19 August China

MSCI China Funds: Stock Sentiment Analysis

119 Active China Funds, AUM $52bn.

MSCI China Stock Sentiment

Investment levels among the thousands of stocks in the investible China universe differ greatly. Some stocks are widely owned, others largely avoided with ownership levels changing every month. We combine current and historical positioning against shorter-term manager activity to get a handle on where sentiment lies for every stock in the China universe. We highlight 7 stocks at the extreme ends of their own positioning ranges whilst also seeing large changes in fund ownership.

The Sentiment Grid

The Sentiment Grid below is designed to visualize the interplay between current fund positioning, long-term fund positioning and shorter-term fund manager activity for all stocks in the China universe. The Y-axis shows the ‘Position Score’, a measure of current positioning in each stock compared to history going back to 2011 on a scale of 0-100%. It takes in to account the percentage of funds invested in each stock versus history, the average fund weight versus history and the percentage of funds overweight the benchmark versus history. The higher the number, the more heavily a stock is owned by active China managers compared to its own history.
The X-Axis shows the ‘Momentum Score’, a measure of fund manager activity for each stock between 01/31/2022 and 07/31/2022 on a scale of 0% (maximum negative activity) to 100% (maximum positive activity). The Momentum Score takes in to account the change in the percentage of funds invested in each stock over the period, the change in average weight and the change in the percentage of funds overweight. The chart also highlights the companies at the extreme ends of each quadrant by colour, which will shall explore in more detail below.

Extreme Stocks

The tables below list the stocks in the extreme corners of each quadrant. The screening methodology is as follows:

  • High Positioning & Negative Momentum: Position Score > 80%. Momentum Score < 5%
  • Low Positioning & Negative Momentum: Position Score < 5%. Momentum Score < 5%
  • Low Positioning & Positive Momentum: Position Score < 20%. Momentum Score > 95%
  • High Positioning & Positive Momentum: Position Score > 90%. Momentum Score > 95%

Extreme Stocks

The charts below track the percentage of active funds invested in each of the top 2 stocks across the 4 categories. It’s another way to visualize how the Sentiment Grid works. For example, in the top left-hand chart below both Hong Kong Exchanges & Clearing and GoerTek Inc Class A are towards the higher end of their historical ownership ranges, yet more recently that trend has started to reverse from the peak.
In the opposite case (bottom right), both Bank of China Ltd and Brilliance China Automotive are at the bottom of their historical ownership ranges, but both have started to climb from the lows. In the charts that follow we provide more detailed profiles of each of the 8 stocks at the extreme corners of our Sentiment Grid.

High Positioning, Negative Momentum: Hong Kong Exchanges & Clearing Ltd

High Positioning, Negative Momentum: GoerTek Inc. Class A

Low Positioning, Negative Momentum: CRRC Corporation Limited Class H

Low Positioning, Negative Momentum: CNOOC Limited

Low Positioning, Positive Momentum: Brilliance China Automotive Limited

Low Positioning, Positive Momentum: Bank of China Limited Class H

High Positioning, Positive Momentum: China Yangtze Power Co Ltd

High Positioning, Positive Momentum: Kweichow Moutai Co Ltd

For more analysis, data or information on active investor positioning in your market, please get in touch with me on steven.holden@copleyfundresearch.com