Int'l Macro Vision: Sector Synopsis
MSCI EM Breaking Out on Chinese StimulusThe MSCI Emerging Markets index (local currency) and EEM-US (USD) are breaking out from their multi-month consolidations thanks to significant Chinese stimulus -- add exposure on pullbacks. We continue to favor EM over EAFE, which has been our view since our May 6th, 2024 EM Strategy report; the EM vs. EAFE ratio remains in an uptrend that began in late-March 2024.
Below we highlight attractive and actionable themes within EM. On page 4 we include a table of all 86 stocks highlighted in this report.
EM Countries. India (SENSEX) remains our lone country overweight, though there continues to be a plethora of countries that are bullish and/or worthy of overweights, including South Africa, Philippines, Hungary, Argentina, and Thailand (among others). The Hang Seng is our preferred play on China as it displays a base breakout and RS has been consolidating for all of 2024; we are monitoring for an upgrade to overweight. Mainland China markets such as the Shanghai Composite and CSI 300 need to form reliable bottoms as they were trading at 10+ year price and RS lows just two weeks ago, and both remain in 1.5-year RS downtrends... see page 2.
EM Sectors. Nearly all EM Sectors are bullish in terms of price; the only unattractive Sector is MSCI EM Energy. With that said, the only Sectors that display meaningful RS improvement are Telecommunications, Consumer Discretionary, and Real Estate, which are all Sectors that have a significant weighting to China; add exposure on pullbacks to these Sectors. RS is consolidating for MSCI EM Technology, and we are downgrading to market weight after being overweight for the past year... see page 3.
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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