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Sector Rotation StrategiesKo Tseng, FRM/PRM/CAIAAsian Sector Index Investment StrategySeptember 2012www.tigeretf.com.hk
Why Sector? CASE STUDY OF SECTORROTATION IMPLEMENTEDSector Allocation is the Most Popular Approach in AsiaAsia-Pacific investors’ three top methods of asset allocation are bySECTOR, globally and regionally, in that order,according to an investor survey conducted this month by Dutch fundmanager Robeco and AsianInvestor.Source: AsianInvestor, 26 October 2011TIGER S&P Sector ETFs are the ideal tool to apply the asset allocation strategy.For Professional Investor Only. Not For Public Distribution - 2 -
S&P Pan Asia ex JANZ LargeCap Sector Indices S&P ASIA EX JANZ SECTORINDICESThe graph below shows the absolute performance of the S&P Pan Asia ex-JANZLargeCap Sector Indices compared to MSCI AC Asia ex Japan NTR indexSource: S&P, BloombergData as of Aug 31, 2012For Professional Investor Only. Not For Public Distribution - 3 -
S&P Pan Asia ex JANZ LargeCap Sector Indices S&P ASIA EX JANZ SECTORINDICES The graph below shows the relative index performance of the sector indices compared with the broaderMSCI AC Asia ex Japan Index. The under and outperformance of different sectors since March 2007 shown below demonstrates thattactical sector rotation can potentially improve portfolio Industrials-0.631For Professional Investor Only. Not For Public Distribution - 4 00.390.011Source: S&P, BloombergData as of Aug 31, 2012Correlation matrix for last 3 year’s monthly excess return
Mirae Asset TIGER ETF SeriesS&P Asia Sector IndicesTickerCorrespondent ETFsS&P Pan Asia ex JANZ LargeCapEnergy Index3076 HKTIGER S&P ASIA ex JANZEnergy ETFS&P Pan Asia ex JANZ LargeCapMaterials Index3078 HKTIGER S&P ASIA ex JANZMaterials ETFS&P Pan Asia ex JANZ LargeCapIndustrials Index3075 HKTIGER S&P ASIA ex JANZIndustrials ETFS&P Pan Asia ex JANZ LargeCapFinancials Index3064 HKTIGER S&P ASIA ex JANZFinancials ETFS&P Pan Asia ex JANZ LargeCapIT Index3066 HKTIGER S&P ASIA ex JANZIT ETFS&P Emerging AsiaConsumer Index3054 HKTIGER S&P Emerging AsiaConsumer ETFFor Professional Investor Only. Not For Public Distribution - 5 -
Case A – Buy Last Month Winner Trend following: Buy last month winner It outperformed regional index by 206.2%p.(5.5%p p.a)CASE STUDY OF SECTORROTATION IMPLEMENTEDIllustrative purposes onlySectorstrategy ACumulativeReturn (p.a.)VolatilitySharp ratioMSCI ASIAex JP NTR373.6%14.4%29%0.49167.4%8.9%24%0.37Source: S&P, MSCI, Bloomberg / Period: Feb 2001 Aug 2012, HKD*Note: Utilize underlying index performance of each ETFs with 50bps of rebalancing cost,Risk free rate was assumed as 0%, for Sharp ratio calculation. EM Asia consumer started to include in 2007JulyFor Professional Investor Only. Not For Public Distribution - 6 -
Case A – Buy Last Month Winner (Decomposition) Trend following : Buy last month winner Break it down by 4 distinguished phaseCASE STUDY OF SECTORROTATION IMPLEMENTEDIllustrative purposes onlyPhase 1modest bull market( 2006)Phase 2Bull market( Oct 2007)Phase 1 Phase 1 Phase 2- Strategy market - StrategyCumulativeReturn (p.a.)VolatilitySharp ratioIllustrative purposes only110.7%13.6%26%0.52109.4%13.5%19%0.71Phase 4Recovering, After GFC(Dec 2008 )Phase 3GFC ( Nov 2008)131.3%173.5%23%7.58Phase 2market53.3%66.9%16%4.20Phase 3- Strategy-66.9%-64.0%38%(1.70)Phase 3market-60.5%-54.9%31%(1.77)Phase4Phase 4- Strategy market185.5%31.5%27%1.18102.5%20.2%25%0.82Source: S&P, MSCI, Bloomberg / Period: Feb 2001 Aug 2012, HKD*Note: Utilize underlying index performance of each ETFs with 50bps of rebalancing cost,Risk free rate was assumed as 0%, for Sharp ratio calculation. EM Asia consumer started to include in 2007JulyFor Professional Investor Only. Not For Public Distribution - 7 -
Case A’ – Buy Last Month Winner (Redesign) Trend following with Cash management: Buy last month winner Break it down by 4 distinguished phaseCASE STUDY OF SECTORROTATION IMPLEMENTEDIllustrative purposes onlyPhase 1modest bull market( 2006)Phase 2Bull market( Oct 2007)Phase 1 Phase 1 Phase 2- Strategy market - StrategyCumulativeReturn (p.a.)VolatilitySharp ratioIllustrative purposes only132.2%15.3%25%0.60109.4%13.5%19%0.71Phase 4Recovering, After GFC(Dec 2008 )Phase 3GFC ( Nov 2008)131.3%173.5%23%7.58Phase 2market53.3%66.9%16%4.20Phase 3- Strategy-36.6%-32.4%19%(1.68)Phase 3market-60.5%-54.9%31%(1.77)Phase4Phase 4- Strategy market115.7%22.8%23%0.98102.5%20.7%25%0.84Source: S&P, MSCI, Bloomberg / Period: Feb 2001 Aug 2012, HKD*Note: Utilize underlying index performance of each ETFs with 50bps of rebalancing cost,Risk free rate was assumed as 0%, for Sharp ratio calculation. EM Asia consumer started to include in 2007JulyFor Professional Investor Only. Not For Public Distribution - 8 -
Case A’ – Buy Last Month Winner (Recomposition) CASE STUDY OF SECTORROTATION IMPLEMENTED Trend following with Cash management: Buy last month winner Add cash management strategy when last month winner performed negative return, allocate cash to 100%. It outperformed regional index by 466.6%p.(9.9%p p.a)Illustrative purposes onlySectorstrategy A’CumulativeReturn (p.a.)VolatilitySharp ratioMSCI ASIAex JP NTR634.1%18.8%25%0.74167.4%8.9%24%0.37Source: S&P, MSCI, Bloomberg / Period: Feb 2001 Aug 2012, HKD*Note: Utilize underlying index performance of each ETFs with 50bps of rebalancing cost,Risk free rate was assumed as 0%, for Sharp ratio calculation. EM Asia consumer started to include in 2007JulyFor Professional Investor Only. Not For Public Distribution - 9 -
Case B – Buy Last Month Winner Duo CASE STUDY OF SECTORROTATION IMPLEMENTED Trend following: Buy 2 last month winners (with various allocation) Choose 2 top performing sector for diversification. Purpose Best and second best performed sector allocation as follows 30(top sector):70(second top sector) / 50:50 / 70:30 / 90:10Illustrative purposes onlyBLMW 3070 BLMW 5050 BLMW 7030 BLMW 9010CumulativeReturn (p.a.)VolatilitySharp %0.1234.2%6.0%33%0.18MSCI ASIAex JP NTR-3.0%-0.6%28.7%(0.02)Source: S&P, MSCI, Bloomberg / Period: 2007 July 2012 Aug, HKD*Note: Utilize underlying index performance of each ETFs with 50bps of rebalancing cost,Risk free rate was assumed as 0%, for Sharp ratio calculationFor Professional Investor Only. Not For Public Distribution - 10 -
Case C – Buy Last Month Winner as Satellite CASE STUDY OF SECTORROTATION IMPLEMENTED Sector tilting: Regional index mixed with “Buy last month winner” Sector tilting strategy, for those who can not extremely overweight in certain sector Strategy C Strategy C’ Strategy C’’ 90(MSCI ASIA x JP) :80(MSCI ASIA x JP) :70(MSCI ASIA x JP) :10(Buy last month winner)20(Buy last month winner)30(Buy last month winner)Illustrative purposes onlySectorstrategy CReturn (Cum.)Return (p.a.)VolatilitySharp ratio1.1%0.2%29%0.01SectorSectorstrategy C’ strategy C’’5.3%1.0%29%0.03MSCI ASIAex JP NTR9.6%1.8%30%0.06-3.0%-0.6%29%(0.02)Source: S&P, MSCI, Bloomberg / Period: 2007 July 2012 Aug, HKD*Note: Utilize underlying index performance of each ETFs with 50bps of rebalancing cost,Risk free rate was assumed as 0%, for Sharp ratio calculationFor Professional Investor Only. Not For Public Distribution - 11 -
Case D – Sector Pair Trading Long/Short: Buy Last quarter Loser & Short last quarter winner, 50:50(with 5 S&P Pan Asia ex JANZ Sector Indices)CASE STUDY OF SECTORROTATION IMPLEMENTEDIllustrative purposes onlySectorstrategy DReturn (p.a.)VolatilitySharp ratio1.1%5%0.23AsiaAsiaAsiaEnergy Financials I ASIAex JP NTR-3.0%30%(0.10)Source: S&P, MSCI, Bloomberg / Period: 2007 3Q 2012 2Q, HKD*Note: Utilize underlying index performance of each ETFs with 50bps of rebalancing cost, 100bps of quarterlystock borrowing cost is applied to calculation. Risk free rate was assumed as 0%, for Sharp ratio calculationFor Professional Investor Only. Not For Public Distribution - 12 -
TIGER S&P Asia ex JANZ Sector ETF SeriesTIGER S&P ASIA exJANZ Industrials ETFTIGER S&P ASIA exJANZ IT ETFUnderlyingIndex# ofConstituentsin IndexTIGER S&P ASIA exJANZ Financials ETFTIGER S&P ASIA exJANZ Materials ETFS&P Pan Asia ex JANZ LargeCap Sector Indices554310038WeightingFree float adjusted market capitalization weightingIndex ReviewAnnual reconstitution (Third Friday of September)Markets27China (non-A-shares), Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand75bpsEstimated TER*Top FiveHoldingsTIGER S&P ASIA exJANZ Energy ETFHutchison WhampoaLtd. (9.5%)Jardine MathesonHldgs Ltd (6.74%)Keppel Corp Ltd(5.99%)Hyundai HeavyIndustries Co (5.47%)Samsung C&T Co(4.20%)Samsung Electronics Co(31.28%)Taiwan SemiconductorManufacturing Co Ltd(14.08%)Tencent Holdings Ltd.(6.09%)Baidu.com ADR (6.01%)Hon Hai PrecisionIndustry Co Ltd (5.62%)China ConstructionBank Corp H Shares(6.67%)Industrial andCommercial Bank ofChina Ltd H Shares(4.64%)AIA Group Ltd (3.91%)Bank of China Ltd HShares (3.09%)Overseas-ChineseBanking (2.96%) JANZstands for Japan, Australia and New Zealand*Please refer to the “Fees and Charges” section of the Prospectus for details.For Professional Investor Only. Not For Public Distribution - 13 -POSCO (12.94%)Formosa Plastics Corp(6.74%)LG Chem Ltd (6.02%)Nan Ya Plastics Corp(5.64%)China Steel Corp(5.60%)CNOOC Ltd. (16.79%)PetroChina Co Ltd HShares (14.20%)Reliance Industries Ltd(12.33%)China Petroleum &Chemical Corp H Shares(8.82%)China Shenhua Energy CoLtd H Shares (6.91%)Source: S&PData as of Aug 31, 2012
TIGER S&P Emerging Asia Consumer ETFTIGER S&P Emerging Asia Consumer ETFUnderlying Index# of Constituents inUnderlying IndexWeightingIndex RebalancingMarketsS&P Emerging Asia Consumer Index40 (fixed number)The Consumer Discretionary and Consumer Staples sectors are equally weighted to 50% ofthe index weight at the semi-annual index rebalance. Stocks within the sector are weighted bytheir float market cap subject to a maximum stock weight cap of 10%Semi-Annual (January and July)China (non-A-shares), India, Indonesia, Malaysia, Taiwan and ThailandEstimated TER*Top Five Holdings75bpsAstra International Tbk PT (12.94%)Hindustan Unilever Ltd (6.74%)ITC Ltd (6.02%)Genting Bhd (5.64%)Want Want China Holdings Ltd. (5.60%)*Exclude establishment costs and certain extraordinary expenses. Please refer to the “Fees and Charges” section of the Prospectus for details.Source: S&PData as of Aug 31, 2012For Professional Investor Only. Not For Public Distribution - 14 -
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Oct 11, 2012 · rotation implemented Source: S&P, MSCI, Bloomberg / Period: 2007 3Q 2012 2Q, HKD *Note: Utilize underlying index performance
