Weekly Update: Saxo Thematic Investing Performance Weekly Update: Saxo Thematic Investing Performance Weekly Update: Saxo Thematic Investing Performance

Weekly Update: Saxo Thematic Investing Performance

Peter Garnry

Head of Equity Strategy

Summary:  Last week was driven the narrative that China is about to significantly ease its strict zero Covid policy but interestingly enough our two Chinese theme baskets were not aligned in terms of conviction of how fast it can be achieved. Our China consumer & technology basket, which consists mostly of liquid technology and consumer stocks traded in Hong Kong, was up 4% while the China's little giants basket, which consists most of stocks traded on mainland exchanges, were down 1%. Another key development last week was Bullard's hawkish comments on policy rates slamming our bubble stocks basket down 9% last week.

The Chinese paradox

Last week was driven by two narratives and trades. China is reopening its economy loosening its strict zero Covid policy and Europe must increase its military strength after a loose missile struck ground in a small Polish town close to the border of Ukraine. As a result our China consumer & technology and defense baskets were the two best performing baskets up 4.4% and 2.3% respectively.

What is a bit striking is the divergence between our two Chinese baskets. The one tracking the large cap consumer and technology companies was up 4.4% and consists of many liquid stocks traded in Hong Kong and thus more easily accessible by foreign investors. The other basket tracks the little giants of China, which are mainly hardware technology companies listed on the mainland exchanges and thus are dominated by domestic flows, and was down 1% last week. Was last week a story about foreign investors buying the ‘Xi pivot’ on the country’s Covid policy and domestic investors less certain about the direction and speed?

In any case it is clear today that the path to leave the strict zero Covid policy will be a lot more bumpy. Shijiazhuang, a city of 11mn people around 300 kilometers from Beijing, has moved back into a restrictive policy mode forbidding residents in high risk areas to leave their homes. While China has a lot of incentive to opening up again to kickstart the economy the path is likely not to be smooth as investors have priced in over the past two weeks.

Bullard’s hawkish remarks slam bubble stocks

Last week’s performance among our theme baskets was also characterized by the 9% decline in our bubble stocks basket. This was due to Fed James Bullard’s comments that higher interest rates have had little impact on inflation and that the policy rate could be set at 5-5.25% before being within the ‘restrictive zone’ which is 125 basis points above the current policy rate. This more restrictive monetary policy outlook is negative for long duration assets such as bubble stocks that have negative earnings expectations over the next year and are priced at high equity valuations.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.