Active Shares: Active Share is calculated by taking the absolute value of the difference between portfolio holdings and benchmark weights, summing all of these differences, and dividing by two. The calculation will result in an active share number between 0%, which indicates the portfolio perfectly replicates the benchmark, and 100%, which indicates there is no overlap whatsoever between the portfolio and the index.
American depositary receipts: An American depositary receipt is a negotiable security that represents securities of a non-U.S. company that trades in the U.S. financial markets.
A-shares are shares in mainland China-based companies that trade on Chinese stock exchanges such as the Shanghai Stock Exchange and the Shenzhen Stock Exchange.
Basis Point: One basis point equals 1/100th of 1%. For example, 125 basis points equal 1.25%.
Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.
B-shares are mainland Chinese companies listed on the Shanghai and Shenzhen stock exchanges, available to both Chinese and non-Chinese investors.
Bloomberg Barclays Global Aggregate Bond Index (Global Agg): An index of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.
Bond Rating Agency: Credit ratings are issued by three major credit rating agencies: S&P, Moody's and Fitch. If the bond is rated AAA to BBB-, then it is considered investment grade. If it is BBB- to C-, it is considered as high yield. If it's below C-, it's a defaulted bond.
Bottom-Up Investing is an investment approach that de-emphasizes the significance of economic and market cycles. This approach focuses on the analysis of individual stocks. In bottom-up investing, therefore, an investor focuses his or her attention on a specific company rather than on the industry in which that company operates or on the economy as a whole.
The Bovespa Index is a gross total return free-float market-weighted index comprised of the most liquid stocks traded on the São Paulo Stock Exchange.
China-Affiliated Corporations [CAC]:
China-Affiliated Corporations [CAC], also known as "Red Chips," are mainland China companies with partial state ownership listed in Hong Kong, and incorporated in Hong Kong.
Compound Annual Growth Rate (CAGR):
Compound Annual Growth Rate (CAGR) is the year-over-year growth rate of an investment over a specified period of time.
A situation in which a publicly traded corporation owns stock in another listed entity.
Default Rates: Default rates refer to the percent of loans that are not repaid within a given sector, region or style of bonds. For example, if a sector contains 1,000 bonds and 30 bonds default, the default rate would be 3% for that sector.
Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock.
Dovish: Dovish describes when a central bank relaxes or loosens monetary policy, such as lowering policy rates or buying assets to add to its balance sheet in order to increase the available money supply within a specific country or region. “Dovish” is also used when a central bank relaxes or loosens monetary policy more quickly than market participants expect, or when a central bank raises interest rates less than expected.
Earnings Before Interest and Taxation (EBIT) Margin:
Earnings Before Interest and Taxation (EBIT) Margin is a profitability measure equal to EBIT divided by net revenue. This value is useful when comparing multiple companies, especially within a given industry, and also helps evaluate how a company has grown over time.
Earnings Before Interest and Taxation, Depreciation and Amortization (EBITDA):
Earnings Before Interest and Taxation, Depreciation and Amortization (EBITDA) is a measure of a company’s earnings before considering the financing of that company (the share of equity capital and debt employed), and disregarding potential depreciation and amortization policies, which can be very different. EBITDA allows like-for-like comparisons between different companies’ performance.
Earnings Per Share (EPS):
Earnings Per Share (EPS) is the amount of annual profit (after tax and all other expenses) attributable to each share in a company. EPS is calculated by dividing profit by the average number of shares on issue.
Economic Value Added (EVA):
Economic Value Added (EVA) is a measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis).
Emerging Markets (EM):
Emerging Markets are countries that have some characteristics of a developed market, but do not meet standards to be considered a developed market. This includes countries that may be developed markets in the future or were in the past.
Enterprise Multiple (EV/EBITDA):
Enterprise Multiple (EV/EBITDA) is a ratio used to determine the value of a company. The enterprise multiple looks at a firm as a potential acquirer would, because it takes debt into account - an item which other multiples like the P/E ratio do not include.
Earnings Before Interest and Tax (EBIT): Earnings before interest and tax is an indicator of a company’s profitability, often calculated as revenue minus expenses, excluding tax and interest.
Enterprise Value (EV):
Enterprise Value (EV) is a measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents.
Exchange Traded Fund (ETF):
An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day.
Ex-Date is the date on or after which a security is traded without a previously declared dividend or distribution. After the ex-date, a stock is said to trade ex-dividend.
Fixed Asset Investment (FAI):
Fixed Asset Investment (FAI) is a measure of capital spending. It refers to any investment within the measurement period in physical assets, such as real estate infrastructure, machinery, etc. that are held for more than one year. FAI can be a good indicator for how much investment is occurring in a country or region, but it is not a direct contributor to GDP.
FOMC: FOMC is an acronym for the U.S. Federal Open Market Committee, made up of 12 members of the Federal Reserve Board that sets monetary policy for the U.S. Used interchangeably with the “Fed” or “Federal Reserve.”
Foreign direct investment (FDI): Foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country.
Forward Earnings (Predicted Earnings):
Forward Earnings (Predicted Earnings) is a company's forecasted, or estimated, earnings made by analysts or by the company itself. Forward Earnings/Predicted Earnings does not represent or predict the performance of any fund.
Forward Price-to-Earnings (P/E):
Forward Price-to-Earnings (Forward P/E) is a measure of the price-to-earnings ratio (P/E) using forecasted earnings for the P/E calculation. While the earnings used are just an estimate and are not as reliable as current earnings data, there still may be benefit in estimated P/E analysis. The forecasted earnings used in the formula can either be for the next 12 months or for the next full-year fiscal period.
Free Cash Flow (FCF):
Free Cash Flow (FCF) is a measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base.
Free Cash Flow Yield:
Free Cash Flow Yield is an overall return evaluation ratio of a stock, which standardizes the free cash flow per share a company is expected to earn against its market price per share. The ratio is calculated by taking the free cash flow per share divided by the share price.
Gross Margin is a company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. The gross margin represents the percent of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services sold by a company.
High Yield Bond:
H-shares are shares of a company incorporated in the Chinese mainland that are listed on the Hong Kong Stock Exchange or other foreign exchange. H-shares are still regulated by Chinese law, but they are denominated in Hong Kong dollars and trade the same as other equities on the Honk Kong exchange.
HSBC Asian Local Bond Index (ALBI):
The HSBC Asian Local Bond Index (ALBI) tracks the total return performance of a bond portfolio consisting of local-currency denominated, high quality and liquid bonds in Asia ex-Japan. The ALBI includes bonds from the following countries: Korea, Hong Kong, India, Singapore, Taiwan, Malaysia, Thailand, Philippines, Indonesia and China.
The Impossible Trinity:
The Impossible Trinity—also known as the Trilemma or Unholy Trinity—is the hypothesis in international economics that a country may choose any two, but not all of the following three policy goals—monetary independence, exchange rate stability and free movement of capital.
Inverted Yield Curve: An inverted yield curve is considered to be a predictor of economic recession. Curves become inverted when long-term bonds have a lower yield than short-term bonds of the same credit quality. Curves can also invert if markets expect stress or defaults to come over the short term, such as during the Greek debt crisis in 2012.
J.P. Morgan Asia Credit Index (JACI): J.P. Morgan Asia Credit Index (JACI) tracks the total return performance of the Asia fixed-rate dollar bond market. JACI is a market cap-weighted index comprising sovereign, quasi-sovereign and corporate bonds and is partitioned by country, sector and credit rating. JACI includes bonds from the following countries: China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Thailand and Singapore. Index is for comparative purposes only it is not possible to invest directly in an index. Source: BNY Mellon Investment Servicing (US) Inc., Index data from J.P. Morgan.
Korea Composite Stock Price Index (KOSPI):
The Korea Composite Stock Price Index (KOSPI) is a market capitalization–weighted index of all common stocks listed on the Korea Stock Exchange.
Long-Term Capital Gain or Loss:
Long-Term Capital Gain or Loss is a gain or loss from a qualifying investment owned for longer than 12 months and then sold. The amount of an asset sale that counts toward a capital gain or loss is the difference between the sale value and the purchase value. Long-term capital gains are assigned a lower tax rate than short-term capital gains in the United States.
Modified Duration is a formula that expresses the measurable change in the value of a security in response to a change in interest rates.
MSCI All Country Asia Index:
The MSCI All Country Asia Index is a free float–adjusted market capitalization–weighted index of the stock markets of China, Hong Kong, India, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.
MSCI All Country Asia ex Japan Index:
The MSCI All Country Asia ex Japan Index is a free float–adjusted market capitalization–weighted index of the stock of markets of China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.
MSCI All Country Asia ex Japan Small Cap Index:
The MSCI All Country Asia ex Japan Small Cap Index is a free float–adjusted market capitalization–weighted small cap index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.
MSCI All Country Asia Information Technology Index:
The MSCI All Country Asia Information Technology Index is a free float–adjusted market capitalization–weighted index designed to measure the combined equity market performance of companies in the information technology sector of developed and emerging markets countries in Asia. Component companies include those of software and services, technology hardware and equipment, and semiconductors and semiconductor equipment.
MSCI All Country Asia Pacific Index:
The MSCI All Country Asia Pacific Index is a free float–adjusted market capitalization–weighted index of the stock markets of Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan and Thailand.
MSCI BRIC Index:
The MSCI BRIC Index is an index measuring the equity market performance of the emerging market indices of Brazil, Russia, India and China. The MSCI BRIC Index is one of MSCI's Regional Equity Indices, and is a free float-adjusted, market capitalization weighted index of four of the biggest emerging market economies. Prior to this index, MSCI launched the first Emerging Markets Index in 1988, focusing on 21 markets.
MSCI China Index:
The MSCI China Index is a free float–adjusted market capitalization–weighted index of Chinese equities that includes China-affiliated corporations and H shares listed on the Hong Kong Exchange, and B shares listed on the Shanghai and Shenzhen exchanges.
MSCI China Small Cap Index:
The MSCI China Small Cap Index is a free float–adjusted market capitalization–weighted small cap index of the Chinese equity securities markets, including H shares listed on the Hong Kong Exchange, B shares listed on the Shanghai and Shenzhen exchanges, and Hong Kong-listed securities known as Red Chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China).
MSCI Emerging Markets (EM) Asia Index:
The MSCI Emerging Markets (EM) Asia Index is a free float-adjusted market capitalization-weighted index of the stock markets of China, India, Indonesia, Korea, Malaysia, the Philippines, Taiwan and Thailand.
MSCI Emerging Markets Index: Captures large and mid cap representation across 24 Emerging Markets (EM) countries including Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, South Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. With 1,125 constituents, the Index covers approximately 85% of the free float-adjusted market capitalization in each country.
MSCI India Index:
The MSCI India Index is a free float–adjusted market capitalization index that is designed to measure the performance of the large and mid -cap segments of the Indian market.
MSCI Japan Index:
The MSCI Japan Index is a free float–adjusted market capitalization–weighted index of Japanese equities listed in Japan.
Multiple Expansion is a term that measures some aspect of a company's financial well-being, determined by dividing one metric by another metric.
Net Margin is the ratio of net profits to revenues for a company or business segment—typically expressed as a percentage—that shows how much of each dollar earned by the company is translated into profits. It is calculated by dividing net profit by revenue.
Nonperforming loan (NPL) is the sum of borrowed money upon which the debtor has not made his or her scheduled payments for at least 90 days. A nonperforming loan is either in default or close to being in default. Once a loan is nonperforming, the odds that it will be repaid in full are considered to be substantially lower.
Operating Margin is a ratio used to measure a company's pricing strategy and operating efficiency. Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production.
Ordinary Income is Income received that is taxed at the highest rates, or ordinary income rates. Ordinary income is composed mainly of wages, salaries, commissions and interest income (as from bonds). Ordinary Income can only be offset with standard tax deductions, while capital gains income can only be offset with capital losses.
Overseas Listed [OL]:
Overseas Listed [OL] companies are companies that conduct business in mainland China but listed in overseas markets such as Japan, Singapore, Taiwan and the United States.
Payment Date is the date on which a declared stock dividend is scheduled to be paid. Only those shareholders who bought the stock before the ex-dividend date receive the dividend on the date of payment (payable date).
Price-to-Book Ratio (P/B Ratio):
Price-to-Book Ratio (P/B Ratio) is used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share. A lower P/B ratio could mean that the stock is undervalued.
Price-to-Earnings (P/E) Ratio:
Price-to-Earnings Ratio (P/E Ratio) is a valuation ratio of a company's current share price compared to its per-share earnings.
Purchasing Power Parity (PPP):
Purchasing Power Parity (PPP) is an economic theory that estimates the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency's purchasing power.
Quantitative Easing (QE): Quantitative easing is a central bank action aimed at relaxing or loosening monetary policy, thereby increasing the money supply. The central bank accomplishes this by buying select securities and then holding them on its balance sheet. In the U.S., past QE programs affected mainly government bonds (U.S. Treasuries) and mortgage-backed securities (MBS). In the eurozone, the European Central Bank has previously bought government bonds, corporate bonds and covered securities as part of a QE program. And Japan's central bank has previously bought government bonds, corporate bonds and equity ETFs as part of a QE program.
Quantitative Tightening: Quantitative tightening is the reverse of easing. Central banks tighten monetary conditions by shrinking their balance sheets, typically by either selling securities or letting securities mature and not replacing the matured securities. In quantitative tightening programs, the money supply within a country or region is reduced.
Real Estate Investment Trust (REIT):
A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges like a stock. REITs provide investors with an extremely liquid stake in real estate. They receive special tax considerations and typically offer high dividend yields.
Reinvestment Date is the date on which an investment’s or capital gains income is reinvested, if requested by a shareholder, to purchase additional shares. Also known as the ex-dividend date.
Return on Capital:
Return on Capital is a profitability ratio that measures the return that an investment generates for capital contributors, i.e. bondholders and stockholders. Return on capital indicates how effective a company is at using its money to generate returns.
Return on Equity (ROE):
Return on Equity (ROE) is the amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested, and is calculated as net income divided by shareholder’s equity.
Return on Invested Capital (ROIC):
Return on Invested Capital (ROIC) is a calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. The return on invested capital measure gives a sense of how well a company is using its money to generate returns.
Shanghai Composite Index (SSE Composite):
Shanghai Composite Index (SSE Composite) is a market composite made up of all the A-shares and B-shares that trade on the Shanghai Stock Exchange.
Sharpe Ratio: is a method of examining the performance of an investment by adjusting for its risk. The ratio, named after William F. Sharpe, measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk.
The S&P 500 Index:
The S&P 500 Index, or the Standard & Poor's 500, is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ.
S&P Bombay Exchange Sensitive Index (S&P BSE SENSEX)
The S&P Bombay Exchange Sensitive Index (S&P BSE SENSEX), also-called the BSE 30 or simply the SENSEX, is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange. The 30 component companies which are some of the largest and most actively traded stocks, are representative of various industrial sectors of the Indian economy.
S&P Bombay Stock Exchange 100 (S&P BSE 100) Index
The S&P Bombay Stock Exchange 100 (S&P BSE 100) Index is a free float–adjusted market capitalization–weighted index of 100 stocks listed on the Bombay Stock Exchange.
Shanghai Stock Exchange:
The Shanghai Stock Exchange is a market composite made up of all the A-shares and B-shares that trade on the Shanghai Stock Exchange.
Special Administrative Region or SAR: Special Administrative Region or SAR (Hong Kong) companies are companies that conduct business in Hong Kong and/or mainland China.
Standard Deviation: Standard deviation is a mathematical measurement of the dispersion of a set of data from its mean. For investors, standard deviation is applied to the annual rate of return of an investment to measure the investment's volatility. A volatile investment will have a high standard deviation. A lower standard deviation means less variance of returns and therefore lower level of risk.
State-Owned Enterprise (SOE):
A State-Owned Enterprise (SOE) is a legal entity that is created by the government in order to partake in commercial activities on the government's behalf. A state-owned enterprise (SOE) can be either wholly or partially owned by a government and is typically earmarked to participate in commercial activities.
The small statistical probability that an asset price will move more than three standard deviations from its current and/or average price level.
Tightening: Tightening can be used to describe both credit spreads and monetary policy. Tightening or narrowing credit spreads indicate improving creditworthiness among private or corporate bond issues. Expanding or widening credit spreads indicate growing concern about the ability of corporate and other private borrowers to service their debt. Tightening of monetary policy means reducing the money supply within a country or region, while a relaxing or loosening of monetary policy means increasing the money supply.
Tokyo Stock Price Index (TOPIX):
The Tokyo Stock Price Index (TOPIX) is a market capitalization–weighted index of all companies listed on the First Section of the Tokyo Stock Exchange.
Total Return: Total return is the aggregate return an investment generates. Total return is calculated by adding together price appreciation and income or dividends received during a specific time period.
Tracking Error: is a measure of the risk in an investment portfolio that is due to active management decisions made by the portfolio manager. It indicates how closely a portfolio follows the index to which it is benchmarked.
Valuation is the process of determining the current worth of an asset, company, region or country. Valuation may take into consideration a variety of factors such as the prospect of future earnings, the market value of assets or a company, economic conditions and government influences.
Widening: Widening or loosening credit spreads indicate growing concern about the ability of corporate and other private borrowers to service their debt. Narrowing or tightening credit spreads indicate improving creditworthiness among private or corporate bond issuers.
Yield: Yield is a measure of earnings generated over a period of time, expressed as a percentage of the original cost of a security, the current value of a security or the face value of the security.
Yield Curve: A yield curve measures the difference in yield between bonds of different maturities in basis points. Most commonly, the term yield curve refers to the spread between a 10-year U.S. Treasury and 2-year U.S. Treasury. This spread between Treasuries of different maturities is often referred to as the “2-10” spread. In normal economic environments, the spread is positive, as investors demand more interest to lend money to the U.S. government for a longer period.