M IdeaChina Quantitative Strategy | Asia PacificA-shares Alpha Guide – 1Q24Morgan Stanley Asia Limited+Gilbert Wong, CFAQuantitative Strategist Gilbert.Wong@morganstanley.com +852 2848-7102 Laura WangEquity Strategist Laura.Wang@morganstanley.com +852 2848-6853 Jason Ng, CFAQuantitative Strategist Jason.Dl.Ng@morganstanley.com +852 2848-8845 Morgan Stanley appreciates your support in the 2024 Institutional Investor All-Asia Research Team Survey. Voting will open early January 2024. Exhibit 1 : QuantChina Stock Screen PerformanceActive Return Since May 21Stock Screen vs. CSI 300Last 12M Active ReturnStock Screen vs. CSI 300Beta to CSI 300 IndexExposure to Market Direction+10.25%+3.12%0.95Last 12M VolatilityStock Screen | CSI 300Last 12M Information RatioRelative to CSI 300 IndexLast 12M Tracking ErrorStock Screen vs. CSI 30021.7% | 25.5%1.222.54%Average Holding PeriodForecast Time Horizon4.3 monthsHistorical Active Return By Market RegimesBull | Flat | Bear+3.7% | +8.4% | +13.3% Source: Morgan Stanley Research; notes: Returns are presented in USD and before transaction costs. Data as of December 31, 2023. Past performance is no guarantee of future results. Exhibit 2 : QuantChina Screen active returns501001502002503002010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024Stock Screen Active Return vs. CSI300Since Launching PerformanceAnn. Active Return: +8.09%Info Ratio: 1.46x Source: Wind, FactSet, Rimes, Morgan Stanley Research; data as of December 31, 2023. Notes: Returns are presented in USD and before transaction costs. Past performance is no guarantee of future results. Morgan Stanley's "A-shares Alpha Guide" provides a comprehensive quarterly update of: 1) stock ideas in QuantChina Long-Only Model Stock Screen; 2) quant signals and market dynamics that we are monitoring; and 3) our latest takeaways and recommendations on the market. M Market overview: The China A-shares market continued to trend lower in 4Q23, as the CSI300 and CSI500 returned -6.2% and -4.6%, respectively, in local currency. Value (e.g. Materials, Industrials) outperformed Growth (e.g., Tech Hardware, Media). Concurrently, Low Beta factor outperformed the most, but Quality, Momentum, and Large cap underperformed.QuantChina stock screen performance and change highlights: Our screen outperformed CSI300 by +1.9% in 4Q23, rounding up outperformance in 2023 at +3.1% in total. The outperformance in 4Q23 was driven by our exposure toward Low Beta Value stocks, while our short price momentum exposure also played out. Heading into 1Q24, our screen ( Exhibit 8 ) continued to suggest exploring alpha opportunities in Industrials and Info Tech sectors ( Exhibit 4 ).Our takeaways on A-shares in 1Q24: Our China equity strategy team remained cautious on China equity overall amid risks lingering on further earnings deterioration and a lack of near-term policy action, in their view. Still they...
