Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<ul>
<li>The BHP Board has decided to proceed with the Unification due to the advantages of simplification, strategic flexibility, elimination of DLC dividend arrangement, and elimination of share price differentials. </li>
<li>Since announcement of the Unification, the <a href="https://www.smartkarma.com/entities/bhp-billiton-plc-adr" target="_blank" data-smartkarma-citation="entities:14531:1" rel="noopener">BHP Billiton Plc (ADR) (BBL US)</a> discount to <a href="https://www.smartkarma.com/entities/bhp-billiton-ltd-adr" target="_blank" data-smartkarma-citation="entities:5424:1" rel="noopener">BHP Billiton (ADR) (BHP US)</a> has narrowed from 16.6% to 1.4% and will reach parity soon.</li>
<li>There will be selling on <a href="https://www.smartkarma.com/entities/bhp-billiton-plc" target="_blank" data-smartkarma-citation="entities:21840:1" rel="noopener">BHP Billiton (BLT LN)</a> from UK Index and STOXX trackers in January, and S&amp;P/ASX trackers will buy <a href="https://www.smartkarma.com/entities/bhp-group-ltd" target="_blank" data-smartkarma-citation="entities:147:1" rel="noopener">BHP Group (BHP AU)</a>, possibly in 2 tranches. </li>
</ul>


The BHP Board has decided to proceed with the Unification due to the advantages of simplification, strategic flexibility, elimination of DLC dividend arrangement, and elimination of share price differentials. 
Since announcement of the Unification, the BHP Billiton Plc (ADR) (BBL US) discount to BHP Billiton (ADR) (BHP US) has narrowed from 16.6% to 1.4% and will reach parity soon.
There will be selling on BHP Billiton (BLT LN) from UK Index and STOXX trackers in January, and S&amp;P/ASX trackers will buy BHP Group (BHP AU), possibly in 2 tranches. 


BHP Unification: Board Approves; S&P Market Consultation in Progress

Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Macroeconomics

All the inflation gauges in the US are far above the Fed's 2% inflation target. Headline CPI inflation is at a 13-year high of 5.4% YoY, headline PCE inflation at a 30-year high of 4.4% YoY, and the GDP deflator was up 5.7% QoQsaar in 3Q 2021; the Fed's preferred gauge, the core PCE deflator was up 3.6% YoY in July-August 2021, while the core CPI inflation rate was 4% YoY in September. The reason for the inflation surge is something that we have been predicting since last year -- the excessively rapid increase in money supply (M2), which was up 13% YoY in September 2021, on top of the 24% YoY rise a year ago; it is increasingly clear that the Fed effectively has a M2-growth target of 11-13% YoY, which it has maintained since April 2021. (As we keep stressing, this is much faster than M2 growth in 2009-10, which peaked at 11% YoY because the money-multiplier was depressed at a time when banks were choosing to hold large excess reserves). See our June 2020 insight <a href="https://www.smartkarma.com/insights/labour-market-slack-remains-but-fomc-will-need-to-tighten-by-mid-2021" target="_blank" data-smartkarma-citation="insights:40185" rel="noopener">Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021.</a>The ECB's rapidly-shrinking credibility took a massive further hit when the first read on October 2021 inflation showed CPI (HICP) inflation at 4.1% YoY -- after the ECB's policy council chose to keep policy unchanged, stating that its analysis after "a lot of soul-searching" about "inflation, inflation, inflation" had led it to conclude that there was no basis for the market's expectations of even a minuscule rate hike in 2022. The ECB formally targets headline (not core) inflation, and with average inflation in Jan-Oct 2021 already above that (and more than double that target in October 2021), it is ludicrous for the ECB to still be pursuing its PEPP, even at a moderately slower pace. The likely outcome will be near-term appreciation of the Euro -- and sharp unexpected tightening in the Eurozone over the next half year. We would recommend being Underweight Europe, but particularly Italy, Greece, Cyprus and Spain. Near-term Euro strength will likely give way to a strong dollar by March 2022, as the Eurozone faces a new debt crisis with the tightening of monetary conditions in the Eurozone.

All the inflation gauges in the US are far above the Fed's 2% inflation target. Headline CPI inflation is at a 13-year high of 5.4% YoY, headline PCE inflation at a 30-year high of 4.4% YoY, and the GDP deflator was up 5.7% QoQsaar in 3Q 2021; the Fed's preferred gauge, the core PCE deflator was up 3.6% YoY in July-August 2021, while the core CPI inflation rate was 4% YoY in September. The reason for the inflation surge is something that we have been predicting since last year -- the excessively rapid increase in money supply (M2), which was up 13% YoY in September 2021, on top of the 24% YoY rise a year ago; it is increasingly clear that the Fed effectively has a M2-growth target of 11-13% YoY, which it has maintained since April 2021. (As we keep stressing, this is much faster than M2 growth in 2009-10, which peaked at 11% YoY because the money-multiplier was depressed at a time when banks were choosing to hold large excess reserves). See our June 2020 insight Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021.The ECB's rapidly-shrinking credibility took a massive further hit when the first read on October 2021 inflation showed CPI (HICP) inflation at 4.1% YoY -- after the ECB's policy council chose to keep policy unchanged, stating that its analysis after "a lot of soul-searching" about "inflation, inflation, inflation" had led it to conclude that there was no basis for the market's expectations of even a minuscule rate hike in 2022. The ECB formally targets headline (not core) inflation, and with average inflation in Jan-Oct 2021 already above that (and more than double that target in October 2021), it is ludicrous for the ECB to still be pursuing its PEPP, even at a moderately slower pace. The likely outcome will be near-term appreciation of the Euro -- and sharp unexpected tightening in the Eurozone over the next half year. We would recommend being Underweight Europe, but particularly Italy, Greece, Cyprus and Spain. Near-term Euro strength will likely give way to a strong dollar by March 2022, as the Eurozone faces a new debt crisis with the tightening of monetary conditions in the Eurozone.  

Inflation Is Entrenched, and Central Bank Credibility Is Sinking, Especially the ECB's

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

EURO STOXX 50 Price EUR / Technical Analysis

Eurobanks index (SX7E) met our 103 tactical rally objective and now prone to a pullback on a give back in yield that will set up a fresh long in the banks.Upside choppy overlap warns of a tactical top in line with our call for bond yields to pullback. Daily RSI divergence (break below micro support) and MACD rolling also warns that a top is forming.Upside choppy overlap warns of a tactical top as does RSI divergence and MACD resistance.Price and trendline support coincide at the 97 area making 98 a viable fresh long zone. Our next key upside target lies at 108.

Eurobanks index (SX7E) met our 103 tactical rally objective and now prone to a pullback on a give back in yield that will set up a fresh long in the banks.Upside choppy overlap warns of a tactical top in line with our call for bond yields to pullback. Daily RSI divergence (break below micro support) and MACD rolling also warns that a top is forming.Upside choppy overlap warns of a tactical top as does RSI divergence and MACD resistance.Price and trendline support coincide at the 97 area making 98 a viable fresh long zone. Our next key upside target lies at 108.

European equities have met tactical rally targets from buy levels met on Monday September 20th. Focus is now on buy support levels on a secondary pullback in October but bear divergence may have a downside surprise in store.Eurostoxx 50 dual top at 4,246 stands out and the cap for any near term rise. Eurostoxx 50 met 4,010 tactical long support and overshot our 4,150 bounce target where we reduced in preparation of a harder downside test of 3,900 support in October.DAX has been our strategic long pick from March 2020 and recently met the 14,900-15,200 buy zone. 14,900 stands out as the key level to hold to buy again in October.CAC and IBEX charts are our short picks for downside protection in October.

European equities have met tactical rally targets from buy levels met on Monday September 20th. Focus is now on buy support levels on a secondary pullback in October but bear divergence may have a downside surprise in store.Eurostoxx 50 dual top at 4,246 stands out and the cap for any near term rise. Eurostoxx 50 met 4,010 tactical long support and overshot our 4,150 bounce target where we reduced in preparation of a harder downside test of 3,900 support in October.DAX has been our strategic long pick from March 2020 and recently met the 14,900-15,200 buy zone. 14,900 stands out as the key level to hold to buy again in October.CAC and IBEX charts are our short picks for downside protection in October.

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.

Our neutral and cautious outlook continues to be reinforced by market dynamics that have generally deteriorated over the past week. RS improvement for defensives (Utilities, Staples, Real Estate, and Health Care) continues to make these Sectors attractive. Meanwhile, not one MSCI ACWI Sector is breaking down, and important price support levels are holding in the US, Europe, and Japan. Until supports start to break we cannot be bearish, though we would not be surprised to see ~5% downside with potential for more.

Our neutral and cautious outlook continues to be reinforced by market dynamics that have generally deteriorated over the past week. RS improvement for defensives (Utilities, Staples, Real Estate, and Health Care) continues to make these Sectors attractive. Meanwhile, not one MSCI ACWI Sector is breaking down, and important price support levels are holding in the US, Europe, and Japan. Until supports start to break we cannot be bearish, though we would not be surprised to see ~5% downside with potential for more.

Crude Oil and Copper Breakdowns Reinforce Our Concerns; Defensive Sectors Remain Attractive

The EURO STOXX 50 Index, Europe's leading blue-chip index for the Eurozone, provides a blue-chip representation of supersector leaders in the region. The index covers 50 stocks from 11 Eurozone countries. The index is licensed to financial institutions to serve as an underlying for a wide range of investment products such as exchange-traded funds (ETFs), futures, options and structured products.

EURO STOXX 50 Price EUR (SX5E INDEX)

BHP Unification: Board Approves; S&P Market Consultation in Progress

The BHP Board has approved the Unification and the UK line could stop trading on 28 January. The UK line will see selling from UK Index and STOXX...

Brian Freitas

Inflation Is Entrenched, and Central Bank Credibility Is Sinking, Especially the ECB's

ECB retained its PEPP the day before the 4.1% inflation print. US too has overshot inflation targets, but taper guidance is clear. Near-term Euro...

Prasenjit K. Basu

Euro Banks Long Add Level

Eurobanks index (SX7E) met our 103 tactical rally objective and now prone to a pullback on a give back in yield that will set up a fresh long in...

Thomas Schroeder

Europe Re Load Buy Levels

European equities have met tactical rally targets. Focus is now on buy support levels on a secondary pullback in October but bear divergence may...

Thomas Schroeder

Crude Oil and Copper Breakdowns Reinforce Our Concerns; Defensive Sectors Remain Attractive

Our cautious outlook is reinforced by ongoing developments. Relative strength improvement for defensives (Utilities, Staples, Real Estate, Health...

Vermilion Research