EM PM, Ecstrat

Emad Mostaque

EM PM

Ecstrat

Ecstrat is a consultancy advising on asset allocation between global equity markets, with a focus on the intersection of governments, geopolitics, governance and markets.
 
Over the past few years and more especially since the Great Financial Crisis (GFC), investors have become more focused on short-term market movements and real-time returns and have consequently neglected the analysis of the underlying structural themes that underpin longer term performance.
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More specifically we believe that the evolution of governance-based relationships between investors, controlling shareholders, labour and the state is one of the primary determinants of both relative and absolute performance between individual equity markets.
 
We will endeavour to provide investors with some of the context surrounding governance-related issues which encompass many different disciplines including history, economics and political science, as well as the financial metrics which are the most obvious manifestation of the structural characteristics of each market.
 
We will pay particular attention to the shifts and potential inflection points for governance in individual markets as these are often the best lead indicators for both economic and market performance.

Thematic (Sector/Industry)

In May we noted that Saudi was likely to pursue a production maximisation policy for 6 months, with a freeze or cuts likely as we head into winter.This appears to have been prescient as OPEC yesterday announced that OPEC-14 production levels would be capped at 32.5-33mbpd, a slight decrease over the levels achieved over summer and back at Doha talks levels.However, detail is lacking on the proposal and there is strong reason to doubt potential enforceability of any agreement, with oil jumping but still being flat month on month as a result.This piece explores some of these issues and potential market action.

In May we noted that Saudi was likely to pursue a production maximisation policy for 6 months, with a freeze or cuts likely as we head into winter.This appears to have been prescient as OPEC yesterday announced that OPEC-14 production levels would be capped at 32.5-33mbpd, a slight decrease over the levels achieved over summer and back at Doha talks levels.However, detail is lacking on the proposal and there is strong reason to doubt potential enforceability of any agreement, with oil jumping but still being flat month on month as a result.This piece explores some of these issues and potential market action.

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Crude markets have tightened a good deal in recent months, as strong demand growth and supply issues have pulled forward the industry recovery by about a year, relative to our previous outlook. Fundamentals after 2017 are looking particularly bullish for prices, and an oil price rally in 2018 is looking more and more likely (we've raised our 2018 West Texas Intermediate, or WTI, forecast to $65 per barrel).Even so, the strength of U.S. shale is lurking beneath the surface: Our analysis shows that the recent uptick in rigs and falling shale decline rates together are enough to stabilize U.S. crude production within six months. Remarkably, if activity isn't scaled back, U.S. production will begin growing in 2017 (albeit barely). This underscores the strength of U.S. tight oil: Should a price rally ensue, it is far too strong to not overheat and eventually snuff out any future oil price rally. We remain bearish on oil prices longer term, and we reiterate our midcycle oil price outlook of $55 WTI ($60 Brent).Analyst: Stephen Simko, CFA

Crude markets have tightened a good deal in recent months, as strong demand growth and supply issues have pulled forward the industry recovery by about a year, relative to our previous outlook. Fundamentals after 2017 are looking particularly bullish for prices, and an oil price rally in 2018 is looking more and more likely (we've raised our 2018 West Texas Intermediate, or WTI, forecast to $65 per barrel).Even so, the strength of U.S. shale is lurking beneath the surface: Our analysis shows that the recent uptick in rigs and falling shale decline rates together are enough to stabilize U.S. crude production within six months. Remarkably, if activity isn't scaled back, U.S. production will begin growing in 2017 (albeit barely). This underscores the strength of U.S. tight oil: Should a price rally ensue, it is far too strong to not overheat and eventually snuff out any future oil price rally. We remain bearish on oil prices longer term, and we reiterate our midcycle oil price outlook of $55 WTI ($60 Brent).Analyst: Stephen Simko, CFA

Oil Markets: Fundamentals Improving, but U.S. Shale Still Looms

Equity Analyst, TMT & Energy Specialist

HL Tan

Brent Oil prices have rallied by more than 18% since end-July'16 close, after new Saudi oil minister tipped for an 'OPEC deal' on oil production freeze, in the upcoming informal OPEC meet in Algeria from 26-28 September 2016. We are skeptical on execution, deal or no deal. Nevertheless, any headline news on supply cuts could result in near term oil volatility or fund re-positioning.Who is going to cut?<ul><li>
Collective production quota is difficult to enforce– Despite an explicit OPEC collective…</li></ul>

Brent Oil prices have rallied by more than 18% since end-July'16 close, after new Saudi oil minister tipped for an 'OPEC deal' on oil production freeze, in the upcoming informal OPEC meet in Algeria from 26-28 September 2016. We are skeptical on execution, deal or no deal. Nevertheless, any headline news on supply cuts could result in near term oil volatility or fund re-positioning.Who is going to cut?
Collective production quota is difficult to enforce– Despite an explicit OPEC collective…

Director - Research, Consulting and Advisory, BondAdviser

Nicholas Yaxley

Director - Research, Consulting and Advisory

Australian bonds & fixed income research

BondAdviser

BondAdviser is the central reference point for intelligent information on Australian fixed income markets. We help you make informed decisions by providing unbiased research, transparent pricing data, analytics, portfolio tools and education.

BondAdviser has the broadest coverage of retail-accessible ASX-listed and over-the-counter Australian bonds and fixed income securities. We make it easy for you to review and compare investments before you place an order with your broker or dealer.

Credit

Over the past year Australian companies have been effected by changing regulation, falling interest rates and currency, sharp drops in commodity prices, an economy in transition and last but not least the uncertainty surrounding Brexit. In our Second Half 2016 Outlook we address the issues that matter to fixed income investors.

Over the past year Australian companies have been effected by changing regulation, falling interest rates and currency, sharp drops in commodity prices, an economy in transition and last but not least the uncertainty surrounding Brexit. In our Second Half 2016 Outlook we address the issues that matter to fixed income investors.

Second Half 2016 Outlook: Where to from Here?

Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

Macroeconomics

<ul><li>Interbank Cash Rate Futures point to a 65% probability that the RBA will cut the Overnight Cash Rate (OCR) by 25 basis points to 1.5% on Tuesday.  Real rates have effectively lifted in the first half of CY2016, with the 25 basis point cut to the OCR in May only partially offsetting the 50 basis point decline in underlying inflation.</li><li>Consequently, Evidente believes that the central bank should deliver another rate cut this week of 25 basis points.  With the Governor’s ten year term about to end in September, surely Mr Stevens will not want to leave a legacy of have tolerated a 50 basis point undershoot on the RBA’s inflation target?</li><li>Since its launch a month ago, the key macro principle guiding Evidente’s model portfolio has been the prospect that interest rates will remain low for an extended period due to the shortfall in aggregate demand.  As a result, the portfolio retains a strong defensive bias, with an overall beta of less than 0.85.  Over the past month, the portfolio delivered alpha of 1.2%, reflecting stock selection within the small cyclical budget, including overweights in MND (+41%), BSL (+32%), MYR (+19%) and PMV (+14%). </li></ul>

Interbank Cash Rate Futures point to a 65% probability that the RBA will cut the Overnight Cash Rate (OCR) by 25 basis points to 1.5% on Tuesday.  Real rates have effectively lifted in the first half of CY2016, with the 25 basis point cut to the OCR in May only partially offsetting the 50 basis point decline in underlying inflation.Consequently, Evidente believes that the central bank should deliver another rate cut this week of 25 basis points.  With the Governor’s ten year term about to end in September, surely Mr Stevens will not want to leave a legacy of have tolerated a 50 basis point undershoot on the RBA’s inflation target?Since its launch a month ago, the key macro principle guiding Evidente’s model portfolio has been the prospect that interest rates will remain low for an extended period due to the shortfall in aggregate demand.  As a result, the portfolio retains a strong defensive bias, with an overall beta of less than 0.85.  Over the past month, the portfolio delivered alpha of 1.2%, reflecting stock selection within the small cyclical budget, including overweights in MND (+41%), BSL (+32%), MYR (+19%) and PMV (+14%). 

Retain Defensive Bias as the Reluctant Rate Cutter Likely to Deliver More Stimulus

Australia

Washington H. Soul Pattinson & Company Limited is an investment holding company. The Company owns shares and properties, coal mining, bulk handling, commercial television licensee, telecommunications carrier, merchant banking, funds management, pharmaceutical retailing, manufacture, processing and marketing of biscuits and cakes.

Washington H. Soul Pattinson and Co. Ltd (SOL AU)

Santos Limited explores for and produces natural gas, crude oil, condensate, naphtha and liquid petroleum gas.  The Company conducts major onshore and offshore petroleum exploration activities at oil and gas fields in Australia (Cooper/Eromanga Basins), the United States (Gulf of Mexico), Indonesia and Papua New Guinea. The Company also transports crude oil by pipeline.

Whitehaven Coal Limited mines and sells metallurgical and thermal coals to the global steel, power generation, and metallurgical industries.

New Hope Corporation Limited is a thermal coal production company based in Australia. The Company also has interests in logistics and infrastructure operations in Australia as well.

Viva Energy Group Limited markets petroleum products. The Company focuses on making, importing, and delivering the fuels, lubricants, chemicals, and bitumen. Viva Energy Group serves the mining, aviation, and marine industries in Australia.

Beach Energy Limited explores for, develops, and produces oil and natural gas. The Company holds interests in exploration and production tenements in Australia, USA, Egypt, Tanzania and Papua New Guinea.

Paladin Energy Ltd operates as a mining company. The Company explores and mines uranium. Paladin Energy serves customers worldwide.

Stanmore Coal Ltd. explores for coal in Australia. The Company's interests include a portfolio of coal assets within Queensland's Bowen and Surat Basin coal provinces.

Emerald Resources NL is an oil and gas exploration company with exploration activities in the United States and Australia.

Karoon Energy Ltd operates as an exploration company. The Company explores and acquires oil and gas exploration assets. Karoon Energy serves customers worldwide.

Idemitsu Kosan Co., Ltd. explores, imports, refines, and distributes petroleum and its related products.  The Company also manufactures and sells petrochemical products.

PTT Exploration and Production Public Company Limited explores for crude oil and natural gas, develops fields for production, and produces oil and natural gas. The Company is a subsidiary of the Petroleum Authority of Thailand.

China Petroleum & Chemical Corporation produces and trades petroleum and petrochemical products. The Company offers gasoline, diesel, jet fuel, kerosene, ethylene, synthetic fibers, synthetic rubber, synthetic resins, and chemical fertilizers. China Petroleum & Chemical markets its products throughout China.

ENEOS Holdings, Inc. operates refining and marketing businesses. The Company refines and distributes petroleum and petroleum chemical products. ENEOS Holdings also provides non ferrous metals, electronic materials, and other products.

APA Corporation operates as an oil and gas company. The Company focuses on exploration and production of oil and gas properties. APA serves clients worldwide.

Marathon Oil Corporation is an independent international energy company engaged in exploration and production, oil sands mining and integrated gas. The Company's operations are focused in North America, Africa and Europe.

EQT Corporation is an integrated energy company with emphasis on Appalachian area natural-gas supply, transmission and distribution. The Company, through its subsidiaries, offer natural gas products to wholesale and retail customers.

Kunlun Energy Company Ltd, through its subsidiaries, explores and produces crude oil and natural gas in China.

Bharat Petroleum Corporation Limited explores for and refines crude oil. The Company manufactures petroleum, petroleum products, lubricants, liquefied petroleum gas, aromatics like benzene and toluene, and other related products. Bharat has retail outlets throughout the country.

Antero Resources Corporation explores, develops, and produces oil and natural gas. The Company focuses on the acquisition, development, and production of unconventional oil and liquids-rich natural gas properties. Antero Resources serves customers in the United States.

Origin Energy Limited is an integrated energy company. The Company is an energy retailer in Australia across electricity, gas and LPG. Origin Energy also holds a generation portfolio and fuel position and a renewable energy portfolio, as well as unconventional gas and LNG interests.

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Origin Energy (ORG AU)

Can OPEC Cut Production

In May we noted that Saudi was likely to pursue a production maximisation policy for 6 months, with a freeze or cuts likely as we head into...

Emad Mostaque

Oil Markets: Fundamentals Improving, but U.S. Shale Still Looms

Crude markets have tightened a good deal in recent months, as strong demand growth and supply issues have pulled forward the industry recovery by...

Morningstar, Inc.

Oil Price - OPEC Deal or No Deal?

Brent Oil prices have rallied by more than 18% since end-July'16 close, after new Saudi oil minister tipped for an 'OPEC deal' on oil production...

HL Tan

Second Half 2016 Outlook: Where to from Here?

Over the past year Australian companies have been effected by changing regulation, falling interest rates and currency, sharp drops in commodity...

BondAdviser

Retain Defensive Bias as the Reluctant Rate Cutter Likely to Deliver More Stimulus

Interbank Cash Rate Futures point to a 65% probability that the RBA will cut the Overnight Cash Rate (OCR) by 25 basis points to 1.5% on...

Sam Ferraro

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