ab2 February 2024Global Research and Evidence LabAsia Style GuideMost styles up as year starts Most styles in the black; Value mixedAll styles except Value showed positive returns in the first month of 2024. Momentum stood out as the best-performing style in January, with all three definitions posting returns greater than 6% on a long-short basis. Among them, Momentum Composite and 12-month Momentum emerged as the top performers, each yielded 9.6% and 8.9% MoM, respectively. In contrast, returns from Value factors were mixed. Dividend Yield and Free Cash Flow Yield were up 4.6% and 3.1%, respectively; whereas Book Value Yield, Composite Value and Earnings Yield were down 4.4%, 2.5% and 0.8%, respectively.USD Index now dominates the macroeconomic environmentThe macroeconomic environment's explanatory power inched up from 51% to 54% of the market variance in January. Surpassing Gold, the USD Index is now the main macro driver, accounting for 24% of variance. The explanatory power of Gold, by contrast, fell from 20% to 12%. Pairwise correlations were up for Korea, flat for ASEAN, and down for Taiwan, CN+HK, India and Asia ex-Japan in January. Cross-sectional volatilities were up for all markets except for Taiwan, which was down. Market valued slightly below median of its historical PE range The Asia ex-Japan market's valuation fell in January, from a 12-month forward PE of 12.2x in December to 11.7x in January. It is now trading slightly below its historical median. ASEAN's valuation decreased as well, from 12.7x to 12.5x on a 12-month forward PE. India is still the most expensive market in Asia and is currently priced at 21.7x forward PE. It is valued well above the upper quartile of its historical PE ranges. At the sector level, although trading close to its historical median, Health Care is still the most expensive, currently valued at 21.4x forward PE. From a style perspective, 12-month Momentum, Earnings Revision and High Quality are trading above their upper quartile of historical valuations, while Low Price Beta and all Value definitions are trading below their lower quartile of historical valuations.Figure 1: Style-factor performance in January 2024Source: FactSet, UBS Quantitative DatabaseThis report has been prepared by UBS Securities Asia Limited. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on page 11. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.EquitiesAsiaQuantitativeWill StephensAnalyst will.stephens@ubs.com +852-3712 3892Jia Li Mok, CFAAnalyst jia-li.mok@ubs.com +65-6495 5772Pa...
