20160127-高盛-Fund_positioning__Addressing_FAQs_amid_volatile_markets_17页_716kb

Fund Positioning Summary: Addressing FAQs Amid Volatile Markets

Core Content

This report provides an analysis of fund positioning in Asian markets, focusing on the impact of market volatility, foreign inflows/outflows, and sector-specific allocations. It highlights the current trends in investor behavior, particularly in response to China's economic concerns and the MSCI inclusion of Chinese ADRs.

Main Points

• Fund Flow Trends:

  • EM Asian equities have experienced significant foreign selling, totaling US$40bn since June 2015 and US$8bn ytd.
  • The risk reduction has been more aggressive than previous sell-offs, with EM funds facing outflows of US$50bn since August 2015.
  • Despite the volatility, UW allocations (like China and Taiwan) have been hardest hit, leading to less pain for AEJ/EM funds.
  • US-focused funds have seen outflows of US$20bn ytd, while DM funds (like Japan and global funds) have received inflows.

• Over-/Under-Owned Markets and Sectors:

  • Funds are overweight (OW) in India, parts of ASEAN, consumer sectors, and domestic cyclicals.
  • They are underweight (UW) in China, North Asia (Korea and Taiwan), commodities, and global cyclical sectors.
  • ASEAN shows divergence in fund exposure, with Thailand, Singapore, and Philippines still OW, while Indonesia and Malaysia are UW.

• China Equities Positioning:

  • Global mutual funds are UW China by 240bp, compared to 190bp at end-3Q2015.
  • Even with HK exposure, China remains the largest UW market, with 170bp UW in aggregate, the largest shortfall in a decade.
  • Banks are the largest under-exposed sector in China, with 266bp UW in EM funds.
  • Consumer sectors are OW, while infotech and SOE sectors are UW.

• MSCI Inclusion Impact:

  • China internet stocks appear crowded in global funds, but still under-owned in EM/AEJ funds.
  • EM funds have turned UW in China tech by more than 100bp post ADR inclusion, as allocations failed to keep up with benchmark weight increases.
  • The second tranche of MSCI inclusion in May is expected to increase EM funds' UW to 345bp, making it the largest UW sector in China.

• Investor Risk Exposure:

  • India's private banks, infotech, and pharma are over-owned and at higher risk of underperformance if outflows persist.
  • India Midcaps are crowded due to domestic mutual fund ownership.
  • 'Old China' sectors like banks and SOEs are under-owned, but there is potential for upside in 'New China' stocks.

• Allocation Gaps:

  • There are significant allocation gaps in UW China internet, China property, KR/TW chemicals, and India refiners, which may present upside risks.
  • Downside risks are noted in OW Thailand banks and HK property.

Key Investor Questions and Answers

1. Fund Flow Trends: Aggressive risk reduction in Asia, with EM Asian equities seeing US$40bn foreign selling since June 2015 and US$8bn ytd.
2. Over-/Under-Owned Markets and Sectors: Funds are OW in India, parts of ASEAN, consumer sectors, and domestic cyclicals; UW in China, North Asia, commodities, and global cyclical sectors.
3. China Equities Positioning: Funds are UW China by 240bp, and UW China banks by 266bp, indicating a light overall exposure.
4. 'Old China' Sectors: Banks are the largest under-exposed sector, with three-fourths of Top 200 EM funds being UW or not owning them.
5. Crowdedness of China Internet Stocks: While global funds are crowded, EM/AEJ funds are still under-owned.
6. India as a 'Consensus Long': Funds are OW India by 400-585bp, but private banks, infotech, and pharma are over-owned and at risk.
7. Retail Flows in India: Midcaps, public banks, and investment cyclicals are most crowded.
8. ASEAN as a 'Consensus UW': Not true; there is divergence within ASEAN, with Thailand, Singapore, and Philippines still OW, while Indonesia and Malaysia are UW.
9. Large Allocation Gaps: UW China internet, China property, KR/TW chemicals, and India refiners are under-exposed, while OW Thailand banks and HK property are over-exposed.
10. Peer Positioning in Key Stocks: Detailed analysis of the Top 200 EM funds and their holdings in key Asian stocks is provided in the report.

Key Recommendations

• 'New China' Stocks: Focus on under-owned stocks with strong fundamentals and MSCI inclusion catalysts, such as Tencent, Alibaba, and AviChina Industry.
• 'Old China' Stocks: Consider SOE reform beneficiaries and bottomed-out old economy stocks, such as China Mobile, PetroChina, and China Citic Bank.
• India Exposure: Be cautious of over-owned sectors like private banks and infotech, which may face downside risk if outflows continue.

Disclaimer

Goldman Sachs does and seeks to do business with companies covered in its research reports. This report is intended for institutional clients only and should be considered only a single factor in investment decisions. For Reg AC certification and other important disclosures, refer to the Disclosure Appendix or visit www.gs.com/research/hedge.html.