DB-DB EPIC Systematic hedge funds and THB：A momentum play, not a gold proxy？-20250922

THB has long been a favoured short among macro investors in Asia, driven bypolitical uncertainty, a subdued growth outlook, and rich valuations. However, ourEPIC+ metrics suggest systematic hedge funds disagree with this consensus,instead accumulating significant long positions in the THB (Figure 1). Why aresystematic funds favouring the Baht? Are they using it as a proxy for gold? Toexplore this, we turn to our proprietary CORAX flow data, which tracks the tradingactivity of different market players including systematic hedge funds.

Our initial correlation analysis, examining systematic hedge funds’ THBflows against the performance of both the Baht and gold, reveals a keyinsight. The correlation between systematic hedge funds’ THB flows andthe Baht's performance is significantly tighter than with gold performance(Figure 2).

Further, a multilinear regression model, with systematic hedge funds’ THBflows as the dependent variable and THB and gold performance asindependent variables, sheds more light. The results indicate that, aftercontrolling for THB performance, gold performance has an almostnegligible impact on systematic hedge funds’ THB flows. Acknowledgingthe potential collinearity risks inherent in such regressions, this findingstrongly suggests that systematic hedge funds are primarily trading onTHB momentum itself, rather than using the currency as a gold proxy.

To corroborate these statistical conclusions, we examined charts plottingsystematic hedge funds’ cumulative THB flows against the price action ofboth the Baht and gold. These visualizations (Figure 3 and Figure 4) clearlyshow at least three distinct periods where systematic hedge funds’ THBflows meaningfully diverged from gold's performance. Crucially, duringthese same periods, their flows largely coincided with the Baht'sperformance.