Report
Dave Nicoski ...
  • Ross LaDuke

Vermilion Int'l Compass: Global Equity Strategy

MSCI ACWI hitting multi-month highs, U.S. remains leadership

Note: This week's report is presented in an abbreviated format, as we are publishing the June International Macro Vision book this week (available next Tues. AM).
Over the past several weeks we have outlined the case for our increasingly bullish outlook, noting that market internals remain favorable and S&P 500 and MSCI ACWI price trends are showing evidence of early-stage uptrend formations. In today's report we provide an overview of international markets and highlight our top recommendations.

• Index overviews. Led by U.S. outperformance, the MSCI ACWI is advancing to multi-month highs. Both the MSCI ACWI ex U.S. and MSCI EAFE indexes continue to consolidate from a price perspective, but relative strength vs. the MSCI ACWI is near all-time lows. Be selective. Within EM, as long as price and relative strength support levels continue to hold, we see recent weakness as a buying opportunity... see below and page 2.

• Top ideas within developed international. We reiterate our preference for small- over large-caps within EAFE. Europe's STOXX 600 continues to consolidate within a broad range, but relative strength remains near an all-time low. Be selective. Japan's TOPIX continues to outperform, and we reiterate our overweight recommendation. Additional attractive country-specific setups include Norway, Hong Kong, and the UK... see pages 3-4.

• Top ideas within emerging markets. While many previous stock recommendations within Brazil and Russia remain attractive, we no longer recommend a broad overweight to the Bovespa and RTS. On the other hand, China is showing signs of reasserting its leadership status. Overweight. Additional attractive EM country indexes: Chile's IPSA, Colombia's IGBC, Peru's S&P/BVL, and Egypt's EGX 30... see pages 5-6.
Underlyings
ABCAM PLC

Abcam produces and distributes research-grade antibodies and associated protein research tools. Co.'s main product types consist of: antibodies, which is generated to target antigens on molecules it is interested in studying to understand where they are located within a cell or tissue sample; research-grade antibodies, which is used in academic pharma and biotech laboratories to investigate fundamental scientific questions; in vitro diagnostic antibodies, which is used in a clinical setting, such as a hospital or medical institute lab, to help diagnose a particular disease or condition; and kits, which contains everything a researcher needs to run an experiment.

AIA Group Limited

AIA Group is an investment holding company. Co. is a life insurance based financial services provider operating throughout the Asia Pacific region. Through its subsidiaries, Co. is engaged in writing of life insurance business; providing life insurance, pension, accident and health insurance and savings plans throughout Asia; and distributing related investment and other financial services products to its customers. Through a network across Asia-Pacific, Co. serves the holders of over 28 million individual policies and over 16 million participating members of group policies. As of Nov 30 2013, Co. had operations in 17 markets throughout Asia-Pacific region.

Aker ASA Class A

Aker is an industrial investment company that exercises active ownership. Co. organizes its business activities in two segments: Industrial holdings and Financial investments. The industrial holdings comprise Co.'s ownership interests in Aker Solutions ASA, Kvaerner ASA, Det norske oljeselskap ASA, Ocean Yield ASA, Aker BioMarine ASA and Havfisk ASA. The financial investments comprise cash, real estate, investments in funds and other financial assets of Co. and holding companies, with the exception of industrial equity investments. Co.'s ownership interests are concentrated in the oil and gas, fisheries/marine biotechnology, maritime assets and finance sectors.

Alicorp SA

Alicorp is engaged in the export, import and manufacture of products derived from cotton oil seeds; production of soaps; production of noodles; export and import of coffee to be processed; export and import of animal and vegetable concentrates; purchase, distribution, sale, import and export of food and hygiene products in general, and sale of cosmetics, flour, cookies, cooking oils, shortening, and margarine. Co. operates throughout Peru and exports to Chile, Bolivia, Colombia, Ecuador, Venezuela, Haiti, Guatemala, Costa Rica, United States, Dominican Republic, Nicaragua, Canada, Panama, Mauritania, Curazao, China, Bahamas and Honduras.

Anhui Conch Cement Company Limited Class H

Astellas Pharma Inc.

Astellas Pharma is engaged in the development, research, manufacture, and sale of pharmaceuticals. Co. operates its operation in Japan, Americas, Europe, and Asia/Oceania. Co.'s principal product for the global market include "Xtandi" a therapeutic agent for prostatic cancer, "Eligard" a luteinizing hormone-releasing hormone (LHRH) agonist for the treatment of prostate cancer,"Prograf" an immunosuppressant used to prevent rejection in organ transplants, "Vesicare" a treatment for overactive bladder, "Harnal ( "Omnic" in the U.S. and Europe)" an 1 blocking agent for prostatic and urethral smooth muscle, and "Fungurad ("Mycamine" in the U.S. and Europe)" a candin-type antifungal agent.

Autohome Inc. Sponsored ADR Class A

Baidu Inc Sponsored ADR Class A

Bosideng International Holdings Limited

Bosideng International Holdings is an apparel company in the People's Republic of China with four core down apparel brands, namely Bosideng, Snow Flying, Combo and Bengen. Co.'s key non-down apparel brands include Bosideng MAN, JESSIE ladies' wear and Mogao casual wear. Co. has three reportable segments: down apparels, which carries on the business of sourcing and distributing branded down apparels; original equipment manufacturer (OEM) management, which carries on the business of sourcing and distributing OEM products; and non-down apparel, which carries on the business of sourcing and distributing non-seasonal apparels, including branded apparels of menswear, ladieswear and casual wear.

China Lodging Group ADS (N Shares)

China Travel International Investment Hong Kong Limited

China Travel International Investment Hong Kong is an investment holding company. Co.'s segments include: travel agency and related, which provides travel agency and related services; tourist attraction, which includes theme parks, scenic spots, cable car systems, skiing facilities and resorts hotel; hotel, which provides hotel accommodation, food and beverage services; passenger transportation, which provides cross-border transportation services, vehicle rental and charter operations; golf club, which provides facilities to members of its golf club; arts performance, which engages in arts performances; and power generation, which engages in the generation of electricity.

Croda International Plc

Croda International creates, makes, and sells specialty chemicals. Co.'s sales, marketing and research activities are organized into four global market sectors: Personal Care, which focuses on ingredients for skin, hair, sun protection and color cosmetic products; Life Sciences, which comprises of three complementary businesses: Health Care, Crop Protection, and Seed Enhancement; Performance Technologies, which targets technologies in Smart Materials and Energy Technologies and continues to develop its presence in Home Care and Water Treatment; and Industrial Chemicals, which is a sector based on selling co-streams, developing niche industrial applications and undertaking toll processing.

Embraer S.A.

Embraer is a commercial aircraft manufacturing group. Co. is engaged in the development, production export and sale of commercial jet and propeller aircraft and in the provision of related support services, principally to the commercial airline industry worldwide. Co. is a supplier of defense aircraft for the Brazilian Air Force, and has supplied aircraft to armed forces in Europe, Asia, the U.S. and Latin America. Co. has also developed a line of executive jets and launched new executive jets in the entry-level, light, ultra-large and mid-light/mid-size categories. Co.'s aircraft models include ERJ's, EMB's, Super Tucano, F-5BR, AMX-T jet fighter, Legacy 600, the Phenom and others.

Empresas Copec S.A.

Empresas COPEC SA is a Chile-based holding company engaged, through its subsidiaries, in the energy and natural resources sectors. The Company's operations are structured into four business sectors: the Forestry Business. Fuels Business, Fishing Business and Other Investments. The Company operates in the forestry business through its affiliate Arauco, which produces wood pulp, panel and sawn lumber. The Company's fuel business is focused on the liquefied fuels, lubricants, and liquefied petroleum gas and natural gas markets. The Company operates in the fishing business through its affiliate Pesquera Iquique - Guanaye, which produces fishmeal, fish oil, canned and frozen seafood for human consumption. The Company has productive platforms in Argentina, Brazil, Canada, Colombia, the United States and Uruguay. On April 11, 2014, the Company with Inversiones Ultraterra Ltd sold their total stake in Empresa Electrica Guacolda to AES Gener.

Enauta Participacoes SA

QGEP Participacoes SA, formerly known as Latina Participacoes SA, is a Brazil-based company principally engaged in the oil and gas industry. The Company operates through single segment: Oil and gas exploration and production, which focuses on the exploration, production, industrial processing and marketing of crude oil, natural gas and its derivatives. The Company holds interests in exploration and production concessions located in the offshore Brazilian continental margin. Its asset localizations include various basins, such as Santos, Espirito Santo, Camamu-Almada, Camamu-Almada, Pernambuco-Paraiba, Ceara and Foz do Amazonas. The Company operates through Queiroz Galvao Exploracao e Producao SA and QGEP Internacional GmbH, among others. The Company is a subsidiary of Queiroz Galvao SA.

Fibria Celulose S.A.

Fibria Celulose is a pulp and paper products company and a producer of wood-free printing and writing papers and specialty papers. Co. produces bleached eucalyptus kraft pulp (BEKP), which is a variety of hardwood pulp. Co. sells BEKP to both the Brazilian domestic and export markets. In addition to selling its pulp production to third parties, Co. uses its pulp production internally to manufacture a range of printing and writing paper products, including coated and uncoated printing and writing papers, thermal papers, carbonless papers and other specialty papers.

Hang Seng Bank Limited

Hang Seng Bank and its subsidiaries are engaged in the provision of banking and related financial services. Hong Kong and other businesses segment include: Retail Banking and Wealth Management; Commercial Banking activities; Global Banking and Markets; and Other. Co.'s Mainland China business segment comprised of the business of Hang Seng Bank (China) Limited and Co.'s share of profits from mainland associates. As of Dec 31 2014, Co. had total assets of HK$1,263,990,000,000.

Health and Happiness (H&H) International Holdings Limited

Health & Happiness (H&H) International Holdings is an investment holding company. Through its subsidiaries, Co. is mainly engaged in providing pediatric nutritional and baby care products to mothers. As of Dec 31 2014, Co. had four reportable operating segments as follows: infant formulas, which comprises the production of infant formulas for children under seven years old and milk formulas for expectant and nursing mothers; probiotic supplements, which comprises the production of probiotic supplements; dried baby food and nutrition supplements, whihc comprises the production of dried baby food products; baby care products.

Hong Kong & China Gas Co. Ltd.

Hong Kong & China Gas is engaged in the production, distribution and marketing of gas, water supply and energy businesses in Hong Kong and the People's Republic of China (the PRC). Co. is also engaged in property development and investment activities in Hong Kong. As of Dec 31 2014, Co. had 202 projects on the mainland, spread across 24 provinces, autonomous regions and municipalities. These projects encompass upstream, midstream and downstream natural gas sectors, water sectors, energy applications, energy resources' exploration and utilisation, as well as telecommunications. Inclusive of Towngas China, Co. had a total of 127 city-gas projects, serving around 18.98 million customers.

Medipal Holdings Corporation

Medipal Holdings is a holding company controls, administers and supports the operating activities of subsidiaries and affiliates in which it holds shares in the prescription pharmaceutical wholesale business, cosmetics, daily necessities and OTC pharmaceutical wholesale business, Animal health products and food processing raw materials wholesale business, and related business. Co. is involved in the wholesale of pharmaceutical products, medical equipment and test reagents; cosmetics, daily necessities, soap, detergents, over-the-counter pharmaceuticals; and veterinary products, food additives and food processing raw materials.

Metalurgica Gerdau S/A Ord

Multiexport Foods

Multiexport Foods is engaged in the investment in all types of business and activities related to aquiculture, the sale, marketing, distribution, import and export of hydro-biological species and the business related to the management and consulting services of aquiculture activities.

Nippon Sanso Holdings Corporation

Taiyo Nippon Sanso and its affiliates are mainly engaged in the manufacture and sale of industrial gases. Co. provides industrial gases including oxygen, nitrogen, argon, hydrogen, carbon dioxide, helium and acetylene, as well as gas supply equipment and gas-related equipment for cutting, welding, combustion and freezing and exhaust gas abatement systems. Co. also provides liquid petroleum gas (LPG), medical gases, and medical devices. In addition, Co. is engaged in the provision of construction and engineering services of gas-related facilities and related equipment. Co., through its affiliates, is also engaged in the manufacture and sale of housewares as well as the real estate business.

NMC Health PLC

NOF Corporation

NOF and its affiliates are mainly engaged in the manufacture and sale of oil and chemical-related products. Co. operates in three business segments: functional chemicals, life science, and explosive & propulsion. Co.'s principal products include fatty acids, fatty acid derivatives, surfactants, ethylene oxide and propylene oxide derivatives, organic peroxides, functional polymers, functional films, materials for anti-corrosion, biocompatible materials, raw materials for delivery system ("DDS") drug formulation, edible oils, functional foods, industrial explosives, defense-related explosives, rocket propellant, automotive safety devices and metal manufactured products.

Novolipetsk Steel

Novolipetsk Steel is a vertically integrated steel manufacturing and production group based in Russia. Co. specializes in the manufacturing of high-quality hot and cold rolled steel in a variety of grades and sizes. Co. is also engaged in production and sales of flat steel products including slabs, hot rolled and cold rolled sheet, electrical steel, galvanized steel, cold rolled sheet with polymeric coatings. In addition, Co.'s areas of manufacturing include sintering, coke production, blast furnace production, steel-making, hot and cold-rolled flat steel production, galvanized and prepainted steel production. Co. exports its products to 70 countries around the world.

Oxford BioMedica PLC

Oxford BioMedica is a producer of gene and cell therapy in lentiviral vector and cell therapy research, development and production. Gene and cell therapy is the treatment of disease by the delivery of therapeutic deoxyribonucleic acid into a patient's cells. This can be achieved either in vivo (referred to as gene therapy) or ex vivo (referred to as cell therapy), the latter being where patients' cells are genetically modified cells outside the body before being re-infused. Co.'s products include: OXB-102, which targets Parkinson's disease; OXB-202, which targets corneal graft rejection; and OXB-302 (CAR-T 5T4), which targets targets a range of cancers.

Rumo SA

Rumo SA, formerly ALL America Latina Logistica SA, is a Brazil-based company primarily engaged in the transport and logistics sector. The Company's activities are divided into three business segments: North operations, which includes railway concessions hold by ALL Malha Norte and ALL Malha Paulista; South operations, which comprises railway concessions hold by ALL Malha Sul and ALL Malha Oeste, and Container operations, which focuses on the railway freight transportation of containers. The Company offers transportation of agricultural commodities, fuel and final goods, intermodal freight transport, integrated warehousing services, port operations and handling of merchandises, among others. In addition, it develops logistics projects for newly created businesses in the industrial and agricultural commodities industry.

Safestore Holdings plc

Safestore Holdings is engaged in the rental of self-storage space and the sale of ancillary products such as insurance and merchandise (for example, packing materials and padlocks) in both the U.K. and Paris.

SEGRO plc

Segro owns, develops, and manages warehouse properties in selected markets in the U.K. and Continental Europe. Co.'s reportable segments are the geographical business units, Greater London, Thames Valley and National Logistics, Northern Europe (principally Germany), Southern Europe (principally France) and Central Europe (principally Poland).

Sinopec Shanghai Petrochemical Co. Ltd. Class H

SITC International Holdings

SITC International Holdings Company is principally engaged in the provision of marine transportation services, freight forwarding services for marine transportation, depot and warehouse services and related business. Co. operates within two business segments: sea freight logistics; and land-based logistics. As of Dec 31 2012, Co. operated a total of 60 vessels.

Sunny Optical Technology (Group) Co. Ltd.

Sunny Optical Technology Group is an optical manufacturing group based in Hong Kong. Co. is engaged in the design, research and development, manufacture and sales of optical and optical-related products. These products include optical components (such as glass spherical and aspherical lenses, plane products, handset lens sets, vehicle lens sets and other lens sets), optoelectronic products (such as handset camera modules, smart television video modules, security surveillance cameras and other optoelectronic modules) and optical instruments (such as microscopes, optical measuring instruments and various optical analytical instruments).

Suzuken Co. Ltd.

Suzuken is mainly engaged in the manufacture and sale of pharmaceutical products. Co. is engaged in the sale of pharmaceuticals and medical equipment; the manufacture of pharmaceutical products and diagnostic medicines; the operation of dispensing pharmacies; the provision of medical-related services, such as the sale of healthcare-related literature and the provision of clinical research coordinators; the provision of home nursing care and facility nursing care services; the manufacture of biological and physiological measuring equipment, such as electrocardiographic equipment and blood pressure gauges; as well as the transportation of pharmaceutical products.

Toho Holdings Co. Ltd.

Toho Holdings is a holding company mainly engaged in the wholesale distribution of pharmaceuticals. Co. operates in four major business segments: pharmaceutical wholesale, dispensing pharmacies, site management organization ("SMO") and information equipment sales. Co. is engaged in the sale of prescription pharmaceuticals, reagents and medical devices to hospitals, clinics and dispensing pharmacies; the management and operation of health insurance dispensing pharmacies; the SMO business firmly assists a variety of medical establishments and provides pharmaceutical development services commissioned by pharmaceutical manufactures; and the planning and sale of information processing equipment.

Tokuyama Corporation

Tokuyama is engaged in the manufacture and sale of chemicals, specialty products, cement and functional materials. Co.'s principal products include soda ash, calcium chloride, sodium silicate, caustic soda, vinyl chloride monomer, propylene oxide, methylene chloride, polyvinyl chloride, polycrystalline silicon, fumed silica, aluminum nitride, high-purity chemicals, methylene chloride, polycrystalline silicon, fumed silica, aluminum nitride substrate, portland cement, cement-type soil solidifier, ready-mixed concrete, active pharmaceutical ingredients and intermediates, plastic lens-related materials, microporous film, polyolefin film, ion exchange membranes, and plastic window sashes.

UNITE Group plc

Unite Group is a provider of purpose built student accommodation in the U.K. Co. has two activity lines, Operations and Property. The Operations segment manages rental properties, owned directly by Co. or by joint ventures. The Property business undertakes the acquisition and development of properties.

Victrex plc

Victrex is a non-trading investment holding company. Through its subsidiaries, Co. is engaged in polymer solutions, focused on the strategic markets of Automotive, Aerospace, Energy (including Manufacturing & Engineering), Electronics and Medical. Co. develops solutions in Polyether ether ketone (PEEK) and Polyaryletherketones (PAEK) based polymer, selected semi-finished and finished parts. Co.'s operating segments are: Industrial (Victrex Polymer Solutions), which focuses on its Automotive, Aerospace, Electronics and Energy markets; and Medical (Invibio Biomaterial Solutions), which focuses on providing solutions for medical device manufacturers.

Want Want China Holdings Limited

Want Want China Holdings is an investment holding company. Through its subsidiaries, Co. is engaged in the manufacturing, distribution and sale of rice crackers, dairy products and beverages, snack foods and other products. Co.'s activities are primarily conducted in the People's Republic of China, Taiwan, Japan, Singapore and Hong Kong. Co. produces and markets its products under the Want Want brand. As of Dec 31 2014, Co.'s operations are mainly organized into four business segments, including manufacturing and sale of: rice crackers, dairy products and beverages, snack foods and other products.

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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