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A look at quant performance in China

23 August 2018

Investors' interest in China's capital markets has gained momentum following the launch of the Shanghai-Hong Kong stock-connect program in November 2014 and the Shenzhen-Hong Kong stock-connect program in December 2016. Improved accessibility to the markets has ultimately resulted in the inclusion of over 220 China A-shares in the MSCI Emerging Markets Index, in two phases beginning 31 May 2018. Given this additional conduit for foreign investors to participate directly in the A-shares market, we review the economic landscape of China and recent quantitative factor and model performance within the China A-shares universe of the Research Signals Global Factor Library.

  • Despite an economic environment of mild growth deceleration and bear market pricing, especially in May and June, positive equity ETF flows support a positive investor outlook
  • From a long-only perspective, factors which outperformed on average year-to-date include North America Sales Exposure along with gauges of low risk and medium-term price momentum
  • Short-term price reversal and valuation measures were among the most successful thus far this year in identifying stocks to avoid, underweight or sell
  • Our China A-shares Model, a quantitative multi-factor model developed in 2016, has performed well in 2018, with the decile 1 (long) names outpacing the universe average by just over 1% monthly

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