The MSCI EM roll is trading rich to fair value, richer than last quarter, and inline with its roll cost last December. However, the roll has barely started to trade and may have a significant price adjustment once it becomes more active this week. The last 2 quarters, the MSCI EM roll cheapened significantly into expiry. Positioning in EM futures appears to have improved this quarter, though it's not clear if by enough to reverse last quarter's weak trend. As such, we adopt a neutral view for the EM roll trend this quarter and recommend rolling in-line with liquidity.

 The MSCI EAFE roll is indicated cheap to fair value (based on an exchangedisseminated theoretical price). However, it hasn’t started to trade, bid/offer is wide, and open interest on the December futures is close to zero, so there will likely be a sizable price adjustment to a tradable level once the roll spread begins actively trading later this week (as has occurred frequently in the past). Investor positioning in international developed market equities appears to have moderately improved over the past quarter. We believe the EAFE roll is biased to richen into expiry (once a tradable level is established) given the improved positioning and risks around dealer capital constraints into year-end, and thus recommend rolling longs early/shorts late.

 For other liquid regional MSCI Dec-20/Mar-21 futures rolls: the MSCI World NTR (ZWPA) roll is trading at a relatively large premium. While a roll premium is likely to remain into expiry, it may narrow from current steep levels. The MSCI Europe NTR (ZRPA) roll, on the other hand, is trading at a material discount on minimal trading volume. As we move towards expiry and roll volumes pick up, the discount should likely narrow. Lastly, similar to major Asia country contracts, the MSCI EM Asia NTR (ZTWA) roll is also trading at a meaningful discount despite a surge of foreign inflows into the region. This is likely due to continued hedging demand after a strong rally.

 Among liquid country MSCI contracts, the Indonesia contract traded at a large premium in November, after trading at sizable discount in most months in 2020. The Singapore roll traded at a small premium; the Taiwan contract continued to trade a discount last month after migrating from the SGX in Singapore to the HKEX in Hong Kong. In the broader region, despite materially better risk sentiment, roll costs of major Asia Pacific monthly Nov-20/Dec-20 future rolls mostly traded at a considerable discount to fair value. In particular, the roll discount on China A-shares futures remains relatively large, likely driven by persistent hedging demand after the strong YTD rally.