Report
Dave Nicoski ...
  • Ross LaDuke
EUR 233.53 For Business Accounts Only

Int'l Macro Vision: Global Ex-U.S. Equity Strategy

In our January 31 International Compass we presented a case for an incrementally improving overall global outlook, with the caveat that market bottoms tend to be a process that develops over many weeks. Since the end of January, not a lot has changed to alter our views. We remain constructive overall and continue to believe that global equities (MSCI ACWI) are going through a bottoming process. Opportunities exist but Sector leadership is mixed.

In our February International Strategy, we explore various themes which lead to our overall constructive outlook, along with areas of the market where we see opportunity.

Themes leading to our overall constructive outlook and are supportive of an ongoing bottoming process:

• Global central banks have shifted to a more dovish stance on monetary policy.

• Trade and tariff concerns have been waning with the expectation that a non-disruptive deal may be in sight.

• Most major indexes exhibit bottoming price action.

• U.S. high yield spreads vs. Treasuries have narrowed substantially, dampening economic concerns.

• The U.S. dollar (USD) is showing signs of a potential top. We believe a continued gradual weakening of the USD would aid EM and developed international markets.

• Despite defensives (Utilities, Consumer Staples, Real Estate) remaining longer-term leadership (ex-U.S.), cyclical Sectors (esp. Technology & semiconductors) exhibit early signs of price and RS bottoms.

Areas of the market where we see opportunity:

• The defensive Consumer Staples and Utilities Sectors remain leadership (ex-U.S.).

• Cyclical areas of the market exhibit early signs of price and RS bottoms. We highlight attractive Groups within Technology and Consumer Discretionary.

• Despite RS deterioration for the broad MSCI EM index, China continues to show signs of bottoming - both in terms of price and RS. Add exposure... see pages 19-21.

• Due to RS deterioration for the MSCI EM index, we are downgrading EM to market weight from overweight. See comments on page 19.
Underlyings
Acea S.p.A.

Acea is engaged in services related to the energy services area, water services areas and areas of diversification (telecoms) and services. Co. operates prinicpally in the energy services area (electricity and urban heating) and in the water services area (fresh and waste water), supplying services mainly in the territory of Rome and its Province. In energy services, Co. maintains operations in the production, transmission and distribution of electricity. In water services, Co. is active in the abstraction, transport and distribution of fresh water of the Comune di Roma and several local authorities in the provinces of Rome and Rieti. Co. also maintains operations in telecommunications.

ASM International N.V.

ASM International is an equipment supplier mainly to the semiconductor manufacturing industry. Co. designs, manufactures and sells equipment and services to its customers for the production of semiconductor devices, or integrated circuits. Co.'s front-end segment manufactures and sells equipment used in wafer processing, encompassing the fabrication steps in which silicon wafers are layered with semiconductor devices. Co.'s back-end segment manufactures and sells equipment and materials used in assembly and packaging, encompassing the processes in which silicon wafers are separated into individual circuits and subsequently assembled, packaged and tested.

ASML Holding NV

ASML Holding provides lithography systems for the semiconductor industry, manufacturing machines that are used in the production of integrated circuits or chips. Co. develops, produces, markets, sells and services advanced semiconductor equipment systems exclusively consisting of lithography systems. Co. sells its products to micro-processor manufacturers and Foundries, NAND-Flash memory and DRAM memory chipmakers. Co.'s products line includes the following: PAS 5000 lithography systems, which Co. no longer manufactures but continues to refurbish; PAS 5500 products; TWINSCAN DUV systems and TWINSCAN EUV systems based on a new platform utilizing the concepts of the TWINSCAN platform.

Capital Power Corporation

Capital Power is engaged in the building, owning and operating of power plants and managing its related electricity and natural gas portfolios by undertaking trading and marketing activities within Canada and the United States.

China Mobile Limited

China Mobile and its subsidiaries are engaged in the provision of mobile telecommunications and related services principally using the Global System for Mobile Communications standard and the Time Division Synchronous Code Division Multiple Access standard. In addition, Co. provides its customers with internet access through wireless local area networks. Co. also develops and carries its 4G business based on the TDD mode long-term evolution technology. As of Dec 31 2013, Co. had approx. 767,200,000 customers in all 31 provinces, autonomous regions and directly-administered municipalities in the People's Republic of China as well as in Hong Kong.

CK Infrastructure Holdings Limited

CK Infrastructure Holdings and its subsidiaries are engaged in the development, investment and operation of infrastructure businesses in Hong Kong, Mainland China, the U.K., the Netherlands, Australia, New Zealand and Canada. Through its subsidiaries, Co. is engaged in investment holding; production and laying of asphalt; manufacturing, sale and distribution of cement and property investment; financing; treasury; and waste management servicce. Through its principal associates, Co. is engaged in investment in power and utility-related businesses, and electricity distribution.

Davide Campari-Milano N.V.

Davide Campari-Milano is engaged in manufacturing spirits industry with an extensive product portfolio in three business lines: spirits, which includes internationally brands such as Appleton, Campari, Carolans, SKYY vodka and Wild Turkey, as well as brand in local markets including Aperol, Cabo Wabo, Cynar, Frangelico, GlenGrant, Ouzo 12, X-Rated Fusion Liqueur, Zedda Piras, and Brazilian brands Dreher, among others; wines, which main regional brands are Liebfraumilch, Mondoro, Odessa, Riccadonna, Sella&Mosca and Teruzzi&Puthod; and soft drinks, which covers the extended ranges of Crodino and Lemonsoda. Co. operates in 190 countries with registred positions in Europe and the Americas.

Dongfeng Motor Group Co. Ltd. Class H

Dongfeng Motor Group and its subsidiaries are engaged in the manufacture and sale of commercial vehicles, passenger vehicles, automotive engines and parts; and the production of vehicle manufacturing equipment. Co. is also engaged in the import and export of vehicles and equipment and other automotive-related businesses such as finance, insurance agency and used car trading. Co.'s principal products include commercial vehicles (trucks, buses and engines, auto parts and vehicle manufacturing equipment of commercial vehicles) and passenger vehicles (sedans, multi purpose vehicles, sport utility vehicles and engines, auto parts and vehicle manufacturing equipment of passenger vehicles).

Electricite de France SA

Electricite de France is an integrated energy company with a presence in a range of electricity-related businesses: nuclear, renewable and fossil-fuel fired energy production, transmission, distribution, marketing as well as energy management and efficiency services, along with energy trading. Co. is an integrated energy company engaged in all aspects of the energy business: generation, transmission, distribution, supply and trading of energies. Co. is an electricity operator in France and abroad. The breakdown used by Co. for its activities is as follows: France; United Kingdom; Italy; Other International; and Other activities.

Emperor Entertainment Hotel Ltd.

Emperor Entertainment Hotel is an investment holding company. Co. and its subsidiaries principally engage in provision of entertainment and hospitality services in Macau. Co. and its subsidiaries have two segments: Gaming Operation, which comprises mass market hall, VIP room and slot machine hall operations and provision of gaming-related marketing and public relation services in the casino of the Grand Emperor Hotel in Macau; as well as Hotel Operation, which comprises hotel operation in the Grand Emperor Hotel and the Best Western Hotel Taipa (to be renamed as Inn Hotel Macau) in Macau including property investment income from investment properties in these hotels.

Galaxy Entertainment Group Limited

Galaxy Entertainment is an investment holding company, engaged in operation in casino games of chance or games of other forms, as well as the provision of hospitality and related services in Macau. In addition, Co. manufactures, sells and distributes construction materials through its Construction Materials Division across Mainland China, Hong Kong and Macau. Co.'s segments include gaming and entertainment, and construction materials.

Guangzhou Automobile Group Co. Ltd. Class H

INFINEON TECHNOLOGIES AG

Infineon Technologies is a semiconductor manufacturing company. The Automotive segment designs, develops, manufactures and markets semiconductors for use in automotive applications. The Industrial Power Control segment designs, develops, manufactures and markets semiconductors for the generation, transmission and economy in the use of electrical energy. The Power Management & Multimarket segment designs, develops, manufactures and markets semiconductors for power supplies, mobile devices and mobile phone network infrastructures. The Chip Card & Security segment designs, develops, manufactures and markets semiconductor-based security products for card applications and networked systems.

Korea Circuit

Korea Circuit is engaged in the manufacture of printed circuit boards, moulds and copper clad laminates. Co. is also engaged in the export and import of toxic chemicals.

MGM China Holdings Limited

MGM China Holdings is an investment holding company. Through its subsidiaries, Co. is engaged in the development and operation of casino games of chance and other casino games and the related hotel and resort facilities in Macau. Co. operates in one business segment, being the management of casino, hotel and food and beverage operations.

Muyuan Foods Co. Ltd. Class A

Muyuan Foods Co.,Ltd. is a China-based company principally engaged in the breeding and distribution of pigs. The Company's main products consist of piglets, boars and commodity pigs. The Company operates its business mainly through feedstuff processing, hog breeding, boar breeding and commodity pig feeding. The Company operates its business in domestic market.

NH Foods Ltd.

NH Foods is mainly engaged in the meat processing and packaging businesses. Along with its subsidiaries and associated companies, Co. operates in four business divisions: processed foods, fresh meats, related products and overseas. The Processed Foods business division manufactures and sells hams, sausages, prepared meals and other processed foods. The Fresh Meats business division is engaged in the pig, cattle and broiler farming business as well as the manufacture and sale of fresh meats and organic fertilizer and vegetables. The Related-Products business division manufactures and sells marine products and dairy products. The Overseas division produces and sells food items overseas.

Pernod Ricard SA

Pernod Ricard produces and distributes wines and spirits. Co. produces aniseed products, vodka, whisky, cognac, rum, gin, liqueurs, champagnes and wines. Co.'s activity is organized around families of products built around brands. Its brands portfolio includes: ABSOLUT vodka, Ricard pastis, Ballantine's, Chivas Regal and The Glenlivet Scotch whiskies, Jameson Irish whiskey, Martell cognac, Havana Club rum, Beefeater gin, Kahlua and Malibu liqueurs, Mumm and Perrier-Jouet champagnes as well as Jacob's Creek and Brancott Estate wines. Co. is structured into four segments constituted by the following geographic regions: France, Europe (excluding France), Americas, Asia/Rest of the World.

Remy Cointreau SA

Remy Cointreau is an operator in the global wines and spirits market. Co. produces, markets and distributes Cognac, Liquors and Spirits and other non-group brand alcoholic beverages. Co.'s primary cognac brand is Remy Martin, produced from Petite Champagne and Grande Champagne eaux-de-vie. Co.'s principal liquor and spirits include the following brands: Cointreau, Passoa, Metaxa, St Remy, and Mount Gay. Co. also operates a distribution network that handles products from partners and third-party companies. Major non-group products distributed by Co. include Scotch Whiskies (Edrington brand), Champagne (Piper-Heidsieck and Charles Heidsieck brands) and Vodka.

RWE AG

RWE is an electricity and gas company. The Conventional Power Generation segment consists of the activities of RWE Power, Essent and RWE npower. The Supply/Distribution Networks Germany segment supplies electricity, gas and heat. The Supply Netherlands/Belgium segment comprises the activities of Essent in the Netherlands. The Supply United Kingdom segment comprises the operations of RWE npower. The Central Eastern and South Eastern European segment contains activities in the Czech Republic, Hungary, Poland, Slovakia, Turkey and Croatia. The Renewables, Upstream Gas & Oil and Trading/Gas Midstream segments include the activities of RWE Innogy, RWE Dea and RWE Supply & Trading, respectively.

SDIC Power Holdings Co. Ltd. Class A

SDIC Power Holdings and its subsidiaries are engaged in the investment construction, operation and management of electric power plants; construction, operation and sales of hydropower plants, thermal power plants, solar power plants and wind power plants; and provision of information and consultation services. As of Dec 31 2009, Co. generated approximately 36.631 billion kilowatt hours of electric power. Co. operates predominantly in the People's Republic of China.

Shandong Xiantan (A)

Shandong Xiantan Co., Ltd. is a China-based company principally engaged in cultivation, slaughtering, processing, and sale of broilers. The main activities include cultivation of parent generation breeding hens, the hatching of chicks, the production of feed, the cultivation and slaughtering of commercial generation broilers, as well as chicken processing and sale. The main products of the Company contain commercial generation broilers as well as chicken products including drumsticks, chicken breasts, chicken wings, and chicken dogmeats, among others. The Company distributes its products in China market.

SK hynix Inc

SK hynix is engaged in the manufacture and sale of semiconductors and related devices. Co.'s memory semiconductors include dynamic random access memory ("DRAM") modules, multi-chip products (MCPs) and NAND flash memory semiconductors. Co.'s memory semiconductors are used for desktops, notebooks, smartphones, tablets, game consoles, MP3, PMP, USB drive, televisions, and digital cameras. Co. also develops non-memory semiconductors such as complementary metal oxide semiconductor image sensors used in digital imaging devices.

STMicroelectronics NV

STMicroelectronics is a global independent semiconductor company that designs, develops, manufactures and markets a broad range of semiconductor integrated circuits (“ICs”) and discrete devices. Co. offers a diversified product portfolio and develops products for a wide range of market applications, including automotive products, computer peripherals, telecommunications systems, consumer products, industrial automation and control systems. Within its diversified portfolio, Co. is focused on developing products that leverage its technological strengths in creating customized, system-level solutions with digital and mixed-signal content.

Stock Spirits Group

Stock Spirits Group is a spirits company. Co. along with its subsidiaries are engaged in the production and distribution of branded spirits in Central and Eastern Europe. Co.'s spirits include vodka, flavoured vodka, rum, brandy and herbal bitter liqueurs. Co. has more than 40 brands and export internationally to more than 40 countries worldwide. Co.'s brands include Zoladkowa de Luxe, Lubelska, Zoladkowa Gorzka, Stock Prestige, 1906, Fernet Stock, Bozkov, Amundsen, Keglevich, Limonce, Stock Original, Keglevich, Golden, Stock 84, Fernet Stock Citrus, and Hammerhead. Co. has operations in Poland, Czech Republic, Italy, Slovakia, Croatia, and Bosnia and Herzegovina.

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).

TAL Education Group Sponsored ADR Class A

WH Group Ltd. (HK)

WH Group is an investment holding company. Through its subsidiaries, Co. operates its pork business through four segments. Packaged Meats is engaged in the production, wholesale and retail sales of low temperature and high temperature meat products. Fresh Pork is engaged in the slaughtering, wholesale and retail sales of fresh and frozen meat. Hog is enageged in hog farming. Others segment is engaged in the slaughter and sale of poultry, manufacture and sale of packaging materials, provision of logistics services, operate a chain of retail grocery stores, produce flavoring ingredients and natural casings, and sale of biological pharmaceutical materials.

Zespol Elektrowni Patnow Adamow Konin

Zespol Elektrowni Patnow Adamow Konin SA is a Poland-based company engaged in the electricity sector. It operates four power plants: Patnow I Power Plant with six power units and a total capacity of 1,200 MW, Konin Power Plant, with a capacity of 248 MW, Adamow Power Plant, a brown-coal-fire utility thermal power plant with a capacity of 600 MW, and Patnow II Power Plant with a capacity of 474 MW. Its total installed generating capacity covers approximately 8.5% of the Polish market. The Company forms a Group, which includes such subsidiaries as Elektrownia Patnow II Sp z o o, PAK Serwis Sp z o o, PAK Infrastruktura Sp z o o, EL Pak Sp z o o and PAK Gornictwo Sp z o o, among others.

Zhejiang Dingli Machinery Co. Ltd. Class A

Zhejiang Dingli Machinery Co Ltd. ZHEJIANG DINGLI MACHINERY CO.,LTD is a China-based company principally engaged in the research and development, manufacture, sales and provision of services of aerial work platforms. The Company's main products include three types of aerial work platforms, which include scissor type, arm type and mast type. The Company's products are applied in various industries, such as aircraft and ship building and maintenance, building construction and installation, highway and bridge construction, municipal engineering projects, warehousing and supermarket.

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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