亚洲量化策略：亚洲量化策略：减持TW/KR动量敞口 - 风险高

Asia Quant Strategy: Trim TW/KR momentum exposure - Risk ofunwind high Momentum has dominated all styles in the region YTD, delivering 29%/18% alpha in Asiaex Japan and Japan. The rally has been even stronger in TW, KR where momentum hasdelivered north of 50% alpha YTD. Since April, we have been positive on momentum stocksacross Asia and Japan, as a risk-on proxy to play the de-escalation of the war (see here,here, here). However, over the last few weeks, we had turned cautious towards TW andKR equities due to overheating and increased concentration risk (see - here and here). Intoday’s report, we re-iterate the increased risk of momentum unwind in Asia ex Japan exChina, led by TW and KR. Rupal Agarwal+65 6326 7641rupal.agarwal@bernsteinsg.com Cheng Zhang, CFA, CQF+852 2123 2636cheng.zhang@bernsteinsg.com Where is the valuation bubble in the momentum trade?Asia ex Japan ex Chinamomentum portfolio is in a valuation bubble, trading at record high valuations on both 12mfwd. PE and PB. This is driven by all-time high valuations for both TW and KR momentumbaskets, which are already seeing de-rating since the beginning of this month. Valuationfor Asia tech momentum portfolio has also peaked since June after reaching 2024 highvaluation levels. Asia earnings momentum stocks also remain in bubble zone, even thoughthey have been de-rating for some time. However, China and India momentum stocks are nowhere close to bubble valuations. More than valuations, record high earnings expectations are worrying:Earnings hasbeen a bigger driver for momentum stocks this year. Once in a generation AI technologyresulted in earnings expectations for Asia tech stocks cross all previous levels. The recordhigh upward revisions are now visible across Asia momentum, Asia ex China momentumand even Japan momentum baskets. Within Asia, China and Taiwan momentum portfoliosare seeing all- time high earnings expectations while KR momentum is just shy of 2009expectations. Nonetheless, given already stretched valuations, these extreme bullishexpectations set a vulnerable backdrop for momentum in Korea, Taiwan and Asia techsector. Momentum effect has created extreme intra-market dispersion in TW, KR and CN:Correlation of Asia momentum factor with growth is now at historical high, whilemomentum in value, quality and low vol stocks has been decreasing, with low vol droppingto record low momentum levels seen in last 25yrs. In Asia ex China, the drop in low vol hasbeen much more extreme, to some extent reflecting the mind-numbing rallies in Koreaand Taiwan led by high vol (high beta) stocks. In Taiwan and China, momentum effect hasnot just created extreme dispersion between high vol and low vol stocks but also betweengrowth and value. While it is difficult to time the true inflection, such extreme on low volstyle highlights potential move from risk on to risk off when momentum unwind escalates. Given the rising vulnerability, whether looking at concentration and correlation risk orlooking at extremes in momentum, we believe trimming momentum exposure is mostprudent. The re-escalation on the war front could further accelerate this unwind. We believediversifying into the anti-momentum basket ( ie. high yield or low vol) could help. For stocklists, see - Asia Quant Strategy Deck. DETAILS YTD ASIA MARKETS HAVE BEEN LED BY A STRONG MOMENTUM RALLY Momentum has been leading across global markets YTD. In Asia ex Japan, price momentum has been outperforming all otherstyles, generating 36%-38% alpha. Growth (16%-20% alpha) has been the second-best style, while earnings momentum(9%-18% alpha) has lagged behind price momentum. Looking at Asia ex Japan ex China universe, price momentum rally hasbeen much stronger with 53%-60% alpha, and even earnings momentum up 25%-40% vs market. Japan has also seen astrong momentum run with price momentum up 17%-18% relative to market. Do note, momentum rally has been extreme sinceApril in Asia , generating 25% alpha , vs. 8% alpha till Mar (Exhibit 1-Exhibit 3) EXHIBIT 1:Asia ex Japan factor performance: YTD price momentum has led, up 36%-38% relative to market whilelow vol/high yield/value has underperformed the market the most EXHIBIT 2:Asia ex Japan/China Factor Performance: Momentum rally has been even stronger in Asia ex China, up60% vs. market. Growth and earnings momentum have also done well, up 40% vs. market EXHIBIT 3:YTD, momentum rally has been strong in Japan too, up 18% relative to market, however, growth cohorthas been the best, generating 25% alpha PARTS OF ASIA MOMENTUM TRADE IN A VALUATION BUBBLE The strong rally of momentum YTD have led to stretched valuations across Asia - while earnings momentum has been tradingat record high valuations for a while, price momentum has become more expensive. Earnings momentum stocks in both Asia exJapan and Asia ex China have already hit peak valuations and have been seeing de-rating; but still look quite expensive, tradingat +2.7SD/+1.9SD above average valua