Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>Since early November 2023 we have been expecting global equities (MSCI ACWI) to stage a year-end rally that would continue into the early part of 2024.</li>
<li>As we progress through the “early part” of 2024, more global indexes and Sectors are breaking out and starting to participate in the upside. This is classic bull market behavior.</li>
<li>Our outlook remains bullish; continue to ride this trend higher, and treat pullbacks as buying opportunities. Actionable Themes: Hong Kong/China, Consumer Discretionary, Industrials, Energy/Coal, and Polish Banks</li>
</ul>


Since early November 2023 we have been expecting global equities (MSCI ACWI) to stage a year-end rally that would continue into the early part of 2024.
As we progress through the “early part” of 2024, more global indexes and Sectors are breaking out and starting to participate in the upside. This is classic bull market behavior.
Our outlook remains bullish; continue to ride this trend higher, and treat pullbacks as buying opportunities. Actionable Themes: Hong Kong/China, Consumer Discretionary, Industrials, Energy/Coal, and Polish Banks


Hong Kong/China Finally Bottoming?; Bullish Outlook Intact; DXY Rolling Over; Buys in Discretionary

iShares MSCI Emerging Markets / Technical Analysis

<ul>
<li>In our prior EM Strategy (October 2) we discussed that as long as EEM-US is above our important line-in-the-sand at $37, we were buyers on the pullback.</li>
<li>This support level held and EEM-US now displays a bullish 3-month downtrend reversal as the DXY appears to be breaking below $105.70, all bullish signals signaling additional upside-- buy.</li>
<li>We are bullish as long as $36.50-$37 support holds on EEM-US. Our first target is $42, which is 1.5+ year resistance. Remain overweight India, and we're upgrading Poland/Greece to overweight</li>
</ul>


In our prior EM Strategy (October 2) we discussed that as long as EEM-US is above our important line-in-the-sand at $37, we were buyers on the pullback.
This support level held and EEM-US now displays a bullish 3-month downtrend reversal as the DXY appears to be breaking below $105.70, all bullish signals signaling additional upside-- buy.
We are bullish as long as $36.50-$37 support holds on EEM-US. Our first target is $42, which is 1.5+ year resistance. Remain overweight India, and we're upgrading Poland/Greece to overweight


MSCI EM Index Reversing 3-Month Downtrend -- Buy. Remain Overweight India, Upgrading Poland & Greece

Oil & Natural Gas Corp / Technical Analysis

<ul>
<li>MSCI EM (EEM-US) continues to show signs of bottoming as it has held above our $37-$37.50 line-in-the-sand. </li>
<li>Major 1+ year resistance on the EEM-US is at $42, and a breakout would mean the bottom is in (and would be a buy signal).</li>
<li>Favor EM over EAFE due to 2.5-year downtrend reversal in the EAFE vs. EM ratio. Top Overweights: Taiwan, India, Greece; Attractive EM Sectors: Energy, Technology, Consumer Discretionary, Financials</li>
</ul>


MSCI EM (EEM-US) continues to show signs of bottoming as it has held above our $37-$37.50 line-in-the-sand. 
Major 1+ year resistance on the EEM-US is at $42, and a breakout would mean the bottom is in (and would be a buy signal).
Favor EM over EAFE due to 2.5-year downtrend reversal in the EAFE vs. EM ratio. Top Overweights: Taiwan, India, Greece; Attractive EM Sectors: Energy, Technology, Consumer Discretionary, Financials


MSCI Emerging Market Index Testing 1+ Year Resistance; Favor EM over EAFE; Top EM Buys Highlighted

China Petroleum & Chemical / Technical Analysis

<ul>
<li>In last week's Int'l Compass (Jan. 27) we highlighted that the broad global indexes were breaking down, but that we were watching for potential false breakdowns.</li>
<li>We are now getting those false breakdowns as major levels have been reclaimed; we view this as a net positive.</li>
<li>We continue to see select areas that are attractive (namely cyclical value and defensive Sectors) and we expect markets to remain mixed.</li>
</ul>


In last week's Int'l Compass (Jan. 27) we highlighted that the broad global indexes were breaking down, but that we were watching for potential false breakdowns.
We are now getting those false breakdowns as major levels have been reclaimed; we view this as a net positive.
We continue to see select areas that are attractive (namely cyclical value and defensive Sectors) and we expect markets to remain mixed.


False Breakdowns on Global MSCI Indexes as the US Dollar Weakens; Ideas Within Energy & Financials

Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Equity Bottom-Up

While we have been cautious on Polish banks for some time now given structural issues related to “National Policy” and legacy assets as well as decreasing Profitability, recently we have identified Pekao, a relatively lower risk asset versus its Polish counterparts within our VFM model. VFM expresses an asset according to its value-quality characteristics (PH Score™), above average in the case of Pekao, its technical picture, which is relatively depressed, and an additional valuation filter which shows cheapening in recent weeks.Shares in <a href="https://www.smartkarma.com/entities/bank-pekao-sa" target="_blank" data-smartkarma-citation="entities:25195:1" rel="noopener">Bank Pekao SA (PEO PW)</a> have underperformed since the release of somewhat disappointing Q320 numbers. True, there has been some erosion in variables such as core Profitability as seen in a lower PH Score™ vis-à-vis Q220. (The PH Score™ castigates a drop in Equity/Assets but does not reward a better CET1 and Total Capital Ratio). Our PH Score™ though shows that the bank is making headway on the Efficiency front which is a key variable. This helps the bank offset waning credit growth and some margin/spread erosion though NIMs are still above the danger zone of other European and APAC lenders such as Taiwan and Japan. Liquidity trends are also highly benign with Deposits climbing by 18% YoY, Debt/Equity declining, and much higher Liquidity Coverage and Net Stable Funding ratios. The top-line and Operating Income show flat growth versus moderate expansion at Q220LTM while “non-core Income” (at just 14.5% of PT Profit) partially offsets the impact of much higher credit costs on the bottom-line which may be partially reversed going forward. Comprehensive Income was well higher than Net Profit – a good sign. The fundamental picture appears reasonably favourable versus its peers and the underlying narrative remains quite compelling.The shares have cheapened in reaction to the latest earnings release. A FV of 7%, a PBV of 0.46x, and an Earnings Yield of 14.5% are not unattractive. They trade below common-sense thresholds of 10%, 1x, and 10%, respectively.

While we have been cautious on Polish banks for some time now given structural issues related to “National Policy” and legacy assets as well as decreasing Profitability, recently we have identified Pekao, a relatively lower risk asset versus its Polish counterparts within our VFM model. VFM expresses an asset according to its value-quality characteristics (PH Score™), above average in the case of Pekao, its technical picture, which is relatively depressed, and an additional valuation filter which shows cheapening in recent weeks.Shares in Bank Pekao SA (PEO PW) have underperformed since the release of somewhat disappointing Q320 numbers. True, there has been some erosion in variables such as core Profitability as seen in a lower PH Score™ vis-à-vis Q220. (The PH Score™ castigates a drop in Equity/Assets but does not reward a better CET1 and Total Capital Ratio). Our PH Score™ though shows that the bank is making headway on the Efficiency front which is a key variable. This helps the bank offset waning credit growth and some margin/spread erosion though NIMs are still above the danger zone of other European and APAC lenders such as Taiwan and Japan. Liquidity trends are also highly benign with Deposits climbing by 18% YoY, Debt/Equity declining, and much higher Liquidity Coverage and Net Stable Funding ratios. The top-line and Operating Income show flat growth versus moderate expansion at Q220LTM while “non-core Income” (at just 14.5% of PT Profit) partially offsets the impact of much higher credit costs on the bottom-line which may be partially reversed going forward. Comprehensive Income was well higher than Net Profit – a good sign. The fundamental picture appears reasonably favourable versus its peers and the underlying narrative remains quite compelling.The shares have cheapened in reaction to the latest earnings release. A FV of 7%, a PBV of 0.46x, and an Earnings Yield of 14.5% are not unattractive. They trade below common-sense thresholds of 10%, 1x, and 10%, respectively.  

Bank Pekao: Cheapening on the Back of Solid Results

Poland

mBank S.A. provides commercial banking services. The Bank offers corporate, retail, and private banking services. mBank is active on the capital markets through its brokerage subsidiary and offers lease financing services through its leasing subsidiary.

Santander Bank Polska S.A operates as a bank The Bank offers business and personal loans, mortgages, pension plans, insurance, factoring services, securities brokerage services, credit and debit cards, accounts, and money transfer services. Santander Bank Polska serves customers in Poland.

Powszechna Kasa Oszczednosci Bank Polski S.A. attracts deposits and offers commercial banking services. The Bank offers all types of banking services present on the Polish banking market, money market and capital market for institutional and individual clients.

Bank Handlowy w Warszawie S.A. operates as a bank that offers deposits, lending, foreign and domestic settlements, foreign exchange, as well as capital market activities and money market operations. The Bank has 28 domestic branches, four representative offices and the London foreign branch.

Bank Millennium S.A. attracts deposits and offers commercial and consumer banking services.  The Bank offers credit, lease financing, securities brokerage, pension plans, factoring, and investment banking services.  The Bank also sponsors credit and debit cards.

Bank Ochrony Srodowiska S.A. (BOS) attracts deposits and offers commercial banking services.  The Bank offers construction, Lombard, margin, bridge, mortgage, hire purchase, and student loans, trade finance, and investment banking services.  BOS also finances environmental projects.

Powszechny Zaklad Ubezpieczen SA offers property and casualty insurance. The Company offers a wide range of non-life insurance products including fire and automobile insurance. Powszechny Zaklad also has a division that offers life insurance.

Kruk SA as founded in 1998 and offers debt collection services in Poland, Romania, Czech Republic and Slovakia. The Company's two main business lines are: acquisition of non-performing debt portfolios and debt collection outsourcing with a main focus on consumer and corporate loans.

Warsaw Stock Exchange operates an exchange for the trading of Polish securities. The Exchange trades equities, derivatives, bonds, subscription rights, and warrants.

Bank of the Philippine Islands, through its subsidiaries, provides commercial banking services. The Company's products includes ATM, debit card system, credit card, electronic cash card, internet platform and other services.

BDO Unibank Inc provides banking services. The Bank offers saving accounts, investment, loans, credit and debit cards, remittance, insurance, and trade financing services. BDO Unibank serves customers in Philippines.

Canara Bank Ltd. provides a full range of banking services throughout India. The Group's activities include retail banking, commercial and personal banking, investment management, treasury & NRI services, cash management and assorted ATM facilities.

Union Bank of India Limited provides a full range of banking services throughout India. The Company's activities include retail banking, commercial and personal banking, investment management, treasury and NRI services, cash management and assorted ATM facilities. Union Bank has an online tele-banking facility for all its core banking customers.

Bank for Investment and Development of Vietnam provides commercial banking services. The Company offers deposits, personal loans, e-banking, guarantees, and trade finance for customers, corporate, and financial institutions. Bank for Investment also offers foreign exchange, money market, derivatives, and debt market services.

First Financial Holding Co., Ltd. is a holding company.  Through its subsidiaries, the Company accepts deposits, provides loans and discount, letters of credit, and guarantee services, invests in marketable securities, provides securities brokerage and investment services, as well as provides insurance services.

YES BANK Limited provides banking services. The Bank offers deposits, personal loans, e-banking, trade finance, corporate, and business banking services. YES BANK serves the food and agribusiness, life sciences, healthcare, biotechnology, telecommunications, media, information technology, and infrastructure development industries in India.

IndusInd Bank Limited is a Mumbai-based Indian new generation bank established in 1994. The Bank provides a range of banking and financial services including  wholesale banking, credit monitoring, risk management, tele-banking, investment banking and commercial lending. IndusInd Bank operates branches throughout India as well as an office in Dubai and London.

Shinkin Central Bank is a central bank for shinkin banks nationwide, operating as a cooperative financial institution.  The Bank has developed businesses in a variety of fields that contribute the shinkin banking industry.  The Bank's services include enhancement of the credit standing, efficient use of shikin bank's surplus funds, and settlement of domestic exchange transaction.

Taiwan Cooperative Financial Holding, through subsidiaries, offers financial services.  The Company offers commercial banking, asset management, bills finance, and securities brokerage services.

Bank Pekao S.A. attracts deposits and offers commercial, retail, and investment banking services. The Bank provides mortgages, consumer and business loans, debit and credit cards, custody, factoring, lease financing, private banking, asset management, and securities brokerage services.

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Bank Pekao SA (PEO PW)

Hong Kong/China Finally Bottoming?; Bullish Outlook Intact; DXY Rolling Over; Buys in Discretionary

Hong Kong/China Finally Bottoming?; Bullish Overall Outlook Intact; $DXY Rolling Over; Actionable Themes: Hong Kong/China, Consumer Discretionary,...

Vermilion Research

MSCI EM Index Reversing 3-Month Downtrend -- Buy. Remain Overweight India, Upgrading Poland & Greece

In our prior EM Strategy (10/2/23) we discussed that, if $EEM is above $37, we were buyers on the pullback. Support held and now EEM displays a...

Vermilion Research

MSCI Emerging Market Index Testing 1+ Year Resistance; Favor EM over EAFE; Top EM Buys Highlighted

MSCI EM Index $EEM Testing 1+ Year Resistance; Favor EM over EAFE $EFA. Top EM Country Overweights: Taiwan, India, Greece; Attractive EM Sectors:...

Vermilion Research

False Breakdowns on Global MSCI Indexes as the US Dollar Weakens; Ideas Within Energy & Financials

Global sovereign bond yields remain on an upward trajectory, with 10-year yields hitting multi-year highs this week in many countries; we expect...

Vermilion Research

Bank Pekao: Cheapening on the Back of Solid Results

Pekao is a best-in-class Polish bank. Solid results were castigated by the market. Hence the opportunity to pick up a strong franchise at a beaten...

Paul Hollingworth

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