Group 1: ETF Innovations and New Products - Roundhill launched a series of weekly dividend ETFs linked to stocks like Meta, Netflix, Amazon, Berkshire, and Robinhood, offering 1.2 times weekly returns [1] - Rainwater Equity introduced its first ETF focusing on companies with high customer loyalty, such as software providers and exchanges, which are expected to deliver stable earnings growth [2] - WisdomTree released an inflation-protected ETF utilizing a momentum-based long-short commodity strategy, covering 18 commodities and holding long positions in gold and silver [2] Group 2: ETF Fund Flows and Performance - U.S. stock ETFs saw significant inflows exceeding $30 billion last week, with international stock products also attracting over $10 billion [3] - Vanguard's S&P 500 ETF has seen substantial inflows, surpassing $680 billion in total assets, leading other products by nearly $80 billion [6][10] - Technology ETFs, particularly in the semiconductor and cybersecurity sectors, have rebounded significantly, with some products gaining over 20% since May [10] Group 3: Fund Flow Trends - For the week of June 4 to June 11, U.S. domestic equity funds experienced outflows of approximately $11.2 billion, while bond products continued to see inflows exceeding $8 billion [11]

Core Insights - The report presents a novel investment portfolio construction method that combines stock price momentum with hierarchical clustering (HC) to address the instability and concentration issues of Markowitz mean-variance (MV) portfolio weights [2][22] - The proposed Hierarchical Momentum (HM) strategy shows potential applicability in various domains such as stock portfolio construction, ETF portfolio construction, and asset allocation in the domestic market [2][22] Hierarchical Momentum Strategy - The HM strategy derives a distance function from the Pearson correlation coefficients between asset returns, using a bottom-up recursive approach to cluster assets based on proximity, resulting in a dendrogram [3][24] - At a certain height in the dendrogram, a horizontal cut is made to divide the tree into n clusters, identifying the assets with the highest momentum scores within each cluster while assigning zero weight to those with negative momentum scores [3][24] Empirical Results - The backtesting period spans from June 1997 to August 2022, utilizing a high-dimensional dataset from the MSCI All Country World Index (ACWI), which includes large-cap and mid-cap stocks from 23 developed and 24 emerging markets [5][43] - After accounting for transaction costs, the HM strategy outperforms all other strategies in terms of cumulative returns, average returns, risk-adjusted returns (Sharpe and Sortino ratios), and risk metrics (volatility and maximum drawdown) [5][55] - The HM strategy demonstrates improved stability in industry allocation compared to the Maximum Momentum (MM) and Threshold Momentum (TM) strategies, which are known for their potential large drawdown issues [5][56] Methodology - The HM portfolio construction method does not require the inversion of the covariance matrix, instead relying on a hierarchical clustering approach to reduce dimensionality and ensure sparse diversification [24][68] - The method involves two main steps: applying hierarchical clustering to create a distance matrix and then constructing portfolio weights based on the hierarchical structure and momentum scores [24][38] Conclusion - The report emphasizes the importance of sparse diversification in constructing superior investment portfolios, particularly in high-dimensional environments where traditional methods may underperform [68][69] - The HM strategy effectively captures momentum premiums while mitigating risks associated with traditional momentum strategies, demonstrating its robustness across different economic conditions [68][69]

Core Viewpoint - The article emphasizes the importance of understanding the fundamental differences between the Hong Kong stock market and the A-share market, urging investors to remain rational and prepared for risks when participating in the Hong Kong market [1][3][4]. Group 1: Investment Strategies - Investors are increasingly focusing on Hong Kong-listed companies, with a notable presence of Hong Kong heavyweights in A-share fund portfolios, indicating a shift in investment strategies [1]. - The article suggests that early-career fund managers should prioritize studying established companies with proven business models rather than speculative growth stocks, which are harder to predict [2][12]. - The concept of "basic questions" versus "additional questions" in investment is introduced, advocating for a focus on value stocks based on free cash flow as a safer approach for novice fund managers [11][13]. Group 2: Market Dynamics - The article highlights the independent pricing system of the Hong Kong market, which requires investors to understand its unique risks, especially for those accustomed to A-share investment logic [3][4]. - It points out that the Hong Kong market relies heavily on fundamental analysis for pricing, contrasting with the thematic investment approach prevalent in the A-share market [4][6]. - The liquidity disparity between the two markets is significant, with A-share market transaction volumes being approximately ten times higher than those in the Hong Kong market, affecting asset pricing efficiency [4][6]. Group 3: Risk Management - The article warns that the Hong Kong market can present "pits" for uninformed investors, emphasizing the need for thorough market understanding and risk management strategies [3][5]. - It discusses the importance of monitoring capital flows and external market impacts, as the Hong Kong market is sensitive to liquidity changes and foreign investment trends [5][9]. - The article also notes that while institutional investors may appear rational, they can engage in trend-following behaviors that inflate stock valuations, highlighting the need for caution [10][14]. Group 4: Long-term Investment Perspective - The article advocates for a long-term investment approach, emphasizing the need for patience and thorough research in identifying undervalued stocks in the Hong Kong market [6][8]. - It suggests that successful investment requires a deep understanding of a company's fundamentals, management quality, and market positioning, rather than relying solely on market trends [12][13]. - The importance of maintaining a diversified portfolio to manage risks and achieve stable returns in the volatile Hong Kong market is also emphasized [7][8].

Core Viewpoint - The global asset market has experienced significant volatility since the beginning of the year, with a strong start in February followed by a sharp decline in various assets by the end of the month [1] Group 1: Market Dynamics - Goldman Sachs traders anticipate a potential short squeeze in the U.S. stock market, suggesting that risk assets may see a substantial rise due to recent developments in the cryptocurrency space [2] - The S&P 500 and Nasdaq 100 indices fell by 0.98% and 3.38% respectively last week, with meme stocks and long-term momentum stocks also experiencing significant declines [2][4] - As of February 28, the market showed positive signals with pension funds needing to purchase approximately $13 billion in stocks, which helped absorb about $20 billion in S&P 500 sell-offs [3] Group 2: Hedge Fund Activity - Hedge funds have recorded a significant increase in short positions, with total leverage dropping to 206.5% and net leverage decreasing to 53.5%, marking the largest weekly decline since September 2023 [4][6] - The market's momentum indicators have reached a ten-year low, often signaling a potential reversal, while several positive factors are accumulating that could catalyze a sudden market rise [5] Group 3: Economic and Geopolitical Factors - Recent geopolitical developments, such as the potential restart of the Nord Stream 2 pipeline, could lead to lower natural gas prices in Europe, benefiting risk assets [10] - Trade tensions appear to be easing, with the U.S. indicating that tariffs on Mexico and Canada may be lower than 25%, which could trigger a rebound in emerging market risk assets [10] - Germany's new government has established two special funds of €400 billion each for defense and infrastructure, which may stimulate economic activity [10] Group 4: Market Sentiment and Strategy - The market is at a delicate balance, with high short positions and momentum indicators suggesting a potential squeeze, while macroeconomic data remains mixed with uncertainties in inflation and employment [9] - Investors are advised to closely monitor market sentiment and position changes, as the potential for a short squeeze could create significant market movements [11]