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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

On 11 June, Unilever announced that it was looking to unify its group legal structure under a single parent company, <a href="https://www.smartkarma.com/entities/unilever-plc" target="_blank" data-smartkarma-citation="entities:22197:1" rel="noopener">Unilever PLC (ULVR LN)</a>, "creating a simpler company with greater strategic flexibility, that is better positioned for future success".The Dutch shareholders approved the unification on 21 September with 99.39% of the shares voted in favour, while the UK shareholders approved the proposal on 12 October with over 99% of the shares voted in favour.There is still one potential hurdle to the unification in the Departure Tax (GroenLinks initiative bill) being proposed by the GreenLeft Party in the Netherlands that could cost Unilever up to €11bn if it left the Netherlands.If the unification does go through, there will be an impact of passive fund activity on <a href="https://www.smartkarma.com/entities/unilever-nv" target="_blank" data-smartkarma-citation="entities:21141:1" rel="noopener">Unilever NV (UNA NA)</a>, but the bigger impact will be on <a href="https://www.smartkarma.com/entities/unilever-plc" target="_blank" data-smartkarma-citation="entities:22197:1" rel="noopener">Unilever PLC (ULVR LN)</a>. We estimate the net impact of the unification will see around US$3bn of passive money flow into the stock.In this Insight, we take a look at some of the details around the unification before jumping into the impact on the stocks and the possible spread between the two lines prior to unification.

On 11 June, Unilever announced that it was looking to unify its group legal structure under a single parent company, Unilever PLC (ULVR LN), "creating a simpler company with greater strategic flexibility, that is better positioned for future success".The Dutch shareholders approved the unification on 21 September with 99.39% of the shares voted in favour, while the UK shareholders approved the proposal on 12 October with over 99% of the shares voted in favour.There is still one potential hurdle to the unification in the Departure Tax (GroenLinks initiative bill) being proposed by the GreenLeft Party in the Netherlands that could cost Unilever up to €11bn if it left the Netherlands.If the unification does go through, there will be an impact of passive fund activity on Unilever NV (UNA NA), but the bigger impact will be on Unilever PLC (ULVR LN). We estimate the net impact of the unification will see around US$3bn of passive money flow into the stock.In this Insight, we take a look at some of the details around the unification before jumping into the impact on the stocks and the possible spread between the two lines prior to unification.

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

Adding to last week’s concerns reiterated above, additional developments which have further dampened our overall outlook include a breakdown in the global Discretionary vs. Staples ratio, price and RS deterioration for mainland China, Germany, and European Technology, and new lows in the NASDAQ Global Automobile index. Aside from Germany, other major indexes remain above support in Europe/UK and Japan.  We highlight a number of attractive opportunities in “defensive” Financials including electronic exchanges/markets, insurance, commercial/consumer financing, and select asset managers.

Adding to last week’s concerns reiterated above, additional developments which have further dampened our overall outlook include a breakdown in the global Discretionary vs. Staples ratio, price and RS deterioration for mainland China, Germany, and European Technology, and new lows in the NASDAQ Global Automobile index. Aside from Germany, other major indexes remain above support in Europe/UK and Japan.  We highlight a number of attractive opportunities in “defensive” Financials including electronic exchanges/markets, insurance, commercial/consumer financing, and select asset managers.

Global Equity Strategy: More Cracks Begin to Show

Despite negative recent developments, we have remained steadfast in our belief that weakness in May has presented an attractive time to add exposure. In our June International Strategy, we highlight various themes which lead to this belief, along with areas of the market where we see actionable opportunities within our favorite Groups, spanning the Consumer Staples, Technology, Consumer Discretionary, Services, Health Care, and Financial Sectors.

Despite negative recent developments, we have remained steadfast in our belief that weakness in May has presented an attractive time to add exposure. In our June International Strategy, we highlight various themes which lead to this belief, along with areas of the market where we see actionable opportunities within our favorite Groups, spanning the Consumer Staples, Technology, Consumer Discretionary, Services, Health Care, and Financial Sectors.

Global Ex-U.S. Equity Strategy: Cautiously Optimistic Outlook Intact

Equity analyst UK & Europe, UK Long Short

Peter Toeman

Equity analyst UK & Europe

Accelerating Tomorrow’s Independent Research

Boost Research

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Equity Bottom-Up

A ‘perfect storm’ is enveloping UK retailers. Brexit uncertainty is reducing footfall and sales and the structural shift to e-commerce continues unabated. But if things are tough for retailers they are equally bad for UK property companies with a significant proportion of retail in their portfolios. Declining rents and rising yields are not positive for valuations. Landlords also have to deal with an increasing incidence of tenant insolvencies. 
British Land: what does it do ?
British Land is the third largest property company in the FTSE100 with a market capitalisation of £5.6bn and property portfolio of £12.8bn split almost equally between Retail and Central London offices. 
Why is it in the Short portfolio ?
Trading pressure in the retail sector is translating into rent reductions for landlords, or worse, vacant space. Yields are rising due to decreased investment demand. Property consultancies anticipate a double digit decline in retail capital values over the next two years. The consensus expectation is for British Land's EPRA NAV to decline 8% over the next two years.

A ‘perfect storm’ is enveloping UK retailers. Brexit uncertainty is reducing footfall and sales and the structural shift to e-commerce continues unabated. But if things are tough for retailers they are equally bad for UK property companies with a significant proportion of retail in their portfolios. Declining rents and rising yields are not positive for valuations. Landlords also have to deal with an increasing incidence of tenant insolvencies. 
British Land: what does it do ?
British Land is the third largest property company in the FTSE100 with a market capitalisation of £5.6bn and property portfolio of £12.8bn split almost equally between Retail and Central London offices. 
Why is it in the Short portfolio ?
Trading pressure in the retail sector is translating into rent reductions for landlords, or worse, vacant space. Yields are rising due to decreased investment demand. Property consultancies anticipate a double digit decline in retail capital values over the next two years. The consensus expectation is for British Land's EPRA NAV to decline 8% over the next two years.    

British Land (BLND:LN): Retail in Reverse

The MSCI ACWI ex-U.S. is breaking topside its nearly 14-month downtrend and above key resistance. The move is being fueled by improvements throughout most of Europe and the UK, along with strength in China over the past 2-3 months. We believe these positive developments are supportive of higher equity prices moving forward. We provide a technical appraisal of all major markets.The STOXX 600 Banks and Insurance Sectors are exhibiting bullish price inflections and RS indicates these areas may be emerging as leadership. In today’s report we highlight actionable stocks throughout the int’l Financial Sector.

The MSCI ACWI ex-U.S. is breaking topside its nearly 14-month downtrend and above key resistance. The move is being fueled by improvements throughout most of Europe and the UK, along with strength in China over the past 2-3 months. We believe these positive developments are supportive of higher equity prices moving forward. We provide a technical appraisal of all major markets.The STOXX 600 Banks and Insurance Sectors are exhibiting bullish price inflections and RS indicates these areas may be emerging as leadership. In today’s report we highlight actionable stocks throughout the int’l Financial Sector.

MSCI ACWI Ex-U.S. Breaking Topside Its Downtrend: Europe & The UK Look Attractive

United Kingdom

The FTSE 100 Index is a capitalization-weighted index of the 100 most highly capitalized companies traded on the London Stock Exchange. The equities use an investibility weighting in the index calculation. The index was developed with a base level of 1000 as of December 30, 1983. 

UKX Index (UKX INDEX)

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Vermilion Research

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Vermilion Research

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Boost Research

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The MSCI ACWI ex-U.S. is breaking topside its nearly 14-month downtrend and above key resistance. The move is being fueled by improvements...

Vermilion Research