C8 Weekly; China Liberalisation Coincides with C8 China Futures Access Launch

Over the month since our C8 Weekly Bulletin highlighted early signs of an opening up of the Chinese economy, the liberalisation steps have gathered new momentum. Against this backdrop, the timing may be propitious for Cirdan Capital's launch today of the C8 China Futures Access certificate.
BY ROBERT MINIKIN

Over the month since our C8 Weekly Bulletin highlighted early signs of an opening up of the Chinese economy, the liberalisation steps have gathered new momentum. Against this backdrop, the timing may be propitious for Cirdan Capital’s launch today of the C8 China Futures Access certificate.

China – Easing of Covid Restrictions and Property Sector Support

More than a dozen cities have eased COVID rules with a relaxation of both testing and quarantine restrictions. Extended sector-wider lockdowns have finally been abandoned. Against this backdrop, the Shanghai Composite has gained a 4.5% while the Hang Seng Index added a substantial 17.6%.

The more benign COVID-policy backdrop has been reinforced by very substantial, wide-ranging steps to boost China’s property sector. In a year’s worth of policy initiatives packed into a just a few weeks, major banks are reported to have set aside USD 162bn in new credit support for property developers (alongside new offshore and equity funding for the sector) while banks ease borrowing rules for housebuyers more widely.

On the property sector policy news, the CSI 300 Real Estate Index jumped 9.4% – the biggest one-day advance on record – and the Shanghai Property Index has climbed by a fifth in past month. But amid the equity market volatility, the response in the commodity complex – so far – has been rather muted (Dalian’s front contract iron ore still languishes below the 200-day mavg, see chart). Given the role of construction in driving domestic commodity demand (it accounts for over half of domestic steel consumption) this may simply be the lull before the 2023 volatility storm!

China Futures Access Certificate Launches

Against this backdrop of liberalisation, and economic support, the timing is propitious for Cirdan Capital to be launching the C8 China Futures Access certificate today. The certificate (ISIN XS2559387977) is denominated in EUR and listed on the Frankfurt Börse, or available directly by private placement at NAV.

The China futures markets have developed over the past 30 years into some of the largest and most influential futures markets globally, trading traditional as well as esoteric contracts. Historically, regulatory controls have prevented offshore investors gaining exposure to the uncorrelated returns that this highly liquid, yet still inefficient, market can offer. Recent regulatory changes have allowed global investors some limited access to these interesting markets, however, most new capacity has been filled by large institutional investors.

C8 is relatively unique in its position of being independent and well-established in the Chinese market with a 4+ year track record and local presence, with capacity available to offer to investors and managers alike. The strategy has been live in China since 2018, generating a Sharpe Ratio of 1.4 with low correlation to other asset classes (including Chinese equities) making it particularly appealing as a portfolio diversifier.

Other posts

MI2 for C8 – JPY Liftshaft Alert

BY JON WEBB
There is a window emerging for position reduction in the widely held JPY carry trade. Positions are crowded at the same time that the rationale for the extension of the current benign regime is diminishing (carry, carry-to-vol, policy divergence, etc). There is no sense of danger within analyst expectations or embedded in option pricing. While we lack an immediate catalyst, sometimes price can be its own trigger. With USDJPY around 156 and an easily defined stop loss, the risk reward of engaging with JPY strength is compelling. Escalator / liftshaft price action provides significant convexity. Crowded JPY shorts would also need to be covered in the event of a risk-off catalyst coming from other asset classes. Owning USDJPY puts can be an attractive portfolio hedge for investors concerned about general market complacency or for more active tactical FX managers and traders. Read more →

Thoughts From The Divide: Relatively Speaking

BY JON WEBB
In the second half of last year, as we continued to ponder the ever-impressive strength of the US consumer, we highlighted research on the subject of “excess” saving (which still seems a misnomer), noting JPM’s analysis that saw the consumer that had exhausted the various stimmy payments. Soon after, we discussed research from the San Francisco Fed that argued “a larger fraction of aggregate savings remains in the economy than previously expected”, thanks in part to “a comprehensive data revision”. The piece concluded that those savings would last until “the first half of 2024”. Well, while tomorrow may never truly arrive if free beer is involved (a medical concept?!), the future is now, and the SF Fed has bad news: “Pandemic Savings Are Gone”. As ever with economic research, this comes with a list of caveats, the jist of which are captured in the note accompanying the Fed’s chart below, i.e. savings are gone, relatively speaking. Read more →

Day Hagan/NDR Smart Sector® with Catastrophic Stop Strategy August 2023 Update

BY BRIAN SANBORN
Day Hagan/Ned Davis Research Smart Sector® with Catastrophic Stop strategy, model and allocations update. Read more →
Back to all posts →