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As the US Fed rate cut gets imminent, the liquid Asia credit market also is set to benefit from a number of strong tailwinds. In addition to favourable macroeconomic fundamentals, the heterogenous region also offers benefits of broad geographic diversification benefits and positive reinforcement from continued market liberalization and more investor friendly reforms. Within this space, Asian investment grade (IG) bonds set to enter a favorable "Goldilocks" scenario. On one hand, these bonds benefit from the anticipated monetary easing by the US Federal Reserve, which is projected to implement a substantial 240-basis-point rate cut over the next 12 months. On the other hand, the region is expected to sustain healthy growth, with forecasts indicating that many Asian economies will expand at an accelerated pace. In this article, we discuss why Asian IG bonds represent a sweet spot that international allocators sometimes overlook, offering meaningfully higher yields, better credit ratings, and lower duration than their peer IG cohorts from the US and Europe. #premia #asiacredit #investmentgrade #bonds #fixedincome

Given the inextricable links between energy-hungry Artificial Intelligence and renewables, energy storage and smart grids are a necessary “final mile solution” in the intensifying AI race. They provide the critical capability to store and dispatch huge quantities of uninterrupted renewable energy/power on demand without compromising emission reduction targets. In this regard, China is uniquely positioned to tackle the related challenges of AI and renewable energy with its rapid development and upgrades of energy storage systems and smart grids. In fact the country has long been studying intertwined strategic relationship between AI, technology and energy, and studiously incorporate such thinking into its Five Year Plans, and which are subsequently being rolled out as China’s East Data West Computing initiative. Further to our recent insight on China’s “power infrastructure” as the critical enabler for AI-development, in this article, we zoom in on China’s capabilities and investment opportunities in energy storage as the linchpin that holds the last mile solution, and matches renewable energy production with industrial demand in China’s journey to a high-tech, modern society. #Premia #china #energystorage #renewableenergy #AI #greeneconomy #newenergy #photovoltaic #newinfrastructure

In the midst of the AI-driven excitement surrounding major US tech giants, Taiwan has been quietly positioning itself as a significant player in the global technology sector. Over the past two years, Taiwan’s stock market has outperformed all major Asian markets and even surpassed the S&P 500 and Nasdaq 100 in returns. This success can largely be attributed to Taiwan's critical role in the semiconductor industry, which continues to drive its economic growth and investment appeal. In this article, our Senior Advisor Say Boon Lim discusses drivers supporting the unique, strategic moat Taiwan has built over the years, and why it will likely remain an attractive investment destination going forwards, on the expected continued robust growth in demand for semiconductors and its broader economic growth activities over coming years. #Taiwan #semiconductor #AI #hardcoretechnology #dividendyield

The time has come – Federal Reserve chair Jerome Powell finally signalled at Jackson Hole that rate cuts will likely start in Sep, though his remarks offered few clues as to how the Fed might proceed after its Sep gathering. On the surface, extending duration in US Treasuries appears to be a straightforward decision given the assumption that falling interest rates will lead to rising bond prices. However, it is not without risks and complexity as we are entering the rate cut cycle against very different backdrop from previous cycles. In this article, we discuss the intricacies of the upcoming rate cut trajectory, and why US Treasury Floating Rate Notes (FRNs) remains a relevant strategy for investors seeking diversification and stability as a result of the very much inverted yield curve, and market uncertainties in this journey. #USTreasury #Fedratecut #thetimehascome #interestrate #moneyeasing #federalreserve #fixedincome

Going into a July meeting of top party officials at China’s Third Plenum, held once every five years, first-quarter hopes of a 2024 recovery in China’s economy had given way to macro uncertainty, as strength in manufacturing and exports served for many to highlight just how weak domestic sentiment and consumption remain. In this article, Dr. Phillip Wool, Global Head of Research of Rayliant Global Advisors, digs into such challenges and potential paths forward for Beijing, including our thoughts on a Third Plenum meeting that didn’t yield any policy bombshells, but still offers clues as to where investors might focus as we enter the second half ready for bargain hunting. #premia #china #ashares #factorinvesting #multifactor #value #size #quality #growth

China’s 10-year sovereign bond futures reached a record high on Thursday, fueled by a buying frenzy for government debt. The strong move came after data showed global investors boosted their holdings of Chinese debt to a record level last month. Speculative buying from retail investors, demand from fund managers riding a wave of inflows, and purchases by companies seeking higher yields than regular bank deposits are also fueling the rally. One-year deposits at China’s largest banks pay a record-low of just 1.45%. Consequently, China’s total deposits slumped by RMB 3.9 trillion in April and have yet to recover in May, with a significant proportion of funds rushing into higher-yielding fixed-income assets like government bonds. Some traders are betting on further stimulus measures to weigh on yields, as China’s consumer prices rose less than expected in May and factory prices fell for the 20th consecutive month. Shanghai Securities News reported that there is room for China to cut the reserve requirement ratio (RRR) for banks, as well as interest rates, in the third quarter. China needs to inject an additional RMB 500 billion of liquidity this year, which is equivalent to a 25-basis-point RRR cut. According to Natixis and Goldman Sachs, China’s 10-year yield could fall to between 2.18% and 2.2% by the end of the year, from its current level of around 2.25%. Investors interested in long-duration Chinese Government Bonds (CGBs) may consider 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 maturity. We also offer a USD-hedged version (9177.HK) for investors with preference keep currency exposure in USD. #Premia #China #Governmentbonds #Fixedincome #Investmentgrade #Interestrates #Yield

Despite mainland stocks putting up a solid Q1—the CSI 300 Index gained 3.1% for the quarter—and although macro fundamentals appeared as if they might be turning a corner at the start of 2024, bullish sentiment toward China equities had yet to materialize, with many questioning whether a first-quarter rebound would sustain. In the commentary below, Dr. Phillip Wool, Global Head of Research of Rayliant Global Advisors, delves into the details of China’s economy and market action during Q1, discussing how Beijing’s plan to nurture high-quality growth might translate to macro conditions and investors’ portfolios. #premia #china #ashares #factorinvesting #multifactor #value #size #quality #growth

China’s household consumption appears to have been massively underestimated in international comparisons, because of differences in data definitions and valuation methodologies. The two big areas of differences in international comparisons are: 1) Social transfers in kind, which could be worth some 6% of GDP; and 2) The value of housing services provided by owner-occupied homes, which could be worth another 5% of GDP. In this article, our Senior Advisor Say Boon Lim discusses why the criticisms of China’s growth model and "underconsumption" look flawed. #Premia #china #growth #gdp #consumptionupgrade #householdspending #bedrockeconomy #neweconomy

CATL remained solid no.1 in EV battery provider, producing a capacity of 35.5 GWh in the first two months of 2024. Its market share has also expanded to 38.4% year-to-date from 33.6% during the same period last year, followed by LG Energy Solution’s 12.7% and BYD’s 12.1%. For the overseas markets, CATL also expanded its market share by a 0.6% to 26.3%. The company has recently launched what it claims the first mass-produced energy storage system with zero degradation in the first five years of its lifespan. This new equipment is capable of 15,000 charge cycles, a significant increase of 25% from the previous generation. The advancement of the new energy storage should help the company expand beyond its dominant EV battery business. Attractive dividend policy, coupled with improved market sentiment and rising EV demand, contributed to CATL’s recent strong stock price performance. The company has proposed a total of over RMB 22 billion in dividend payout, reflecting a payout ratio of 50% and a dividend yield of 2.5%. CATL is the top holding of Premia CSI Caixin China New Economy ETF (3173.HK). #premia #china #newenergy #evbatteries #ev #greenenergy