China Quantitative Strategy Positions of Active Long-only M...-110250425

M UpdateChina Quantitative Strategy | Asia PacificPositions of Active Long-only Managers in China/HKChina equity outflow from foreign domicile funds continued in August, US$1.9bn from active and US$1.0bn from passive. Slight increase in China underweight for GEM active fund mangers while AxJ and Global active funds reduced their China underweight. Morgan Stanley Asia Limited+Jason Ng, CFAQuantitative Strategist Jason.Dl.Ng@morganstanley.com +852 2848-8845 Morgan Stanley Asia (Singapore) Pte.+Daniel K BlakeEquity Strategist Daniel.Blake@morganstanley.com +65 6834-6597 Morgan Stanley Asia Limited+Laura WangEquity Strategist Laura.Wang@morganstanley.com +852 2848-6853 Exhibit 3 : Active weights of China/HK equities by regional fund category and manager domicile-5.0-4.0-3.0-2.0-1.00.01.02.0USManagersnon-USManagersUSManagersnon-USManagersUSManagersnon-USManagersOct-22Dec-22Jun-23Dec-23Mar-24Apr-24May-24Jun-24Jul-24Aug-24AUM:US$872bnAUM:US$390bnAUM:US$75bnAUM:US$105bnAUM:US$177bnAUM:US$173bn Source: FactSet, MorningStar, EPFR, Morgan Stanley Research; data as of Aug 31, 2024. Notes: fund universe of each category is formed by the largest 30 active mutual funds under MorningStar regional category. Funds under "non-US Managers" are mostly domiciled in Europe. We exclude ESG funds, income funds, and systematic funds. All the covered funds are benchmarking to either MSCI or FTSE standard regional indices of All Country World, Asia ex Japan, or Emerging Markets. China fund outflows from foreign domicile products slowed in August to US$2.9bn in which US$1.9bn selling from active long-only and US$1.0bn selling from passive long-only. Domestic China passive products continued to receive inflow of US$18bn in August targeting China A-shares ( Exhibit 13 ). Inflow from Southbound stock connect program reduced to US$5.4bn ( Exhibit 1 ). According to data from IHS Markit, US$2.7bn short interest are covered in China offshore/HK Equities ( Exhibit 9 ). Short covering mainly focused on Financials and Info Tech sector while added in Staples ( Exhibit 8 ).Exhibit 1:Southbound monthly net fund flow – 2024 YTD2,823 3,135 10,986 10,261 8,998 11,220 6,139 5,372 - 2,000 4,000 6,000 8,000 10,000 12,000JanFebMarAprilMayJuneJulyAugSouthbound 2024 Monthly FlowUS $mnSource: CEIC, Morgan Stanley Research; data as of August 31, 2024Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to FINRA restric