March thirty-first, two thousand twenty-six
《When Crowded Growth Meets a Fundamental Shock: A Look at Pop Mart and a Potential Equity Index Rebound》《When Crowded Growth Meets a Fundamental Shock: A Look at Pop Mart and a Potential Equity Index Rebound》
Author: Ariston
Chart: When crowded growth encounters a fundamental slowdown, repricing can be extremely violent. Pop Mart is the most typical recent example.
As global indices struggle near critical lifelines, the micro-level is undergoing extremely intense repricing, with the vulnerabilities of crowded growth and consumer discretionary stocks becoming concentratedly exposed.
In the two days after Pop Mart’s results, its share price fell 31%; single-day short-selling volume surged to 2650 ten-thousand shares, equivalent to 5.2 hundred million US dollars. Behind the trading are questions about crowded growth amid risk aversion, as well as fragile investor sentiment on the verge of breaking.Whether at the macro or micro level, how high valuations are repriced after growth slows is a question everyone must answer:
Chart: Pop Mart (daily chart, as of 260331); the share price has yet to recover
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We are substantively in a period of declining momentum trading. Continuing to use the trading logic of the past few months is actually very painful:
Chart: Oliver Kell on how to become a full-time trader (View note）
If you haven’t read it, I recommend making time to do so. There is a reason this material was published on the Planet at this particular moment.The hardest part of a bear market for momentum trading is that there are many false starts, follow-through is poor, and the actionable windows are very short. Many trading opportunities last only two or three weeks, or even have a valid window of just a day or two. If you can’t get the timing right, the most rational thing may simply be to keep waiting This experience is important, because the real challenge in momentum trading is how to survive when the wind is against you.
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Squeeze setups are happening in many places. If you shift your focus to a broader view, in South Korea, foreign and long-term funds are still flowing out, and retail investors’ former confidence in buying every dip has been worn down by a weaker trend and higher USDKRW. Taiwan has also seen a classic squeeze setup, as private equity brings in industrial capital while short positions in the sector remain heavy:
Chart: USDKRW overlaid with KOSDAQ (daily chart, as of 260331)
The dual shock to foreign exchange and fundamentals that we flagged two weeks ago is increasingly becoming reality. What you felt you didn’t understand at the time should now be very clear when you look back.
Chart: 26-03-17《Oil Prices Are Just the Opening Act; the Real Repricing Will Hit Growth, Exchange Rates, and the Industrial Chain》
The Planet’s goal is to get ahead of the market by 1-2 weeks in fundamental narratives, and by 1-2 candlesticks in technicals and pricing. Anything that was unclear at the time should be revisited promptly once the events and price action unfold.
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In fact, from a fund-flow perspective, in 2, Asian equities were still extremely crowded in prime book data, recording record-level monthly net inflows and marking the tenth consecutive month of rising risk appetite. After entering 3, selling pressure clearly picked up, with the heaviest stretch concentrated between the 6th and 10th. South Korea, China, and Japan were all affected, and roughly half of net selling came from index shorts in macro products. During the same period, ETF trading as a share of total trading was pushed to 37%, indicating that many funds were using the easiest method to hedge macro risks first, rather than gradually breaking up orders and carefully reallocating.
By late 3, global equities in prime book had already seen their largest round of net selling since 2025 4, while the pace of net selling in EM Asia also hit a near one-year high...
But it seems inaccurate to interpret this simply as a liquidation. Many non-consumer cyclical sectors have been net sold by hedge funds for nine consecutive weeks, yet net exposure to Mag 7 and the US AI theme remains close to elevated levels. Within Asia, gross/net allocations to Taiwan and South Korea remain near the 99 percentile, while China’s gross allocation has been pushed to a five-year high. Foreign selling in EM ex-China has accumulated to 440 hundred million US dollars, with Taiwan and South Korea accounting for the vast majority. China, by contrast, has received some of the funds allocated on the basis of relative outperformance. This is something we identified in several of our earlier long-form articles: 1) China will outperform relatively; 2) the definition of hard assets needs to be revised; and AI can to some extent already be classified in that category...
That is precisely why, although the market’s decline has been severe, its downward momentum has not been as persistent as it might appear.CTA has sold nearly 550 hundred million dollars’ worth of U.S. stocks since the start of the month. If a sustained rally follows, the scale of U.S. stock repurchases within a month could approach 860 hundred million dollars,
Chart: CTA Projected Flows
This is why we expect a relatively sharp rebound during the week:
Chart: “WEEKLY WRAP260329” (Read article) A short-term technical rebound is approaching, but a rebound is not a reversal. The macro backdrop is not strong enough to support the market ignoring oil and interest rates.
Chart: A rebound may occur during the week (not a reversal). Therefore, we will use a multi-timeframe approach to set passive, staggered exits for our short positions across the major indexes, protecting the profits already made.
One phenomenon is that the market is beginning to develop a kind of “fear of Fridays”: geopolitical escalation and more hawkish news are increasingly appearing outside trading hours, while news intended to push oil prices down and reassure markets is more likely to emerge during active trading hours, especially when oil prices are near technically sensitive levels.The result is that since the end of 2, buying energy and agricultural commodities has clearly outperformed in the second half of the week versus the first half, while stocks and metals have performed significantly worse on Thursdays and Fridays.
Chart: A clear split in performance over the week: energy and agricultural commodities have tended to outperform in the second half, while stocks and metals have come under pressure ahead of the weekend.
Meanwhile, the impact of verbal signals on risk assets is also waning:
Chart: This is good to some extent, because the market is pricing in fewer surprises from news.
Some of the more nuanced trading has also involved funds beginning to snap up the rebound (we also did a round of trading in airline stocks at Ganglong, in fact). This is essentially an arbitrage trade that picks up risk-release opportunities in downstream cyclical stocks that fell the hardest first. In Asian trading, airlines have been among the leaders in the rebound, mainly because the market is indeed treating the shock as an oil-price story rather than as a tangible economic consequence.
If you come purely from a fundamental research background, you should know that China Southern Airlines’ earnings sensitivity to oil prices is close to an earnings downgrade of 4.3% for every 1% increase in oil prices, while the figures for China Eastern and Air China are around 4.1% and 3.2%, respectively. These are very large impacts; but, as we keep saying, the things the market trades and the underlying companies behind them often have no connection at all.
Of course, one point also needs to be emphasized: down-stream exposure can certainly be traded, but in essence it is more like a trading-level attempt to snap up a rebound, so positions should be sold into strength. If you are looking for a long-term allocation to buy and hold, it is not a very good bet.
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Against the backdrop of repricing, we are also updating our fundamental stock-screening universes for the mainland market and U.S. equities.
This should settle down in early April,
and it is normal to see companies in the universe change recently.
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(End of article)
A quick plug: the companion U.S. equities, A-shares and Hong Kong stocks, and commodities Planet communities are continuing to improve their content.
U.S. equities:https://www.meridianresearch.app/home?product=us-strategies(Xingzhi)
Hong Kong and A-shares:https://www.meridianresearch.app/home?product=asia-strategies(Ganglong)
Commodities:https://www.meridianresearch.app/home?product=commodity-strategies(Dixin)
Note: Everything in this article is for reference only and does not constitute investment advice or serve as a basis for any laws, regulations, or regulatory policies. Investors should not use or rely on this information as a basis for making decisions.