CSI 500 and ChiNext) rebounded and even managed to record a positive return. It’s important to understand the difference in the universe of stocks before making decisions on the what and how of an A-shares allocation. Changes since trade war: mega-cap -5.5%; large-cap -3.3%; mid-to-small cap +0.3%; ChiNext +4.6% Source: Bloomberg as of 2 April 2018 Undoubtedly, most of these outperforming stocks come from segments that have less influence from overseas sales, such as semiconductor, IT services and health care. All 3 segments recorded a positive return during the down market. They are not only considered as defensive during the current trade war but also viewed as beneficiaries from the increasing tension in the bilateral trade between the US and China.Sector performance since trade war: Semiconductor +8.3%; IT Services +7.9%; Health Care +1.6% Source: Bloomberg as of 2 April 2018 The first outperforming segment that comes into our sight is Semiconductor. After the outbreak of the trade war, China may encourage the use of domestically developed semiconductor products rather than those imported from the US. One such product is the Graphics Processing Unit (GPU). Currently the world’s largest and leading GPU manufactures are mostly US companies, such as Nvidia and AMD. GPU not only plays an important role in gaming but also in the area of Artificial Intelligence (AI) and Cloud Computing. Since China advocates AI and Cloud Computing as future growth drivers, the demand for GPUs will remain high regardless of a trade war. At the company level, Changsha Jingjia Microelectronics (300474 CH), a domestic leading GPU manufacturer with strong research and development capabilities, may benefit from the switch. Zhejiang Jingsheng (300316 CH), a high-tech enterprise in semiconductor silicon material, PV silicon material and related equipment, would also gain from the potential change.Following the same logic, the IT Services segment had a great rally as well. One of the key sectors targeted for tariffs by the Trump administration is technology. It is highly likely that future sanctions may involve punishing Beijing over technology transfer policies. Separately, the State Council issued new guidelines last week that technology exports and Intellectual Property (IP) transfers that are part of acquisitions made by foreign firms involving patents, integrated circuit design and computer software copyright will be subject to national security checks. Going forward, domestic software companies such as Beijing VRV Software (300352 CH) and Xiamen Meiya Pico Info (300188 CH), focusing on information security software, may continue to take advantage of the government’s support to homegrown players.On the healthcare front, the National People’s Congress just passed a proposal to establish a National Health Commission, combining the functions of some former agencies. The main aim is to cut bureaucracy and implement a Healthy China strategy. China will move from a disease treatment approach to a preventative model. It is highly likely that the new agency will lead efforts in improving the medical services and insurance systems, while applying AI and Big Data technologies to promote precision medical treatment. Winning Health Technology (300253 CH) focuses on digitalizing medical information and applying AI and Big Data analysis in hospital and public health, while Autobio Diagnostics (603658 CH) specializes in R&D and production of clinical diagnostic products covering immunoassay, microbiology and biochemistry. Since most of their current and potential customers are domestic and would not be affected much by the trade war, it is not surprising that they managed to outperform after markets digested the initial news flow. Stocks from semiconductor, IT services and health care recorded decent gain in a down market Source: Bloomberg as of 2 April 2018 It’s not hard to notice a few similarities among these highlighted companies: (1) all of them are mid-to-small caps, (2) they have negligible overseas revenue, (3) most of them are listed in ChiNext, (4) they all belong to China’s new economy sectors. Because of the latter, they qualify for the Premia CSI Caixin New Economy ETF (3173 HK) which outperformed the broader market materially during this period. Source: Bloomberg as of 2 April 2018 We expect the development of a trade war to carry on in the next few months, causing ups and downs in global stock markets. It is hard to tell what path the negotiations and public rhetoric will take. From a macro point of view, we do see a silver lining in that China will further prioritize the development of domestic demand and will speed up innovation across many aspects of its economy. Aligning with its Made in China 2025 strategy and the national interest to become a tech superpower, it is time for Chinese companies to invest more in research and development. As investors, we see this as an opportunity to invest alongside government priorities and initiatives. As Warren Buffett once said “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.” We recommend embracing the change and using depressed overall market values to reallocate to your desired 3-5yr horizon positions, riding along the up-and-rising Chinese companies. Regards,David, Alex

Apr 06, 2018

China market rotation and priorities for 2018
insightChina market rotation and priorities for 2018

We are in the middle of China’s “two sessions” and have seen a host of news and market adjustments over the last 5 weeks. 3 themes stand out – a commitment to 6.5% growth, a focus on national champion repatriation, and the beginning of a rotation away from mega-caps toward broader market cap exposure.

Mar 08, 2018

Premia 图说

Chinese SOEs may be worth revisiting
  • 朱荣熙

    朱荣熙

Chinese state-owned enterprises (SOEs) may gain traction again amid Chinese government’s commitment to stabilize the capital market, market value management implementation, and attractive yield against the government bonds. Central Huijin, often considered to be the national team, is approved by CSRC to be the new controlling shareholders of 8 small to mid-size financial companies, with an aim to stabilize the capital market and mitigate potential risks. Investors are also anticipating further policy support for the financial sector, expected to be announced at the Lujiazui Forum in Shanghai. This led to the strong capital inflow to nonbanking financials and outperformance of the sector. Moreover, a couple of SOEs have revealed their market value management plans or valuation improvement plans. Local brokers believed this trend will continue and gain momentum in the rest of this year, leading to the revaluation of these SOEs. On the short-term yield, China’s one- and three-year bonds fell to a four-month low due to heavy purchases of state banks. Onshore traders speculated that the PBOC was involved in the purchases. The PBOC’s potential purchases is one of the tools to bring liquidity to the market. As the bond yield drops and liquidity increases, the relatively higher SOE’s dividend yield would look appealing to investors, further supporting their share prices. To capitalize the above trend and diversify from growth related stocks, investors may consider our Premia CSI Caixin China Bedrock Economy ETF, which places a significant emphasis on SOEs, accounting for over 70% of its portfolio, benefiting from the government support and the potential high dividend yield.

Jun 15, 2025

See More Premia Charts...