The rebalancing of the Chinese economy is happening, aligning the government’s intention in allocating resources from speculative sectors to manufacturing and high-tech sectors. Outstanding loans to the property sector fell RMB 100 billion to RMB 53 trillion at the end of September from a year earlier, the first decline on record. In contrast, lending to the industrial sector surged by almost RMB 5 trillion in the same period. Despite the historic drop in loans, the PBOC said that the overall slowdown in property loans has stabilized, adding that the pace of declines remained unchanged. With more supportive policies such as lower downpayment requirements and reducing mortgage rates, the property sector saw a soft-landing last month. Value of new home sales among the 100 biggest real estate companies in October fell 27.5% YoY to RMB 406.7 billion, narrowing from a 29.2% decline in September, according to China Real Estate Information Corp. On the corporate front, Vanke said it will repay its debts on time after getting signals of support from a local regulator and its biggest shareholder last week, driving a strong rebound in its dollar bonds. Our Premia CSI Caixin China New Economy ETF (3173.HK) offer a diversify universe to capture the opportunities from the economic rebalancing in China, with ~21% invested in industrials and ~27% in information technology. Besides, our Premia China USD Property Bond ETF would be an efficient instrument bottom fish the USD property bonds issued by Chinese developers.

According to Bloomberg, Indonesia's digital banking sector might grow quicker than most countries in Southeast Asia and reach USD 8.6 billion by 2025. Traditional banks, such as Bank Rakyat, have high incentives to adopt digital banking as the government requires them to allocate 30% of lending to micro, small and mid-sized business (MSME) and to provide banking services to 90% of the population by the end of 2024. Given the country's unique landscape of more than 6,000 islands, digital banking would be the best option for traditional banks to meet the government's requirements and goals. Bloomberg sees the country's digital financial services revenue could see a 34% compound average growth rate in 2019-25. Bank Central Asia's Blu recorded 205% loan growth 1H vs 1H22, while Bank Mandiri Persero's Livin' saw its user base growth of 55% in a year. Our Premia Dow Jones Emerging ASEAN Titans ETF (2810.HK) has significant exposure to Indonesian banks, more than 15% including the above-mentioned names, which may be a good tool for investors looking not only to participate in the growth of digital banking in Indonesia but also the long-term economic growth in the region.

China’s economy finally saw some modest pickups in manufacturing activities with China's official manufacturing purchasing managers' index (PMI) for September came in at 50.2, up 0.5 points from the previous month. This is an encouraging sign that factory activities finally recorded an expansion. In addition, the overall industrial profits surged 17.2% YoY in August, marked the first increase since the second half of 2022. Profits improved for 30 of 41 major industrial sectors during the period, with the losses in the raw material manufacturing industry narrowing significantly on rising commodity prices and recovered demand. Economists believe the reversal was mainly driven by the rebound in market demand, improved prices of industrial products, the implementation of macro-support policies, and the low base effect. Investors should monitor closely with the consumption data during the upcoming Golden Week holidays, which may help further boost investors’ confidence in Chinese assets.

Vietnam equity performance remained resilient whilst market turnover continued to climb. The 30-day moving average daily turnover more than doubled from the level seen early this year to reach around USD 850 million in September. Analysts suggested the rising liquidity was driven by local individual investors. SSI Securities believe there are three key elements leading the return of retail interests: (1) Deposit rates offered by state-owned banks have dropped by 30-50 basis points in August alone, back to a low range since 2021. (2) The implementation of Circular 06 in September allows the refinancing of mortgages, which may help boost liquidity in the stock market. (3) The latest meeting of Vietnam State Securities Commission revealed that the authorities have strong desire to help upgrade the stock market to the emerging market status via key reforms on settlements and companies’ foreign ownership. Following the recent visit of President Biden in Hanoi, the enhanced bilateral relationship between Vietnam and the US may bring enormous business opportunities for Vietnamese companies. Fundamentally, the market is trading at an estimated PE of 13.9x in 2024 with 29.6% in earnings growth.

BloombergNEF has recently increased its annual forecast of global solar power installation this year to 391,871MW from 343,745MW that was estimated a few months ago. The upward revision is mainly driven by the acceleration in China, which is expected to complete 96% more in capacity this year as compared with 2022’s level. China is rolling out policies to secure healthy development of the solar market, including green electricity certificates. The government is also clarifying regulations on what land can be used for solar. A recent update to the Renewable Portfolio Standards raises targets for most provinces. Provincial solar markets are developing in different ways. Hubei and Yunnan, where land is plentiful, are building a lot of utility-scale while southeastern provinces like Henan, Shandong, Anhui and Jiangsu are building residential and commercial solar. Some governments are already taking steps to make the rooftop solar boom more sustainable, by increasing the barriers to getting approval or grid connection or by requiring small solar projects to have attached storage.

China’s sales of new-energy vehicles (NEV), including pure battery electric vehicles and plug-in hybrids, went up 31.9% YoY in July to reach 641k units despite the overall auto market fell 2.6% YoY to 1.79m units. The NEV penetration rate is standing at a record 35.8% last month, on track to achieve 35% for the full year and about 50% in 2025. During the first half of this year, sales of China-produced NEVs reached 3.65 million, up 48% YoY and accounting for more than 60% of the global NEV market, according to China Passenger Car Association. Indeed, data from China's General Administration of Customs showed that China exported 2.34m vehicles in the first six months, while Japan exported 2.02mn vehicles, according to the Japan Automobile Manufacturers Association. This is the first time China has overtaken Japan in automobile export at the half-year mark. Industry analysts said that the strong momentum will persist in the following months, so it is highly probable that China will become the world’s largest exporter of all types of vehicles in 2023.

Renminbi internationalization remains on track despite the rising geopolitical risks. According to the latest data from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the share of RMB in global payment currencies increased to 2.77% in June, up for five consecutive months, making it the fifth most active currency in the world. Compared with two years ago, the share of RMB payments increased by 31 basis points. In June, the top four major currencies in the world were US dollar, euro, British pound and Japanese yen, accounting for 42.02%, 31.25% and 6.88%, and 3.36%, respectively. Meanwhile, the Ministry of Finance recently announced that it will issue RMB 12 billion treasury bonds, comprising tranches of RMB 6 billion two-year, RMB 4 billion three-year and RMB 2 billion 10-year bonds. Sheng Songcheng, former director of the Survey and Statistics Department of the People's Bank of China, believes that the regular issuance of offshore RMB government bonds is of positive significance to increasing the supply of RMB assets in Hong Kong and improving the offshore RMB yield curve.

Chinese banks were put into the spotlight after Goldman Sachs downgraded the sector and revised down the earnings estimates. Investor concerns were rising over the repayment capabilities of the debt-laden local government financing vehicles. The National Administration of Financial Regulation, however, communicated with several of the largest Chinese banks to respond to the negative comment, showing keen interests in the capital market reaction seemingly. Fundamentally, the domestic lending market has improved in June with new RMB loan recorded a solid RMB 3,050 billion in June, better than the consensus of RMB 2,384 billion. Both corporate and household new medium-to-long term loans also increased. More importantly, investors should be mindful how much of all these negatives have been priced in. In the A-share market, the sector is trading at an average of 4.3x in PE, 0.5x in PB, and close to 6.3% in dividend yield for 2023 fiscal year. The financial sector is the most heavily weighted exposure (~35%) at Premia CSI Caixin China Bedrock Economy ETF (2803.HK), which has outperformed the mainstream indexes such as CSI300 and FTSE A50 by over 10% points year-to-date. 

Vietnam stock market is one of the best performers in the region in June, supported by the sharp increase in trading activities indicating a return of investors’ interests. The average daily turnover of Ho Chi Minh Stock Exchange picked up steadily since the beginning of the second quarter of this year and accelerated in June, reaching USD 652 million which was almost double from the rough seen in March. Analysts believe the attractive valuation, reduced deposit rates, and the government’s stance in bolstering economic growth are the positive catalysts. Fundamentally, Vietnam is expected to be one of the fastest growing emerging markets in Asia over the next 5 years, according to S&P Global Market Intelligence. The key drivers include (i) low manufacturing wage costs; (ii) large and well-educated labor force; (iii) strong FDI inflows and domestic infrastructure spending; and (iv) multinational manufacturers diversify production capacity and favor Vietnam as one of the key locations.

China’s top 100 developers in May recorded property sales of CNY 485 billion, up 6.7% YoY but down 14% MoM. The moderated number seems to be in line with the low market expectations. About 70% of the top 30 had annual sales growth, with China Resources Land, China Merchants Shekou Industrial Zone Holdings, and Binjiang Real Estate Group reporting a more than 50% increase. In the first five months of the year, sales by the top 100 developers rose 9.1% YoY, with Poly Group ranked the first with sales of CNY 196 billion. Analysts now expect policy relaxation would trigger a re-rating on the sector, as current valuation of both stocks and bonds have largely priced in the worst-case scenario. Investors are now looking for a central government-led coordinated policies to restore market confidence, including stimulating first-time home purchase demand, reducing broad based mortgage rates, lowering down-payment ratio, and providing liquidity/financial guarantee to struggling developers for ensuring projects completion.