Report
Dave Nicoski ...
  • Ross LaDuke
EUR 46.41 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

Stay Defensive With Technology, Health Care, Staples

Upside momentum continues to wane for global equities, a trend we mentioned in last week's Int'l Compass. In that report we highlighted early signs of lower highs forming in the major global indexes. Price action this week has indeed confirmed lower highs for now in the MSCI ACWI, ACWI ex-US, EAFE, and EM indexes. These lower highs increase the probability for breakdowns and a deeper pullback, but we do not want to get ahead of ourselves. Until we see breakdowns we still view global equities as being in a period of consolidation.

· Lower Highs & Key Support Levels To Watch. Lower highs for the MSCI ACWI, ACWI ex-US, EM, and EAFE indexes (priced in USD) could be foreshadowing a deeper pullback, but all these indexes remain above key horizontal support. If these indexes are above support it is hard to get too bearish, however breakdowns are likely to signal a new leg lower. We highlight levels we are watching that will tell us where the indexes are headed next... see chart below and page 2.

· Index Overviews. For several weeks we have pointed to long-term resistance levels on the MSCI ACWI ($70 on ACWI-US), EURO STOXX 50 (2900-3000), Hang Seng (24900), and TOPIX (1465-1485) as reasons to be cautious. Today we take a closer look by zooming-in on these indexes which all have been unable to decisively break above their respective resistance levels. It is worth noting here that Japan is showing early signs of outperformance... see chart below and page 3.

· Ongoing Concerns. New RS lows in global Financials and Industrials has been (and continues to be) a major warning sign for the broad market. Unfortunately, it appears price is also breaking down for Financials, which only adds to concerns that the market is not out of the woods. Unchanged Sector leadership is inconsistent with prior major historical bottoms and continues to give us reason for pause... see page 4.

· Actionable Themes: Technology, Health Care, Consumer Staples, Additional Bottom-Up Ideas. Our favorite global Sector overweights continue to be Technology and Health Care, while Consumer Staples is another leadership Sector in the Asia/Pacific region. This type of leadership has been in place for many months; continue to stick with these trends as there is no reason to expect them to change any time soon. Lastly, 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... see pages 5-
Underlyings
AfriTin Mining

Aier Eye Hospital Group Co. Ltd. Class A

Aier Eye Hospital Group Co.,Ltd. is a China-based ophthalmic medical institution. The Company is mainly engaged in ophthalmic diseases treatment, surgical services and medical optometry. The Company mainly provides corneal refractive surgery, cataract operation, anterior segment operation, posterior segment operation and optometry services. The Company mainly operates its business in domestic market, with Central China as its main market.

Bright Dairy & Food Co. Ltd. A

Bright Dairy & Food is engaged in the production, development and sale of dairy products and feed. Through its subsidiaries, Co. is also engaged in processing milk powder and fresh milks; web site development, operations and services; provision of labor services; production and selling of bull, frozen semen and embryos; wholesaling of food and dairy products; and industrial investment. Co.'s products include yogurt, cheese, fruit juice, milk powder, and fresh milk.

China Grand Pharmaceutical & Healthcare Holdings (P Chip)

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.

CJ CheilJedang Corporation

CJ CheilJedang is engaged in the food, animal feed and life science business. Co.'s food business provides sugar, flour, seasonings, sauces, instant foods, instant cooked rice, fried dumplings, noodles, and hams. Co.'s animal feed business provides feeds for pigs, poultry, fish, chickens and cattle. Co.'s life science business provides circulatory system agents, antibiotics, gastrointestinal agents and blood-making medicines.

Daiichi Sankyo Company Limited

Daiichi Sankyo is engaged in the research and development, manufacture, sales, and marketing of pharmaceutical products. Co. operates its operation in Japan, the Americas, Europe, China and Asia. Co. provides ethical pharmaceutical and proprietary drugs. Co.'s principal products include antihypertensive agent "Olmetec" ("Olmesartan" in overseas), ulcer treatment drug "NEXIUM," Alzheimer's disease treatment "Memary," anti-influenza treatment "Inavir," antiplatelet agent "Prasugrel," anticoagulant "Edoxaban," anti-inflammatory analgesic "Loxonin" Tape, synthetic antibacterial agent "Cravit," treatment for bone complications "RANMARK," and anticoagulant "LIXIANA."

Foshan Haitian Flavouring & Food Co. Ltd. Class A

Foshan Haitian Flavouring and Food Company Ltd. is a China-based company, principally engaged in the manufacture and distribution of seasonings. The Company's products portfolio consists of soybean sauces, general sauces, oyster sauces, chicken essence seasonings, vinegar and others, with soybean sauces, general sauces and oyster sauces as its main products. Its general sauces are applied in barbecue sauces, hot pot sauces and others. Its oyster sauces are applied in cooking, salad dressings and others. The Company conducts its businesses mainly within domestic markets.

Fujitsu Limited

Fujitsu is the parent company of a group engaged in the information and communication technology businesses. Technology Solutions segment provides system integration, application development and integration, system consulting, IT and business process outsourcing services, cloud computing, SAP and Oracle applications services and managed infrastructure services (network and communication, technical and maintenance and service desk services). The segment also offers security platforms, servers, storage systems and software. Ubiquitous Solutions segment offers desktop PCs, notebook PCs, mobile phones and wearable devices. Device Solutions segment offers LSI devices and electronic components.

Genexine

Genexine, Inc., formerly GENEXINE CO., LTD., is a Korea-based company specialized in the research and development of bio-pharmaceuticals. The Company mainly provides three categories of products: biosimilar, used for the therapy of infertility multiple sclerosis; antibody-fusion proteins, used for the therapy of anemia, neutropenia, diabetes, growth hormone deficiency, blood clotting diseases and others, and genetic therapeutic vaccines, used for the therapy of hepatitis, brain cancer, breast cancer, skin cancer, cervical intraepithelial neoplasia and others.

Grupo Bimbo SAB de CV Class A

Grupo Bimbo is a holding company. Through its subsidiaries, Co. is engaged in the production, distribution, sale, and export of bread, cookies, cakes, snacks, tortillas, potato chips, chocolates, and confectionery products. Through its subsidiaries, Co. organizes its businesses in two divisions as follows: the bakery division and the appetizers, salads, confectionery and pastry divison operated by Bimbo S.A. de C.V., and Barcel S.A. de C.V., respectively.

Hanssem Co. Ltd

HANSSEM CO., LTD is a Korea-based company primarily engaged in the manufacture and distribution of kitchen and interior furniture. The Company provides furniture used for kitchens, bedrooms, living rooms, bathrooms and other spaces, such as beds, book cases, desks and sofas, chairs, dressers and others. It also provides allied furniture packages and related materials, as well as remodeling services. Through its subsidiaries, it is also engaged in the provision of real estate consulting services, and sales of other food. The Company distributes its products through shopping malls, Internet shopping malls, sales agencies and interior alliance stores, as well as to overseas markets.

Hebei Yangyuan Zhihui Beverage Co. Ltd. Class A

Hebei Yangyuan ZhiHui Beverage Co., Ltd. is principally engaged in the research, development, production and distribution of vegetable protein beverages and food. The Company primarily provides hickory nut beverages, including hickory nut juice, hickory nut and peanut juice, hickory nut and almond juice, as well as hickory nut food, including hickory nut porridge. The Company provides its products with the brand named Yangyuan and Six Walnuts, specific varieties include Yangyuan Boutique Six Walnut Milk, Yangyuan Selected Six Walnut Milk, Yangyuan Refined Research Six Walnut Milk and Yangyuan Zhihui Health Six Walnut Milk and others. The Company distributes its products primarily in domestic market.

Hikma Pharmaceuticals Plc

Hikma Pharmaceuticals is a pharmaceutical company engaged in developing, manufacturing, and marketing a range of branded and non-branded generic pharmaceutical products across the U.S., the Middle East and North Africa, and Europe. Co.'s business segments are: Injectables, which sells specialized generic injectable products, including sterile liquid, powder, lyophilized and cytotoxic products; Generics, which sells non-injectable generic products that include amoxicillin, buprenorphine, butalbital, acetaminophen and caffeine, colchicine, and fluticasone; and Branded products, which sells branded generics and in-licensed products including Amoclan®, Blopress®, Omnicef®, Prograf® and Suprax®.

JCR Pharmaceuticals Co. Ltd.

JCR Pharmaceuticals is a pharmaceutical company. Along with its affiliates, Co. operates in pharmaceutical business and medical device and laboratory equipment business. Co. is engaged in the manufacture, sale, purchase, import and export of pharmaceutical products, active pharmaceutical ingredient ("APIs") for oncology, Growject® (genetically-modified human-derived growth hormone), Epoetin Alpha BS Inj. JCR® (genetically-modified human erythropoietin), Leukoprol® (drug for leucopenia) and pharmaceutical raw materials; and the sale, purchase, import and export of medical devices and laboratory instruments.

Jiangsu Nhwa Pharmaceutical (A)

Jiangsu Nhwa Pharmaceutical Co., LTD is a China-based company principally engaged in the production and sales of pharmaceutical preparations. The Company offers its pharmaceutical products under four categories, which consist of anesthetic medicines, including midazolam injections and etomidate fat emulsion pharmaceutical preparations injections; psychiatric medicines, including risperidone tablets and others; neurological medicines, including gabapentin capsules and others; bulk drugs, including fenofibrate and miconazole nitrate. The Company is also engaged in the pharmaceuticals trading business. Through its subsidiaries, the Company is also engaged in the Internet medical businesses. The Company distributes its products within domestic market and to overseas markets.

Jonjee Hi-Tech Industrial and Commercial Holding Co. Ltd. Class A

Jonjee Hi-Tech Industrial & Commercial Holding is engaged in urban infrastructure investment; property management; secondary water supply; hi-technology industry investment and development; industrial investment; equipment leasing; provision of technology and communication consultation services; and sale of industrial materials, general merchandises, hardware, electrical appliances; chemical products, needles, textile products and construction materials. Through its subsidiaries, Co. is also engaged in production of sauce, flavoring, non-alcoholic beverage, and automobile and motorcycle accessories.

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.

Kweichow Moutai Co. Ltd. Class A

Kweichow Moutai is engaged in the manufacture and sale of "Guizhou Moutai" series distilled spirits; manufacture and sale of beverages, food and packaging materials; development of anti-counterfeiting technologies; and research and development of relevant IT products. Through its subsidiaries, Co. is also engaged in the wholesale of agricultural vice-local products, building materials, decoration materials, metal materials, machineries, electronic products, telecommunication products, hardware, rubber products, general merchandises and furniture. Co.'s products include millesimes liquor, gift liquor, common liquor and other liquor series.

Logansport Fin

MEDIATEK INC.

Mediatek is engaged in the research, development, manufacture and sales of multi-media integrated circuit ("IC"), IC for computer peripherals, IC for advanced consumer electronics, IC for other special applications and decoders of optical storage; software application design, testing, maintenance and technical consultation services for IC; the import and export of products related to IC. Co.'s product items include optical storage chipset; CD-ROM chipset and single chip, DVD-ROM chipset and single chip, CD-R/RW chipset, combi chipset; and advanced digital consumer chipset DVD-Player chipset (RF chip, servo controller chip and highly integrated chip).

New Hope Dairy (A)

New Hope Dairy Co Ltd. New Hope Dairy Co., Ltd. is a China-based company which mainly develops, produces and sells dairy products and milk-containing beverages. The Company's products mainly include low-temperature fresh milk, low-temperature yogurt, low-temperature modulated milk, low-temperature milk beverage, normal-temperature pure milk, normal-temperature milk beverage, normal-temperature modulated milk, normal-temperature yogurt and milk powder. The main brands of the Company's products include New Hope, New Hope Shuangfeng, Shuangxi, Sanmu and others.

Nikkei225 Bull 2x ETF

ONO Pharmaceutical Co. Ltd.

Ono Pharmaceutical is a pharmaceutical company. Co. is engaged in the production, purchase and sale of pharmaceuticals and diagnostic reagents focusing primarily on prescription pharmaceuticals. Co.'s pharmaceuticals include peripheral circulation improving agents, bronchial asthma and allergic rhinitis medication, pediatric bronchial asthma medications, acute lung injury associated medications and others. Co.'s principal products include Rivastach® Patch, Glactiv® Tablets, Emend® Capsules, Recalbon® Tablets, Staybla® Tablets, Opalmon® Tablets, Onon® Capsules, Onon® Dry Syrup, Kinedak® Tablets and others. In addition, Co. is also engaged in the medical research on lipid metabolism disorder.

PharmaBlock Sciences (Nanjing) (A)

PharmaBlock Sciences Nanjing Inc. PharmaBlock Sciences (Nanjing), Inc. is a China-based company principally engaged in the purchase and sales of drug molecular building blocks, as well as the provision of related technology services. The Company' s main products include aromatic heterocyclic drug building blocks, common saturated alicyclic drug building blocks, four-membered ring drug molecular building blocks and special saturated ring drug molecular building blocks. The Company distributes its products within domestic market and to overseas markets.

Prosus N.V. Class N

Prosus NV Formerly known as Myriad International Holdings NV. Prosus NV, formerly Myriad International Holdings NV, is a Netherland-based global consumer Internet group. The Company is organized into six business areas: Classifieds, Payments & Fintech, Food delivery, Etail, Ventures and Travel. It also holds investments in listed Social & Internet assets. The Classifieds business area manages mobile and digital marketplaces. The Payments & Fintech business area includes PayU, a Payment Service Platform. The Food delivery business area manages food delivery companies. The Travel business area operates a travel online platform. The Etail business area includes business to consumer e-commerce companies. The Venture business area looks for and invests in early stage companies.

Rakuten Inc.

Rakuten is mainly engaged in the Internet-related business. Along with its affiliates, Co. operates in two business segments. The Internet Services segment is engaged in the operation of electronic commerce sites, including an Internet shopping mall "Rakuten Ichiba," an online cash back site, a travel booking site, portal sites and digital contents sites; the sale of advertising on Co.'s sites; the provision of messaging and communication services; and the management of a professional baseball team "Tohoku Rakuten Golden Eagles." FinTech segment is engaged in the provision of Internet banking services and online securities trading services, and the credit card and life insurance businesses.

REC Silicon ASA

REC Silicon is a provider of solar electricity solutions. Co.'s REC Silicon business segment is carried out in the following subsidiaries; REC Solar Grade Silicon LLC, and REC Advanced Silicon Materials LLC. REC Silicon's sales and marketing activities for sales of solar grade polysilicon, semiconductor grade silicon and silicon gases are carried out in China, Japan, Korea, Taiwan, and in the U.S. REC Silicon produces polysilicon and silicon gas for the solar industry and the electronics industry at plants in Moses Lake, WA and in Butte, MT.

Shanxi Xinghuacun Fen Wine Factory Co. Ltd. Class A

Shanxi Xinghuacun Fen Wine Factory is engaged in the production and sales of Fen and Zhuyeqing brand wine and other series of wine and provision of advertising services for Co.'s wine series; high new technology and product research, development, production and application of wine; investments in enterprises' establishment; and provision of related consultation services. Through its subsidiaries, Co. is also engaged in the design, acting as domestic newspaper agent, broadcasting, television, printing, street sign and lamp box advertisement; sales of white wine, grape wine, beer, beverages and condiments; and involved in wine packaging.

Sichuan Teway Food Group (A)

Sichuan Teway Food Group Co Ltd Formerly known as Sichuan Teway Food Co Ltd. Sichuan Teway Food Group Co., Ltd. is a China-based company principally involved in the research and development, manufacturing and sales of Sichuan flavor compound seasonings. The Company's main products include hotpot condiment, Sichuan food seasonings, sausage bacon seasonings, spicy sauce and others. The Company's core brands include Dahongpao, Haorenjia, Tianche and Youdianhuo. The Company distributes its products within domestic market and to overseas markets.

Space Group Holdings Ltd.

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.

Synnex Technology International Corp.

Synnex Technology International and its subsidiaries are engaged in the assemble and sale of computers and its peripheral equipments and other information technology equipments; sale of mobile phones and other communication equipments; sale of consumer electronics; sale of electronic components; and provision of repairing services. Co.'s products include computer motherboard, notebooks, desktop PC, LCD monitor, CRT monitor, digital camera, mp3 player, portable DVD player, digital camcorder, memory card and others.

Tencent Holdings Ltd.

Tencent Holdings Limited is an investment holding company principally involved in the provision of value-added services (VAS) and online advertising services. The Company operates through three main segments. The VAS segment is mainly involved in provision of online/mobile games, community value-added services and applications across various Internet and mobile platforms. The Online Advertising segment is mainly engaged in display based and performance based advertisements. The Others segment is mainly involved in provision of payment related services, cloud services and other services.

Teva Pharmaceutical Industries Limited Sponsored ADR

Three Squirrels (A)

Three Squirrels Inc. Three Squirrels Inc. is a China-based company mainly engaged in the retail business of snack food e-commerce. The Company is mainly engaged in the research, development, testing, packaging and sales of its own branded snack foods. The product portfolio covers many major snack food categories such as nuts, dried fruits, dried fruit, flower tea and snacks. The Company's core brand is three squirrels. The Company mainly operates its business in domestic market.

Wuliangye Yibin Co. Ltd. Class A

Wuliangye Yibin is engaged in manufacture and sale of "Wuliangye" liquors and other series of alcoholic drinks. Through its subsidiaries, Co. is also engaged in the supply of raw materials; packaging and publication printing; investment activities; provision of parking service; and manufacture and sale of industrial-used steams, fine chemicals, fruit wines, white wines, white carbon, and black and lactic acids.

Zhangzhou Pientzehuang Pharmaceutical Co. Ltd. Class A

Zhangzhou Pientzehuang Pharmaceutical is engaged in the manufacture of pastille, tablets, granule, capsule, ointment, syrup, tincture, decoct ointment, and pill; the manufacture and sale of Pientzehuang royal jelly capsule and Liyan Buccal tablets; the import of production necessary auxiliary materials equipment and related technology; undertaking of China and foreign countries joint ventures and cooperation in production; undertaking the processing of materials, sample and assembling parts supplied by clients; and develop compensation trading. Co. primarily provides Pienzehuang series products for pain-inhibition, anti-inflammation and detoxification and curing hepatitis.

Zhejiang Wolwo Bio-Pharmaceutical Co. Ltd. Class A

Zhejiang Wolwo Bio-Pharmaceutical Co., Ltd. is a China-based company principally engaged in the research, development, production and sale of bio-pharmaceutical products. The Company's main products include Dermatophagoides Farinae Drops and Dermatophagoides Farinae Skin Prick Diagnostic Kits. The Company's products are primarily used for the treatment of allergic rhinitis caused by dust mite allergy, the desensitization of allergic asthma and the in-vivo diagnosis of dust mite drops. The Company distributes its products 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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