Asia investors use new data sources to beat benchmarks
hong kong — Sometime in the third quarter of 2016, Blackrock’s scientific active equity team, which manages $80 billion globally, began picking up increased signs of construction activity on the ground in China by using satellite imagery.
Using that as a starting point and adding freight traffic and other data to the picture, the US-based analysts determined that the world’s secondbiggest economy was on the verge of a cyclical rebound.
Their expectations were borne out when China reported last week that its economy grew a quicker than expected 6.9 per cent in the first quarter, the fastest in six quarters.
Blackrock’s quantitative equities portfolios increased their exposure to China based on the data. The Shanghai Composite Index gained about 11 per cent between the end of September and early April, though it has lost some of those gains in recent days as regulators clamped down on speculative activity.
“We were picking up signals by simply looking at more metal on the ground and such unconventional data sources are very essential in an economy as large and diverse as China where data may not be very timely,” said San-Francisco-based Jeff Shen, co-head of the scientific active equity team.
The use of unconventional data sources to gather price-sensitive information about a company, or even an entire economy, before it is made public isn’t a new phenomenon, especially among the hedge fund community in developed markets.
Last year, online searches related to buying property in Nanjing spiked a few months before prices in the city jumped Robert Ciemniak, Founder of Real Estate Foresight
But that behaviour has now spread across the world, and to many more mainstream mutual funds. Faced with fierce rivalry from low-priced exchange traded funds and desperate to show that they can outperform market benchmarks, the mutual funds are now increasingly seeking alternative kinds of information in Asia.
In the first two months of the year, actively managed equity mutual funds domiciled in Asia saw a net outflow of $1 billion compared to net inflows of $9.3 billion in all of 2016 and $40.3 billion in 2015.
In contrast, exchange traded funds saw net inflows of $15.16 billion in the first two months of this year compared to $39.1 billion in all of 2016 and $21.7 billion in 2015, according to Morningstar data.
That pressure is forcing fund managers to increasingly look at alternative sources of information about listed companies ranging from shipping logistics trends, and social media chatter, to payments data for unlisted private companies that supply parts to bigger listed companies.
Robert Ciemniak, founder of Real Estate Foresight, a China-focused real estate data analytics firm, routinely analyses headlines from a variety of publicly available blogs, local news feeds and government bulletins in local cities and provinces to understand the ground-level shifts in the Chinese property sector before it garners attention from mainstream media.
“Last year, online searches related to buying property in Nanjing spiked a few months before prices in the city jumped,” Ciemniak said referring to a property price surge of almost 40 per cent in 2016 in the eastern Chinese city, with the authorities rolling out tightening curbs since August last year.
“In a funny way, China is quite transparent as long as you employ reliable filters and know where to look,” he said. —