Why Quants Think Asia ‘Low-Risk’ Trades Are Most Vulnerable
- Citigroup says factor is at risk of higher drawdowns in region
- Traditional hedging tactics may go only so far, Qontigo says
Photographer: Dario Pignatelli/Bloomberg
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Quantitative strategists say bets on the most tranquil stocks in Asia leave plenty to be worried about, just as the safety trade gathers steam in other parts of the world.
Shares that have demonstrated little sensitivity to broader market swings in the past tend to perform better when the market expects turbulence ahead -- and global investors have been fans of the strategy this year. But the MSCI Asia ex-Japan Minimum Volatility Index, a gauge of the calmest equities in the region, has fallen more than 5% in the past six months, compared with a gain of over 6% for a measure tracking the same strategy for global stocks.