There is one piece of asset allocation advice we’ve been giving over and over again since Rayliant launched: The onshore China A shares are a better place to be than the ADRs and Hong Kong listings trading offshore.
There are 136 firms that dual-list in the mainland China A-share market and the Hong Kong H-share market. Of these, 135 are more expensive in mainland China. This article explains why this price discrepancy exists and how investors can take advantage of it.
Contrary to many pundits’ predictions, Jason Hsu is confident that Beijing’s deleveraging efforts will avoid a housing crash in China. The much bigger issue, from both a social welfare and economic perspective, is housing affordability—a crisis he’s seen firsthand during his recent stay in China. This article explains more.
Headlines in the West have been implying Evergrande’s predicted collapse could cripple Chinese banks and create a run on financial institutions. Rayliant Chairman and CIO Jason Hsu explains why differences in China’s real estate development financing make this very unlikely.
Philanthropy, taxes, and government assistance programs are new concepts that are top of mind for the Chinese government, signaling a willingness to adopt a more Western approach towards achieving common prosperity.
China’s regulators are focused on those industries and companies with the greatest potential to hurt Chinese society. This means ESG investors who tailor their approach to local social issues —which are often different from “western issues”—can avoid regulatory black swan events and earn better returns.
The latest policy decree from Beijing is a likely death sentence for the for-profit education sector in China … but it may be a win for Chinese society. Global investors are sometimes uncomfortable with China’s interventionist approach to address social issues. But if they want to invest successfully in Chinese companies, they’d better understand it.
Is this the end of the road for Chinese ADRs? China may be tightening the VIE loophole that previously permitted U.S. listings of Chinese companies. This article explains why ADRs and VIEs present an especially complicated issue for regulators in China.
I’ve been getting questions about the Ant Financial IPO, and it was validating to see Charlie Munger’s recent interview on the topic. The brief article below shares my thoughts on the topic, and on China’s regulatory approach more generally.
Jason Hsu and I have been monitoring the unprecedented rush of Chinese companies to list on U.S. exchanges. Our key takeaway? Many of the highest-quality Chinese firms are and will continue to be listed exclusively in mainland China.
Given some of the alarmist coverage around the slowing loan activity in China, it’s no surprise that investors are curious. The change in policy will likely have an effect on the Chinese equities market, but the impact may be different than many suspect.
In this research note, Dr. Phil Wool reviews some of the history behind China’s asset management industry. The results shed light on the sources of mutual fund outperformance in China and demonstrate the value of active management in a market dominated by retail investors.
Most people prefer to understand Chinese regulators through the lens of communism vs. capitalism or a one-party system versus a multi-party democracy. However the more useful (and certainly the most simple) analogy is likely the “tiger-mom” vs. Montessori framework for parenting.
Last November, the Trump administration announced a ban on US investors holding Chinese stocks with suspected military links. Despite some big names falling on the US government’s blacklist, the contribution from banned stocks total less than 3% of the overall weight in the average China investor’s portfolio.
The value-growth cycle is a hot debate of late. As it should be. So is talk of bubbles. Research Affiliates co-founder Rob Arnott continues to sagely prophesize value’s return. Here’s Rayliant’s take on where we are in that cycle with respect to the China equities market. We also contrast it with the journey that the US stock market has been on over the last 10 years.
While drama makes for good TV, there may be too much of it around the recent slate of SOE defaults. While attention is warranted, a broader perspective may point to a positive development versus something to trigger alarm.
Despite the staggering size and growth of China’s economy, Chinese stocks occupy a surprisingly small place in most investors’ portfolios. Dr. Phil Wool takes an evidence-based look at common arguments for and against a greater allocation to the world’s second-largest stock market.
Not all investors are immune to fears caused by the coronavirus, and the market’s reaction need not be rational. Our CIO Jason Hsu and Head of Investment Solutions Phillip Wool share their analysis on Chinese stocks’ response in the initial weeks of the outbreak.
Even before the recent trade war, the U.S. president had a hand in China’s market, by way of “concept” stocks. They are just one of the quirks found in retail heavy emerging markets like China, whose inefficiencies—and alpha opportunity—are traced to non-professionals trading as much for entertainment as for profit. In the research below, we investigate the evolution of retail participation in China A shares, the remarkable inefficiencies that creates, and the implications for professional investors.
ESG investing has become more in vogue in the past five years. Part of this may be driven by an on-faith belief, supported by shallow anecdotal evidence, that investing in ethical companies (high ESG companies) must lead to better investment outcome. You could call this belief the “good karma” principal in investing.
Factor returns are often reported as the average of factor returns among large stocks and the factor returns among small stocks. However, factor returns among small, illiquid stocks are significantly higher than those among larger, more liquid stocks, suggesting that the factor returns in the literature are exaggerated and cannot be implemented with substantial assets.
Already the world’s second-largest economy, China is expected to pass the U.S. as the number one within ten years. Just how does that extraordinary growth translate into an opportunity for equity investors?
Emerging markets equity beta provides investors with a welcome source of portfolio diversification. But inefficient markets dominated by heavy retail trading also present a compelling alpha opportunity for portfolios tailored to the nuances of EM.
China’s state-owned enterprises (SOEs) and private listed companies differ in profit motives and capital access, posing a challenge to investors. Combining a quant approach to managing SOE exposure with fundamental insights offers a more compelling solution.
Some investors shy away from the emerging markets, put off by hazy accounting and financial reporting. Quantitative tools help cut through the fog, avoiding the pitfalls of misleading data and capturing opportunities not recognized by the market.