Report
Dave Nicoski ...
  • Ross LaDuke
EUR 240.13 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

Global Rally Losing Upside Momentum

The global rally appears to be losing steam as the bearish rising wedge patterns we highlighted last week in the MSCI ACWI, ACWI ex-US, EM, and EAFE indexes ended up breaking down. Additionally, the aforementioned indexes and major indexes in Europe, Japan, and Hong Kong have been unable to break above longer-term resistance. While we believe global equities remain vulnerable to a pullback, some near-term consolidation is another possibility. For now we believe some consolidation makes sense as we remain in a sort of wait-and-see period as it relates to what will happen as countries and states aim to re-open.

· Rising Wedge Breakdowns. The rising wedges we highlighted across major indexes (MSCI ACWI, ACWI ex-US, EM, and EAFE) resulted in breakdowns. We believe some consolidation or a pullback is likely... see chart below and page 2.

· MSCI ACWI ex-US (ACWX-US) Levels. We continue to see substantial resistance on the ACWX-US at $39.80, though there is potential for some resistance at the $39-$39.20 level which coincides with the recent trend of lower highs. Support that we have been watching at $38 has held for now and remains key support; a break below this level could entice a larger pullback. If that happens, the next substantial support level to watch is near $35.70-$35.80... see chart below.

· Index Overviews. The major indexes we highlighted in recent weeks (Europe's STOXX 600 & EURO STOXX 50, Japan's TOPIX, and Hong Kong's Hang Seng) have been unable to break above significant multi-year resistance zones. The same goes for the MSCI ACWI, ACWI ex-US, EAFE and EM indexes. It is hard to be bullish on an absolute basis if these markets are below their respective resistance areas... see page 3.

· Concerns. If the market was bottoming we would expect to see Sectors such as Financials and Industrials stop hitting new RS lows, but that is not what is happening. WTI and Brent crude breaking down does not engender confidence either. As long as these trends persist it is hard to be bullish on the global equity market.

· Actionable Themes: Staples, Health Care, Technology, Additional Bottom-Up Ideas. The same three Sectors that we have been focusing on for months continue to outperform and have the most opportunities -- remain overweight. We are also continuing to expand our recommendations to include bottom-up ideas within several other Sectors as the market goes through a bottoming process.
Underlyings
A2 Milk Company Ltd.

A2 Milk is principally engaged in the commercialization of a2 Milk™ related products as supported by the ownership of intellectual property that enables the identification of cattle for the production of a2 Milk™. Through its associated companies, Co. is also engaged in the distribution and marketing of a2 Milk™ in Australia and Japan and commercialize the sales and licensing rights for the supply, distribution and marketing of a2 Milk™ in the U.S. Co. products are also sold under the Jalna and Fresha Valley brand names. Co. operates predominantly in New Zealand and Australia.

Adyen NV

Adyen NV, formerly Adyen BV, is provider of mobile, online and point-of-sale (POS) payment solutions based in the Netherlands. It operates an online platform enabling merchants to accept payments internationally and from all sales channels, such as online shops, mobile payments from applications and Websites, and POS, such as countertops, mobile terminals, tablets and cash registers, among others. The platform covers the entire payment chain, including technical, contractual, reconciliation and settlement processes. The platform is available in the form of ready-to-use payment pages (HPP), application programming interface (API), and client-side encryption solution (EE). The Company's customers include Mango, KLM, Netflix, Superdry, Uber, Groupon and Crocs, among others. It has offices in the Netherlands, the United Kingdom, France, Germany, Belgium, Brazil, China, Australia, Mexico, Singapore, Spain, Sweden and the United States.

AstraZeneca PLC ADS

Ausnutria Dairy Corp Ltd

Ausnutria Dairy Corporation is a holding company. Through its subsidiaries, Co. is engaged in the production, research and development, milk collection, processing, marketing and sales of paediatric nutrition and dairy products in the People's Republic of China (the "PRC"), the Netherlands and other overseas countries. Co. operates in two segments; the Ausnutria segment comprises the manufacture and sale of own-branded paediatric cow milk formula products in the PRC, while the Ausnutria Hyproca segment comprises the manufacture and sale of dairy products in the Netherlands as well as the sale of its own-branded products in the PRC and other overseas countries.

Beijing Strong Biotechnologies (A)

Beijing Strong Biotechnologies Inc. is a China-based company mainly engaged in the research and development, manufacture and sales of in vitro diagnostic reagents. The Company's in vitro diagnostic reagents are mainly used in liver, renal, blood fat, glycometabolism and other fields. The Company is also engaged in the manufacture and sales of in vitro diagnostic equipment and the leasing of equipment. The Company operates businesses in domestic and overseas markets.

C. Uyemura & Co. Ltd.

C. Uyemura is engaged in the manufacture and sale of specialty plating and surface finishing chemicals, specialized finishing and plating equipment, chemical control systems, industrial commodity chemicals, and non-ferrous metals. Co.'s principal products are plating chemicals for aluminum magnetic disks and printed wiring boards ("PWBs"), industrial chemicals, non-ferrous metals, and plating machinery for aluminum magnetic disks and PWBs. Co. is also engaged in the provision of plastic plating services and PWB plating services; and the rental of office buildings and apartment houses.

C&S Paper Co. Ltd. Class A

C&S Paper Co.,Ltd is a China-based company principally engaged in the production, processing and sales of household paper products. The Company's main products include roll paper and non-roll paper tissue products. The Company owns brand names of C&S and Sun. The Company distributes its products in the domestic market.

Centre Testing International Group Co. Ltd. Class A

CENTRE TESTING INTERNATIONAL GROUP CO., LTD., formerly CENTRE TESTING INTERNATIONAL (SHENZHEN) CO., LTD., is a China-based company principally engaged in the provision of technical testing services in trading goods, consumer goods, industrial goods and life science areas. The Company mainly provides hazardous substance testing, safety inspection, Electro Magnetic Compatibility (EMC) testing, environment security testing, reliability and failure analysis of electrical and electronic products, material reliability and failure analysis, metal and non-metallic materials analysis, testing for textiles, shoes and leather, toy testing, construction material and light industrial product testing and vehicle and spare parts testing, among others. The Company operates its business in domestic and overseas markets.

China Yuhua Education Corp. Ltd.

CHINA YUHUA EDUCATION CORPORATION LIMITED is an investment holding company. The Company, along with its subsidiaries, is principally engaged in the provision of private formal education from kindergarten to university non-vocational education services in Henan Province of People's Republic of China. The Company operates in three segments: Kindergartens segment, Grade One to Grade 12 (Grade 1-12) segment and University segment. Its subsidiaries include China YuHua Education Investment Limited, China HongKong Yuhua Education Limited, Xizang Yuanpei Information Technology Management Company Limited and Henan Hantang Education Management Company Limited, among others.

Chongqing Fuling Zhacai Group Co. Ltd. Class A

Chongqing Fuling Zhacai Group Co.,Ltd. is principally engaged in the research, production and distribution of pickled mustard tubers, pickled mustard tuber sauce and other appetizers. The Company primarily provides pickled mustard tubers, pickles, radish products, chili products and pickled mustard tuber sauce, among others, under the brand named Wu Jiang. The Company distributes its products in domestic and overseas markets.

Embracer Group

Embracer Group AB, formerly THQ Nordic AB is a Sweden-based company engaged in the computer games development. The Company focuses on acquiring, developing and publishing personal computer (PC) and console games for Xbox and PlayStation platforms. The Company's game portfolio consists of owned franchises intellectual property (IP) and published titles, including Saints Row, Goat Simulator, Dead Island, Darksiders, Metro, MX vs ATV, Kingdoms of Amalur, TimeSplitters, Satisfactory and Wreckfest, among others. It offers games through various distribution channels, including digital platforms, such as Steam, PlayStation Store and Xbox Live, as well as gaming conventions, and global retailers, such as Walmart, GameStop and Amazon. The Company has around 18 internal game development studios and operates in more than 40 countries.

ESCRIT Inc

ESCRIT INC. is a company mainly engaged in the bridal business through the planning and operation of solemnization and receptions. The Company operates in two business segments. The Bridal segment is engaged in the operation of direct solemnization and reception facilities under the four styles: specialty ceremonial halls, guest houses, hotels and restaurants. The Others segment is engaged in the provision of accommodation services through the operation of bridal hotels, as well as the provision of banquet services through the operation of various parties, such as year-end parties, New Year parties, farewell parties, welcome parties and seminars, among others.

GDS Holdings Ltd. Sponsored ADR Class A

GMO Payment Gateway Inc.

GMO Payment Gateway is an agent which connects credit card companies and credit card member stores. Co. primarily provides data processing service of credit-card transaction. Co.'s services include online and offline credit card settlement services, revenue billing services, online settlement data management services and other related services. Co. is also involved in the provision of payment processing services for convenience store receipt, electronic money transaction, and net bank/bank ATM transaction called "Pay-easy" and "PayPal™" transaction services; as well as the provision and operation of applications and online advertising service.

Guangzhou Kingmed Diagnostics Group Co. Ltd. Class A

Guangzhou Kingmed Diagnostics Group Co Ltd. Guangzhou Kingmed Diagnostics Group Co., Ltd. is a China-based company principally engaged in the medical testing and pathological diagnosis businesses. The Company's main business includes the provision of physical and chemical mass spectrometry, genome testing, pathological diagnosis, biochemical luminescence testing, immunological testing and other comprehensive testing services to various medical institutions. The Company principally operates its businesses in the domestic market.

ITO EN Ltd.

ITO EN is engaged in the production and sale of tea-leave products and beverages. Along with its subsidiaries, Co. operates in three business segments: tea leaves and beverages, restaurant, and other. Co.'s products include Japanese tea including mugicha (barley tea) and sobacha (buckwheat tea), vegetable juice, black tea beverages, coffee, Chinese tea, fruit juice, mineral water, other beverages, tea leaves (including tea bags and instant tea products) and supplement. In addition, Co. is engaged in the operation and the franchise of coffee shops under the name of "Tully's Coffee," as well as the production and sales of supplement products in the U.S.

Japan Elevator Service Holdings

JAPAN ELEVATOR SERVICE HOLDINGS CO.,LTD. is a Japan-based company mainly engaged in the provision of the maintenance and inspection service for elevators and escalators, as well as the renewal service for elevators. The Company operates three kind of businesses. The maintenance and inspection business is involved in the provision of maintenance, inspection, replace and repair services for the engine performance and the operation safety of elevators and escalators. The renewal business is involved in the provision of a full range of main components' replacing service, the removal service of products already in the field, as well as the new setting service for elevators which are installed 20 years ago. The others business is involved in the sale of parts for elevator's maintenance.

Kakao Corp.

Kakao is engaged in the provision of Internet services to its users and advertisers. Co. provides its owned and operated online properties and services for its users. Co. provides a range of tools and marketing services designed to enable businesses to reach its users for its advertisers.

Kinaxis Inc.

Kinaxis Inc. is a Canada-based company that provides cloud-based, software-as-a-service (SaaS) solutions. The Company's subscription software enables its customers to analyze and make decisions across their supply chain operations. Its solutions include sales and operations planning, integrated project management, live lens, capacity planning (Constraints), capacity planning (CRP), demand planning, order fulfillment, inventory management, inventory planning and optimization, self-healing supply chain, aggregate supply planning, distribution requirements planning, master production scheduling, supply action management, supplier collaboration and engineering change management. The Company serves various industries, such as aerospace and defense, automotive, consumer products, industrial and life sciences.

Kingdee International Software Group Co. Ltd.

Kingdee International Software Group Co. is an investment holding company. Through its subsidiaries, Co. is engaged in developing, manufacturing and selling of enterprise management software products and the provision of software-related technical services in The People's Republic of China. As of Dec 31 2014, Co. conducted its businesses via two segments: ERP business and Cloud services business, which includes sales and implementation of enterprise management software, provision of other related services and sales of hardware related to enterprise management software arrangements and sales of middleware software business; and others, which consists the operation of investment properties.

Novo Nordisk A/S Class B

Novo-Nordisk is a global healthcare company engaged in the innovation of diabetes care. Co. also provides haemophilia care, growth hormone therapy and hormone replacement therapy. The Diabetes care business segment includes research, development, manufacturing and marketing of products within the areas of insulin, GLP-1 and related delivery systems, oral antidiabetic products (OAD) and obesity. The Biopharmaceuticals business segment includes research, development, manufacturing and marketing of products within the areas of haemophilia, growth hormone therapy, hormone replacement therapy, inflammation therapy and other therapy areas.

Nuveen Pennsylvania Municipal Value Fund

Pan Pacific International Holdings Corporation

Don Quijote Holdings is a holding company mainly engaged in the operation of discount stores. The Retail segment is engaged in the operation discount stores offering electrical appliances, daily commodities, foods, apparel, sporting goods and leisure equipment under the name of "Don Quijote" and "MEGA Don Quijote." It also operates general merchandise stores under the name of "Nagasakiya" and do-it-yourself stores under the name of "Doit." It operates 368 stores as of June 30 2017. The Tenant Leasing segment is engaged in the leasing and management of commercial facilities.

Pum Yang Construction Co. Ltd.

Bumyang Construction Co Ltd. BUMYANG CONSTRUCTION CO.,LTD, formerly PUMYANG CONSTRUCTION CO.,LTD. is a Korea-based company engaged in the construction business. The Company operates its business through architecture division, civil engineering work division. Its architecture division engages in the construction of public facilities, education facilities, residential complexes, hotels, business centers and others. Its civil engineering work division engages in the construction of roads, express ways, bridges, subways, railways, as well as water and sewage treatment works and landscaping works. It was also involved in the international public building, project management and construction businesses.

Qianhe Condiment & Food Co. Ltd. Class A

Qianhe Condiment and Food Co., Ltd. is a China-based company principally engaged in the research and development, production and sales of condiment such as soy sauce, vinegar and cooking wine, as well as caramel and other food additives. The Company's soy sauce and vinegar are used under the trademark Qianhe, which is mainly used for cooking in home and catering companies. The Company's caramel is used under trademark Hengtai, which is mainly used for coloring seasonings and foods. The Company mainly distributes its products in the domestic market.

Rogers Corporation

Rogers designs, develops, manufactures and sells engineered materials and components. The company's segments are: Advanced Connectivity Solutions, which designs, develops, manufactures and sells circuit materials and solutions enabling connectivity for applications in wireless infrastructure, automotive, aerospace and defense, connected devices, and wired infrastructure; Elastomeric Material Solutions, which designs, develops, manufactures and sells engineered material solutions such as polyurethane and silicone materials used in cushioning; and Power Electronics Solutions, which designs, develops, manufactures and sells ceramic substrate materials, busbars and cooling solutions.

SAMSUNG BIOLOGICS Co. Ltd.

Samsung Biologics is engaged in the manufacture of biological products. Co. provides CMO (Contract Manufacturing Organization) services that serve other domestic and international pharmaceutical companies on a contract basis to produce high-tech biomedicine as of the date when the business report is submitted. Co.is also engages in the research & development and commercialization of biosimilar products.

Sectra AB B

Shandong Head (A)

Shenzhen Kangtai Biological Products Co. Ltd. Class A

Shenzhen Kangtai Biological Products Co.,Ltd. is a China-based company and mainly engaged in research and development, manufacture and sale of vaccine. The main products of the company are recombinant hepatitis B virus, haemophilus influenzae type b combined vaccine, measles rubella combined attenuated live vaccine, non-cell Bai Bai Po haemophilus influenzae combined vaccine and other products. The Company operates its businesses primary in domestic market.

Shenzhen Sunline Tech (A)

Shenzhen Sunline Tech Co., Ltd. is a China-based company principally engaged in the provision of financial information technology (IT) services for commercial banks. The Company operates its businesses primarily through the provision of commercial bank IT solutions and services, technology development, services and related system integration of computer software and hardware. The Company's products portfolio consists of bank core business systems, credit loan management systems, credit card business systems, business intelligent systems, customer relations management systems, channel management systems, Internet banking systems, system integration systems, as well as system maintenance services, among others. The Company mainly operates its business in domestic market.

SLC Agricola SA

SLC Agricola is an agricultural production group based in Brazil. Co. is engaged in production of cotton, soybean, corn and coffee in Brazil. Co. is also engaged in the acquisition of farmland for future use. Co.'s main focus is on cotton, soybean and corn. Co. maintains 11 production units strategically located in six Brazilian states, totaling around 230.7 thousand hectares - 118.2 thousand of which planted with soybean, 85.0 thousand with cotton, 24.8 thousand with corn, and 2.6 thousand with other crops, including coffee, wheat and corn seed.

Sun Art Retail Group Limited

Sun Art Retail Group is an investment holding company, engaged in the operation of hypermarkets in the People's Republic of China (PRC), under two banners of Auchan and RT-Mart. As of Dec 31 2014, Co. had a total of 372 hypermarket complexes in China, with a total gross floor area of approximately 10,277,525 sq. m.

Sun Pharmaceutical Industries Limited

Sun Pharmaceutical and its subsidiaries are principally engaged in developing, manufacturing and marketing generic pharmaceutical products and bulk drugs. Co.'s products are mainly for the following therapy areas: psychiatrists, neurologists, gastroenterologists, diabetologists, chest physicians, consultant physicians, orthopedics, oncologists, gynecologists, ophthalmologists and cardiologists. Generic names of three principal products of Co. is Pentoxifyline, Pentoparzole Sodium, and Metformin Hydrochloride. Co.'s business can be divided into four segments: Indian branded generics, U.S. generics, international branded generics (ROW) and Active Pharmaceutical Ingredients (API).

Sundrug Co. Ltd.

Sundrug is mainly engaged in the operation of drugstore chain throughout Japan. Co. operates in two business segments. The Drugstore segment operates the drugstore chains such as “Sundrug,” “Sundrug Pharmacies,” “Drug Tops,” “Seikoudou Yakkyoku,” and “Sundrug Plus.” These drugstores sell pharmaceuticals, cosmetics, and household products. The Discount store segment is engaged in the operation of discount stores selling foods and household products under the name of "Direx." As of Mar 31 2017, Co. operates 831 drugstores including franchise stores, and 239 discount stores.

Swedish Match AB

Swedish Match develops, manufactures, markets, and sells snus and snuff, other tobacco products (cigars and chewing tobacco), and lights (matches and lighters). Snus and snuff are smokeless tobacco products that are produced and sold primarily in Sweden, Norway and the U.S. Other tobacco products represent cigars and chewing tobacco manufactured and sold on the U.S. market. Lights include manufacturing and distribution of matches and lighters. Other operations are primarily the distribution of tobacco products on the Swedish market. Primary brands include General snus, Longhorn moist snuff, White Owl cigars, Red Man chewing tobacco, Fiat Lux matches, and Cricket lighters.

TSURUHA Holdings Inc.

TSURUHA Holdings is a holding company mainly engaged in the management of drug stores that sells pharmaceutical products, cosmetics, miscellaneous goods and others, as well as the provision of business trainings for the drug stores. Co. maintains 1,755 directly-managed drug stores and 2 franchise stores in Hokkaido, Tohoku, Kanto/Koshin, Chubu/Kansai, Chugoku/Shikoku, and Kyushu areas as well as 19 stores in Thailand as of May 15 2017. Co. is also engaged in the wholesale of pharmaceutical products to franchised stores. Additionally, Co. is engaged in the provision of insurance and real estate leasing services, as well as the beverage vending machine leasing and beverage sale businesses.

United Super Markets Holding

United Super Markets Holdings Inc. United Super Markets Holdings Inc. is a Japan-based company primarily engaged in the operation of supermarkets. It operates its business through its subsidiaries. Through its subsidiaries, the Company mainly involves in the operation of supermarkets and others. Supermarket segment includes supermarket business in China such as daily living goods and clothing items, mainly foodstuffs, living related goods and clothing items, mainly foodstuffs, fresh food processing business, food processing business. Other segment mainly focuses on real estate business, product development business, quality control and quality inspection business, business consignment business and temporary staffing business, among others.

Walvax Biotechnology Co. Ltd. Class A

Walvax Biotechnology Co., Ltd. is a China-based company principally engaged in the research, development, production and distribution of vaccines, monoclonal antibodies and blood products. The Company's main products include haemophilus influenza type b conjugate vaccines, freeze-dried group A,C meningococcal polysaccharide conjugate vaccines, group ACYW135 meningococcal polysaccharide vaccines and group A and C meningococcal polysaccharide vaccines, among others. The Company distributes its products mainly in domestic market.

Provider
Vermilion Research
Vermilion Research

Vermilion Research delivers timely, actionable, and unique research inputs to professional investors. Our research strategists highlight securities which we believe are at major inflection points, based on our various proprietary technical indicators, and offer asymmetric risk/return profiles. We believe our research methodology, which is not limited by industry sector or market capitalization, enables us to deliver superior investment recommendations.

Our process begins by organizing all actively traded stocks into coherent sectors, then into logical industry groups. We then apply our proprietary relative strength tools to identify developing price trends. Once attractive trends are identified within a selected sectors or groups, we screen for individual stocks which we believe offer the best risk/reward profile. Vermilion offers U.S. and global equity market research products. Vermilion’s research team, which has received numerous awards and accolades, has a combined 70 year of experience in the analysis of investment securities.

Analysts
Dave Nicoski

Ross LaDuke

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