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Returns to Style: Analyzing Investment Trends in China and Asia (April 2011)

This report by Style Research evaluates investment styles in the Chinese market as of April 2011, providing insights from various international experiences. It highlights the effectiveness of value and small-cap investing in the long term, emphasizing that while beta stocks underperform generally, markets such as China, Japan, and Korea show consistent value performance. The analysis employs Style Research’s Market Analyzer, using a methodical approach that includes sector adjustment and periodic rebalancing. Key findings support investing in value and small-cap stocks based on long-term performance metrics.

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Returns to Style: Analyzing Investment Trends in China and Asia (April 2011)

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  1. Returns to Styleusing Style Research’s Markets Analyzer China End April 2011

  2. International Experience • Style Investing works • Value and Small Cap works long term • Best Value Markets • China, Japan and Korea • Most markets have small cap premium • High beta stocks do not generally perform well

  3. Overview • Value works consistently and in long term • like in other markets • Only Value in top 10 in Last 5 and 10 years • 1st Momentum over 5 years(54/88 over 10 years) • 2nd Book to Price over 5 years (4/88 over 10 years) • Small cap performs better than large cap • Like other markets • High Beta does not work • like other markets • Nothing works consistently • Top 10 inconsistent over different time periods

  4. Approach • Use Style Research’s Market Analyzer • Benchmark = market • All stocks with market cap of USD 100 million • Analysis after sector adjustment • Factor screen within sectors • Eliminates sector bias • Rebalanced every 6 months • Repriced every month • Includes dividends

  5. Value – last 5 years

  6. Book to Price

  7. Book to Price Last 10 Years - SA Last 5 Years - SA

  8. Dividend Yield

  9. Dividend Yield Last 10 Years - SA Last 5 Years - SA

  10. Earnings Yield

  11. Earnings Yield Last 10 Years - SA Last 5 Years - SA

  12. Cashflow Yield

  13. Cashflow Yield Last 10 Years - SA Last 5 Years - SA

  14. Sales to Price

  15. Sales to Price Last 10 Years - SA Last 5 Years - SA

  16. EBITDA to Price

  17. EBITDA to Price Last 10 Years - SA Last 5 Years - SA

  18. Growth

  19. Return on Equity Last 10 Years - SA Last 5 Years - SA

  20. Growth in Earnings per Share Last 10 Years - SA Last 5 Years - SA

  21. Income to Sales Last 10 Years - SA Last 5 Years - SA

  22. Sales Growth Last 10 Years - SA Last 5 Years - SA

  23. Forecast Earnings Last 10 Years - SA Last 5 Years - SA

  24. Forecast Earnings Revisions Last 10 Years - SA Last 5 Years - SA

  25. Other

  26. Market Cap Last 10 Years Last 5 Years - SA

  27. Beta Last 10 Years - SA Last 5 Years - SA

  28. Price Momentum – 6 months Last 10 Years - SA Last 5 Years - SA

  29. Price Momentum – 12 months Last 10 Years - SA Last 5 Years - SA

  30. Quality

  31. Low Accrual Last 10 Years - SA Last 5 Years - SA

  32. Debt to Equity Last 10 Years - SA Last 5 Years - SA

  33. Stability of Earnings Growth Last 10 Years - SA Last 5 Years - SA

  34. Sustainable Growth Rate Last 5 Years - SA

  35. Stability of Sales Growth Last 10 Years - SA Last 5 Years - SA

  36. Stability of Forecast Earnings Last 10 Years - SA Last 5 Years - SA

  37. Returns to Style – last 5 yearsValue and Quality works! SA, annualised

  38. Returns to Style – last 10 yearsValue and Quality works! 10 Years SA 5 Years - SA SA, annualised

  39. Returns to StyleValue works consistently in long term 10 Years SA 5 Years - SA In top 10, only Value has common factors between 5 and 10 years : 1. Book to Price 2. Dividend Yield 3. EBITDA to Price 4. Earnings Yield SA, annualised

  40. 5 year XS returns

  41. 10 year XS returns

  42. Value 10 Year - SA 5 Year - SA

  43. Growth 10 Year - SA 5 Year - SA

  44. Other 10 Year - SA 5 Year - SA

  45. Quality 10 Year - SA 5 Year - SA

  46. Market Cap Weight, 6 mthRebal Xs Return 7.0 % pa T/over 50 % pa

  47. Market Cap Weight, 3 mthRebal Xs Return 7.9% pa T/over 72% pa

  48. Earnings Weight, 6 mthRebal Xs Return 1.9% pa T/over 75% pa

  49. Comparison

  50. XS Monthly Return

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