Vermilion Int'l Compass: Global Equity Strategy
Hang Seng and MSCI China BottomingOur outlook since mid-November remains largely unchanged: we are neutral on global equities (MSCI ACWI), we believe upside remains limited with the MSCI ACWI (ACWI-US), S&P 500, and several European indexes still below major resistance, and we continue to expect rangebound price action in the months ahead on the MSCI ACWI. And, rangebound price action could very well be the theme for all of 2023 (with resistance at $93 and support at $75-77 on ACWI-US. Despite the marginal pullback in December, we would not be surprised to see additional downside ahead.
Remain Overweight Europe; Add Exposure to Hang Seng/MSCI China on Pullbacks. Europe remains a high conviction overweight for us, with France, Netherlands, Germany, Denmark, Ireland, Belgium, Spain, Poland, and Greece all with bullish price and RS trends. Additionally, Hong Kong's Hang Seng and the MSCI China index are reversing topside 1.5-2-year downtrends -- add exposure on pullbacks. We discussed in our Dec. 1 Int'l Compass how the Hang Seng breaking above 18,235 was a bullish signal, and the strength has only continued since. Europe and Hong Kong/China make up the majority of today's buy recommendations... see charts below and page 2.
Japan and India Deteriorating -- Reduce Exposure. Japan and India have been two of our favorite country overweights during the second half of 2022, but we are now starting to see price and RS deterioration. Reduce exposure... see page 3.
Non-U.S. Equities Outperformance Likely to Continue. We believe non-U.S. equities are likely to continue outperforming relative to U.S. equities in the months and potentially years to come. The MSCI ACWI ex-US vs. MSCI ACWI ratio is bullishly inflecting above its 13-year downtrend... see page 4.
DXY Still Above Long-Term Support. A big reason that we continue to believe that upside is limited on the MSCI ACWI is because the U.S. dollar (DXY) is holding above major 6-year base support at $103-103.70. This is a risk-off signal... see page 4.
Actionable Theme: Europe/UK and Hong Kong/China. As discussed above, Europe remains leadership while Hong Kong and China display long-term bullish reversals -- add exposure. Sectors highlighted include Communications, Technology, Consumer Discretionary, Financials, and Industrials... see pages 5-22.
Bollore is a holding company. Through its subsidiaries, Co. conducts business in international logistics, transportation and logistics in Africa (port management, stevedoring, logistics), fuel distribution, batteries and supercapacitors, electric vehicles, plastic films for capacitors and packaging, dedicated terminals and systems, plantations, communicationa and the media (television and free press, advertising and market research) and the management of portfolio shareholdings. Co.'s activities can be divided into four segments: Transportation and logistics, Industry, Fuel distribution, and Other activities.
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.
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.
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