Market and sector reversals significantly results from policy changes affecting China‘s market in the final week of September. Subsequent extreme basis movement and the notable upswing in the China equity markets brings challenges to quantitative model.

In terms of Onshore and Offshore market-neutral portfolio, the result is divergent. Onshore portfolio were concurrently affected by alpha and basis movement, but the extremes leveled off in October, with the net value recover steadily. Offshore market-neutral portfolio continued to posted positive returns through hedging with stock index swaps and shorting single names, effectively mitigating the impact of basis movement of onshore index future and offering long-short alpha.

Active trading activity, increased risk appetite, and high overall volatility in the market help to foster a favorable environment for models to generate alpha while also enabling a variety of arbitrage opportunities in the long run.