Report
Dave Nicoski ...
  • Ross LaDuke
EUR 48.47 For Business Accounts Only

Vermilion Int'l Compass: Global Equity Strategy

ACWI, ACWI ex-US Near Support; Inflation Peaking?

Broad global MSCI equity indexes (ACWI, ACWI ex-US, EAFE, and EM) remain bearish with YTD downtrends intact, while indexes in Japan, Hong Kong, China, Europe, and Germany all remain below key resistance levels (more on that below). Many are now near support, and we could see a bear market bounce, but until these indexes reverse their downtrends and break above resistance levels, we cannot be bullish. On a positive note, we are starting to see signs that inflation is peaking, as commodity prices have pulled back substantially, and the Energy and Materials Sectors are under significant pressure. If inflation and commodity prices have indeed peaked, global equities are likely in the early stages of a bottoming process. Still, in order to have confidence that the factors that caused this bear market are starting to reverse, we need to see commodity prices continue to fall, and see a top in the US dollar and global sovereign yields.

Indexes Remain in Downtrends and/or are Below Resistance. In addition to the aforementioned broad global MSCI equity indexes being in YTD downtrends, many other major Indexes remain below resistance. Specifically, Japan's Nikkei 225 and TOPIX Small indexes are below 28,350 and 2300 resistance, respectively. Hong Kong's Hang Seng remains below 22,700 resistance. Europe's EURO STOXX 50 remains below 3870 resistance. Germany's DAX remains below major resistance in the 14,815-14,950 zone. MSCI China (MCHI-US) remains in a downtrend and China Internet (KWEB-US) remains below $33. Many of these indexes are near logical support that could result in a bear market bounce, but we need to see these indexes break above the aforementioned levels in order to have confidence that a reliable bottom is in... see charts below and page 2.
Commodities. We are downgrading the global Materials Sector to market weight and we are watching the Energy Sector closely for a potential downgrade as well. Signs point to further downside for commodities with copper breaking below major $4 support, RBOB Gasoline breaking its 7.5-month uptrend, aluminum breaking down, and crude oil/natural gas prices deteriorating. These are all things that will bring down inflation... see page 3.
Bottoms-Up Stock Recommendations. In today's report we highlight attractive ideas from a bottoms-up perspective, spanning several Sectors... see pages 4-15.
Underlyings
COFCO Meat Holdings (Red Chip)

COFCO Meat Holdings Limited is an investment holding company. The Company, along with its subsidiaries, is principally engaged in the pork business and the international trading business. The Company mainly operates through four segments. Hog Production segment is engaged in the sales of live hogs. Fresh Pork segment is engaged in the sales of fresh chilled and frozen pork products. Processed Meat Products segment includes sales of processed meat products. International Trading segment includes sales of imported frozen meat products, such as pork, beef, mutton, lamb and poultry. The Company distributes its products to distributors, wholesalers, hypermarkets, supermarkets, food processors, restaurants, as well as canteens, among others.

DONGRUI FOOD GROUP CO LTD

Sonoco Products Company

Sonoco Products is a manufacturer of industrial and consumer packaging products and a provider of packaging services. The company's segments are: Consumer Packaging, which includes round composite cans, shaped rigid paperboard containers, fiber and plastic caulk/adhesive tubes, aluminum, steel and peelable membrane easy-open closures for composite and metal cans; Paper and Industrial Converted Products, which include recycled paperboard, chipboard, tubeboard, lightweight corestock, boxboard, linerboard, corrugating medium, edgeboard, paper grades, and adhesives; Display and Packaging, which include point-of-purchase displays; and Protective Solutions, which include packaging and components.

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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