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Asian Investment Conference 2021


Welcome to the AIC insights, a single destination with access to a comprehensive suite of Credit Suisse in-house reports, unique market insights covering AES® , APAC Securities ResearchChina Quantitative Insights (CQi),  Credit Suisse Research Institute, Decarbonizing PortfolioHOLT® and Next Generation

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AES® Algo Strategies

Credit Suisse’s latest VWAP strategy on our highly anticipated new AES platform utilizes intraday volume profiles and short-term forecasting to optimize benchmark performance. By deviating from a rigid scheduled-based process and adapting to a real-time volume counting approach, our next generation VWAP adds a dynamic element to Asia’s most popular strategy.

Credit Suisse Enhanced Close utilizes Machine Learning methodologies to identify key indicators that affect Close and End of Day volume, allowing for better performance when implementing the Close benchmark. Leveraging “Gradient Boosting” technique, the Volume Prediction model uses both historical and real-time data for a more accurate and consistent forecast over the course of the day.

AlgoKaizen is an evolutionary computing framework that automatically allows for the performance assessment of competing models by using child-level randomized trials to switch between them throughout the order lifecycle for every individual order. The trial results are grouped and classified to determine the best model for a particular set of order characteristics and market conditions.

Credit Suisse’s new Guerrilla is a liquidity-seeking strategy designed to collect liquidity while minimizing market footprint. Ideal for liquid, fast-moving names with tight spreads, the strategy uses our unique price prediction methodology based on the output of our AlgoKaizenTM platform to collect liquidity at optimal prices in lit and dark venues while minimizing market signaling.

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AES® Quantitative Models

VWAP algos normally have high divergence from the benchmark on volatile days. With the focus on wheels and algo performance in general, reducing the standard deviation of the algo performance is an important goal. Historical average curve is effective for normal days. However on volatile days, especially for overnight events, every trader intuitively knows that more volume usually trades in the early part of the day. A similar pattern is observed across markets.

The amount of ‘Leeway’ allowed for a strategy governs how much the strategy can deviate from target volume in order to capture more favorable prices. Too tight a leeway and the strategy will cross the spread unnecessarily to keep up with market volumes, too loose and the strategy may fall behind volume while the stock undergoes an adverse price move, requiring the strategy to catch up at unfavorable prices.

Traders have an intuitive sense of short-term price moves based on the visible order book of a stock. Our quant team has validated that intuition, and discovered that multi-level book imbalance indicates future short-term return based on a simple Economics 101 principle: Price reaches equilibrium when supply and demand intersects. We model the top 5 levels of the order book to calculate the EP to trade and integrated this into in our core algo strategies and deployed in major markets in Asia.

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AES® Market Microstructure

The Hong Kong Stock Exchange (HKEx) has announced the launch of an Omnibus trading mechanism for Northbound Stock Connect, called Master SPSA, in the first half of 2020.The availability of Omnibus trading via the Master SPSA service is a much-welcomed addition that will allow fund managers to place sell orders at the aggregate level and facilitate average pricing execution. 

The Taiwan market replaced intraday call auctions with the globally-predominant continuous trading method on Mar 23, 2020. The move to continuous trading will undoubtedly unlock real-time information that was previously hidden from traders and transform the dynamics of the order book.

Minimizing deviation of realized volume from anticipated volume is one of the primary drivers for stable VWAP performance on Japan SQ days. CS has made substantial investments in improving the accuracy of our predictions by leveraging insights from our in-house quant team to generate a specialized volume prediction curve for the open auction on Japan expiry days.

Following the successful introduction of the Closing Auction Session (CAS) by HKEX on 25th July 2016, the bourse announced extending a similar trading mechanism into the Enhanced Pre-Opening Session (EPOS) for the Hong Kong securities market, effective October 19. We expect more volume to be done in the open, relative to the current setup, due to Auction Limit Orders (ALOs) and Short Sells being permitted throughout the auction session. 

Volume spikes are expected on the quarterly and monthly Japan Special Quotation (SQ) Days, especially during the open auction. AES VWAP leverages insights from our in-house quant team to generate a specialized volume prediction curve for the open auction for Nikkei 225 names on Japan expiry days. All other strategies that use a predicted volume baseline also benefit from the new curve adjustment. Based on data from 2020 April to September, the improvement in VWAP performance and reduction of standard deviation are evident. 

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AES® FIX Global Articles

Whether we like it or not, a lot of what we know is not from our direct experience, rather we learn it from someone else, and that is continually reinforced throughout our lives. Our biases can also play a big part in deciding whom we trust, and therefore what information we are willing to absorb or discard. Could it be time for us to embrace some of these ideas, and challenge the current order of things ? 

In March 2020, investors grappled with a volatile market rout on the back of the COVID-19 outbreak and the oil price wars. The most striking sign of investor fright was witnessed in the market “fear gauge” – VIX, which registered as high as 80, a level not visited since the Global Financial Crisis (GDC) in 2008. The diverse market in Asia all have different ways of tackling the shared goal of “maintaining a fair and orderly market,” which poses unique challenges for traders with different objectives. 

We have yet to accurately define the concept of Best Execution beyond beating the VWAP or Arrival benchmarks. The reality is that Best Execution lacks a discrete objective, which is also why we are all over the map in our attempt to solve this problem, and why we also lack a means of definitive evaluation. We should take pause and wonder, are we asking the right questions? 

When we think about using or building algorithms to trade equities, a similar question arises: The question of how long to wait, or ‘how patient should I be?’ is maybe not asked as often as it might be, but it is crucial to best execution. The strategy may fall behind its participation rate while waiting on the passive side of the order book, but how far should we let it fall behind? Once we think of this concept of ‘patience’ or ‘leeway’ in a strategy, one can see how important a factor it is in achieving best execution.

The global investment and trading landscape has seen an evolutionary shift -- advanced machine learning and data mining techniques have taken centre stage, as investors demand systematic approaches to alpha generation and risk management. As the top managers scour global markets for opportunities and liquidity, they are increasingly looking to China as an exciting place to deploy capital. 

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APAC Securities Research

Given a typical battery-electric car has twice as much semi content at $800 as a gasoline-fuelled car, with ~75% of incremental content coming from Power, we believe that average semi content can grow from ~$510 in 2020 to $1,100 by 2030, driving industry revenues from $38bn currently to $110bn over the next decade (11% CAGR). Introducing our xEV Power Semis model – 25% CAGR until 2030; Powertrain and BMS key beneficiaries. 

Greater China ecosystem in-depth. In a follow-on to our China semiconductor reports, including China’s ascent and supply chain localisation, this report updates on the US-China policy implications, China’s manufacturing, design and tech supply chain, and the fabless industry map. Leveraging our full global semis team, we also take an in-depth look at equipment, materials, RF, Power, CPU, national IC fund investments, China fab projects, and profile 21 covered and Not Covered China IC companies’ business overview, drivers, near-term outlook, and valuation. 

Capable of decarbonising several ‘hard-to-abate’ sectors, hydrogen is winning support from EU policymakers and industries. In this Primer, we provide the policy background, introduce our proprietary Levelised Cost of Hydrogen (LCOH) model with ~30 parameters, and lay out the supply chain – from equipment and transportation to highlighting key end-use cases. 

The race has begun. Hydrogen is set to become one of the most important and fast-growing low-carbon energy sources in the next 30 years, accounting for 18% of primary energy consumption by 2050 (vs ~0% currently), according to BP Energy Outlook. This represents a US$2.5 tn addressable market that spans the value chain. 

Following our APAC Hydrogen Primer in December, we take a deep dive into China’s hydrogen market and focus on the demand side of the value chain, as we believe this is where the near-term investment opportunities lie. We outline China’s potential market size in transportation market, assess the economics between FCEVs and BEVs/ICEVs, and examine the subsidy roadmap.

Global travel retail industry recovery ahead. We anticipate the global travel retail (TR) industry to sequentially recover thanks to an accelerated growth in the Asian non-airport TR increasing share in the global market. Asian consumers’ luxury demand should continue to repatriate to the non-airport TR channel on regulatory support and improving shopping experience. China TR is expected to be mainly led by Hainan offshore duty free in the coming years, thanks to various policy support. Despite concerns on regional competition, we view Korea TR to remain compelling, equally benefiting from the rapidly growing addressable market in Asia luxury. 

The 6 retail megatrends post pandemic. We highlight six retail megatrends that we see materialising post the COVID-19 pandemic: (1) The ongoing rise of e-commerce, driven by the proliferation of mobile and ubiquitous internet; (2) mobile first — proliferation of smartphone devices and consumers who are who connected 24/7; (3) omnichannel being the new standard; (4) social media now playing a critical role for consumer purchasing decisions; (5) retailers using big data to gain better visibility on consumer behaviour; and (6) retailers moving from the retail-centric model to the engagement-centric model.

The security of China’s strategic resources (globally biggest importer of crude oil) has become more important than ever before.. In this third part of our Dual Circulation series, we deep dive into China’s energy security and revolution roadmap to achieve carbon neutrality by 2060. We expect a significant shift in China’s primary energy mix over the next few decades, with the non-fossil fuel portion to rise to 28% by 2030E and ~80% by 2060E (from 17% in 2020) at the expense of coal and oil. Increasing cost competitiveness will continue to drive solar/wind power from 1%/3% in 2019 to high-single digit in 2030E. We believe China may even over-achieve its 2030E non-fossil fuel target (28% vs the official target of 25%). Hydrogen will provide a new source of clean energy, albeit at a preliminary development stage in China currently. Natural gas will remain a medium-term clean energy solution. 

The opportunity in being A/H aware. As onshore China’s importance grows, allocating between on- and offshore is an increasingly critical decision. A common strategy looks to exploit the A/H differential by favouring the “cheaper” line. Such a strategy has generally underperformed.. The proportion of dual-listed names commanding an A-share premium has increased form 70% to nearly 100% over the past five years. A dynamic approach can help triangulate where opportunities lie across the dual-listed universe: when to buy A, when to buy H. 

2021 marks the beginning year of 14th Five-year Plan (2021-25) in China, and major policies for the utilities and renewables sector are likely to be set this year. We believe energy mix improvement would be the key driver behind all subsector demand-supply changes, with clean energy the key winner. Based on our projection, renewables (solar and wind) as a percentage of China’s energy mix (~5% in 2020E) is set to double in 14th FYP (10%) and triple in 15th FYP (16%). Natural gas remains a clean energy solution and should expand further in the medium term (13% by 2030E per CSe), while other traditional fuel types (coal-fired power, etc.) may see continuing drops in % contributions.

China’s IGBT (insulated gate bipolar transistor) development serves a good purpose—“Dual Circulation” in a greener world. Known as the “heart” of power semiconductor devices, IGBT is the core device widely used in areas such as new-energy vehicles, railways, smart grids, renewable power inverters, and home appliances. China has seen explosive growth in demand over the years but still has low self-sufficiency, resulting in a key technology bottleneck. Thanks to its high energy utilisation efficiency, IGBT is also a green solution for China, which has pledged to be carbon-neutral by 2060. We believe IGBT will play a critical role in China’s energy-mix shift towards renewable energy, import substitution, and consumption upgrade, in line with the goals of the “Dual Circulation” strategy. 

China migrating to Cloud. We believe the accelerating cloud migration in China is driven by long-term structural trends in digitalisation/domestic substitution. Post pandemic, we expect continuous increase in business acceptance of cloud/SaaS solutions. Gartner forecasts China’s IT budget to rebound to 7.2% YoY in 2021 (from ~1.3% in 2020), supporting faster cloud migration in China, with 5G’s proliferation and policy support as other drivers.

Stronger demand recovery into 2021. We turn bullish on the sportswear sector on secular trends such as increasing health consciousness among consumers and accelerated DTC channel shifts by brands post COVID. Moreover, sports events are likely to restart in 2021.While brands have sharply discounted their products to clear inventory and we expect discounts to be higher YoY into 2021 as industry inventory levels are 1-2 months higher than normal levels, we expect the market to overlook this, should growth improve sequentially.

E-grocery penetration reaching an inflection point. The online habit cultivated post COVID, improved fulfilment infrastructure, new distribution channels percolating lower tiers (community group purchase) and brands shifting online has set e-grocery to accelerate starting 2021, propelling online penetration to reach 33% in 2025E from 10% in 2019. 

The commercial health insurance premium would exceed Rmb1.9 tn by 2025E, implying an 18% CAGR under our base case, driven by (1) continued growth of healthcare expenditure, (2) rising funding contribution from commercial health insurance to total healthcare expenditure, and (3) government policy direction to lower out-of-pocket healthcare expenses. Our bull case, based on accelerated growth of healthcare expenditure and health insurance funding, suggests that health insurance premium would amount to Rmb2.3 tn by 2025E, implying a 22% CAGR. 

India’s corporate landscape is undergoing a radical change due to a remarkable confluence of changes in the funding, regulatory and business environment in the country over the past two decades. An unprecedented pace of new-company formation and innovation in a variety of sectors has meant a surge in the number of highly-valued, as-yet unlisted companies. While conventional Unicorn lists show 30-35 names for India, our exploration reveals a 100 of them!

India’s FinTech ecosystem is charting a unique growth path as it rides on digital public infrastructure and leans on partnerships. Digital payments have already scaled up with over 200mn active users. FinTechs are now transcending other financial segments including lending, insurance and wealth management, many in partnerships with incumbent players.

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China Quantitative Insights (CQi) 


Focusing on China’s baby boomers, CQi's inaugural special report 'Ready to retire' delves on this boomer generation’s plans for retirement in the coming years as well as those who are already retired.

All CQi-tracked material panels saw strong YoY growth in February thanks to the low base and a quick post-CNY production resumption. They expect the strong growth to continue in March. As environmental enforcement tightened in February, the panels say the government is serious about carbon reduction targets. Thus, CQi thinks the impact on the material sectors in the next 1-2 years could be even greater than the supply side reform. The panels’ feedback show the strong demand support for key materials prices is likely to wane, but carbon reduction may provide support from the supply side.

After Beijing tightened the regulation of community group purchasing recently, CQi surveyed different players along the supply chain. The results chime with our expectations previously set out in “Meituan’s potential in grocery shopping”.

China’s internet giants have been in the eye of an antitrust storm since November. The anti-monopoly campaign in the internet sector is apparently approved by the top Party leadership and is focused on “three major monopolies” and “one major risk”, CQi believes based on our read of new government rules.

CQi NEV Market Monitor: An enviable problem

CQi Consumer Monthly Watch: YoY income rebound not firing up consumption

A CQi survey shows consumers mostly use online health platforms to make doctor’s appointments.

Base effects dominate the year-on-year growth rates in our survey data. The manufacturing and service SMEs we track saw spikes in orders and profitability. The manufacturers expect raw materials costs to rise by 8% in the next 12 months. Over 45% of them increased their stocks of materials in February, the highest share since our data series began in August 2019. Our data show the labour market is loosening and consumer sentiment is cooling, suggesting that it may take longer for some services to return to pre-pandemic levels.

Leading NEV players CQi surveyed in mid-March say the biggest difference in the domestic market this year (vs previous years) is better demand for their products. But they say this rosy picture could lead to intensified competition and cost inflation.

CQi’s latest consumer survey shows a strong rebound in YoY income growth due to the low base in February 2020. Our families’ outlook for future financial and business conditions did not improve much. As food prices softened after the Spring Festival consumer worries over inflation eased a bit. Their interest in buying property and stocks cooled due to tightening policies and market volatility.

CQi’s surveys in mid-March reveal positive signals underlying new overseas orders received by leading Chinese solar producers on our panel. These include higher prices because of strong order growth, and shorter delivery times due to improving logistics. 

In this issue of the CQi ChartBook we launch a number of composite indices based on CQi proprietary data. They are Figures 1–7 below and cover employment trends, consumer outlook and inflation indices, property sales and prices indices, stock market sentiment and business trends. A consistent theme across this month’s CQi data is the power of the base effect. We see it in manufacturing orders, property price expectations, wage growth, inventories, corporate profitability and orders at copper, aluminium, steel and cement producers.

In late February, CQi reexamined China’s infant formula market by revisiting 40 maternal and infant stores and surveying 240 families with babies or toddlers. The pandemic and the quickly falling new birthrate in China have made it difficult for the industry, but CQi data suggests a strong performance by China Feihe, as consumers shift from foreign brands to domestic ones.

CQi survey results and official data suggest that PPI inflation may outpace CPI inflation through 2021, a trend set to be reinforced by softening pork prices. Our review of the PBoC’s record of cutting and raising RRR since 2006 indicates that
the authorities have focused on PPI more than CPI when adjusting monetary policy. In other words PPI inflation may signal a greater risk of tightening. PPI inflation and a widening PPI-CPI divergence should in general boost industrial profitability, Wind data suggests. SMEs and consumers CQi track are becoming increasingly aware of inflation but are so far not very worried about it.

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Credit Suisse Research Institute 

Learn more about Credit Suisse Research Institute.

The latest edition of the report provides an updated analysis of family-owned companies, suggesting that the "family alpha factor" remains intact. On a long-term view, research to date has shown that family-owned businesses deliver higher levels of profitability and stronger revenue growth in all regions, particularly in Asia, mainly as they pursue a longer time horizon in their investment strategy.

Climate change and the energy transition are key topics with far-reaching microeconomic, macro and political implications, as governments and companies around the world rethink mobility, shipping, materials and packaging, urbanism and energy consumption and how to ensure more responsible consumer habits.

The COVID-19 pandemic has triggered the worst global economic crisis since the Second World War and affected human life in boundless ways. The Global wealth report 2020 examines the impact of the outbreak on wealth and the distribution of wealth.

The Credit Suisse Research Institute's report on 'What will last? The long-term implications of COVID-19' suggests that rather than radically changing the world as we know it, the pandemic has accelerated existing trends.

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Decarbonizing Portfolio 


A sustainable investment strategy for a low-carbon future.

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Please read the disclaimer here.

Find out more about HOLT and how it facilities smarter investment decisions.

The HOLT APAC Specialist team has updated its Quarterly Stock Ideas for 1Q 2021. The analysis utilizes our systematic and objective framework to provide ideas with compelling HOLT characteristics.

We have updated our selection of quarterly ideas presenting 25 companies that have a balance of attractive characteristics on the HOLT framework. We select companies across the market, striving for a good balance across both sector representation and company size.

HOLT APAC ‘Companies at Risk’ screens focus on a company’s fundamental characteristics that might result in downward pressures on a firm’s stock price. We use six thematic screens, which encompass various aspects of corporate performance, balance sheet strength, price and earnings sentiment and valuation.

We look at the best/worst-performing stocks over each of the last three decades and highlight that each time, the best-performing stocks have had remarkably similar operational characteristics.

Both reflationary trades and deflationary plays have performed strongly since last August but in a historical context, it is unusual for both to perform at once. 

R&D represents 6% of global cash deployed by companies and is a key use of corporate cash. This report examines R&D globally in three parts: 1.) Why HOLT capitalizes R&D. 2.) Why does R&D matter? and 3.) The R&D Premium, including screening for R&D Wealth Compounders.

Climbing yields and concerns regarding the potential for rising inflation triggered a sharp rotation into Value.

The HOLT Country Ranking Model provides investors with a monthly ranking of APAC markets using a rules-based systematic process. HOLT's multi-factor model uses Valuation, CFROI Sentiment and Market Sentiment to rank each market.

This report reviews the corporate performance, momentum trends and valuation across the Asian Internet sector. We highlight e-commerce and online games given their resilient CFROI forecasts compared to history along with above-average growth rates. With healthier growth prospects in the region, we screen for opportunities within these sub-sectors.

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Next Generation


Credit Suisse and the YIO provide a look at the expectations, needs and ambitions of the inheriting generation. This includes individuals who are destined to take over the reins of a business started by their parents, grandparents, or earlier family members, or who are likely to inherit at least part of the wealth accumulated by previous generations.