Report by CHA-AM Advisors

In the latest edition of David Scott’s A Strategist’s Diary, he argues that the jet-fuel panic has become an “ex-crisis”, with investors too quick to extrapolate higher fuel prices into a broader inflation problem. Instead, he sees demand destruction, airline fare discounting and rising supply from the US and China as evidence that the shock is already mean reverting. The investment implication is contrarian: sectors he would normally avoid, including airlines and state-owned Chinese oil/refining names, now offer compelling valuations. David highlights PetroChina and CNOOC as surprisingly well-run and still cheap despite strong prior returns, while also finding opportunities across global airlines including Spring Airlines, Delta, Ryanair, Eva Airways, IAG and IndiGo.

Report by Copley Fund Research

Allocations in China & HK equities among active EM investors have plummeted 10%+ in the space of 18-months (India, Taiwan and Mexico have been the biggest beneficiaries) - on a sector level, China Industrials and Consumer Staples are the overweights, with managers rotating into Financials and away from Consumer Discretionary. On a stock level, Alibaba remains a core holding; out-of-benchmark AIA Group and Midea Group are popular, and for Value managers, China Mobile and CNOOC are key overweights. Active managers have stayed away from both NIO and Xiaomi, so pressure to invest on the grounds of benchmark tolerance should be disregarded.