Global Asset Allocation, Politics & Governance, Ecstrat

John-Paul Smith

Global Asset Allocation, Politics & Governance

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.

Cross Asset Strategy

<p>Bull markets are born when the prevailing sentiment is one of disgust and die amidst hubris. The post-GFC run-up in equity prices has been rightly labelled as the most hated bull market in history, but sentiment and flows are finally catching up with the 425% appreciation in the S&amp;P 500 index, which has taken place since the markets' post-GFC nadir at the start of February 2009. Conventional wisdom is that long-term investors should not attempt to time markets but there are times such as 1999-2000 and 2007-08, when it is worth taking the risk of being early and shifting assets into cash and cash proxies given the prevailing levels of valuations and sentiment.</p><p>I believe this is one of those occasions, as current market levels do not discount the potential impact of three key secular drivers on the anticipated returns to capital over the medium term.</p>

Bull markets are born when the prevailing sentiment is one of disgust and die amidst hubris. The post-GFC run-up in equity prices has been rightly labelled as the most hated bull market in history, but sentiment and flows are finally catching up with the 425% appreciation in the S&amp;P 500 index, which has taken place since the markets' post-GFC nadir at the start of February 2009. Conventional wisdom is that long-term investors should not attempt to time markets but there are times such as 1999-2000 and 2007-08, when it is worth taking the risk of being early and shifting assets into cash and cash proxies given the prevailing levels of valuations and sentiment.I believe this is one of those occasions, as current market levels do not discount the potential impact of three key secular drivers on the anticipated returns to capital over the medium term.

Global Equities: China, Technology and Politics to Dominate 2018

Asia and Global Semiconductor and Tech Research

Andrew Lu

Equity Bottom-Up

<h2>What's new?</h2><p>Nikkei News reported <a href="https://www.smartkarma.com/entities/666" target="_blank" data-smartkarma-citation="entities:666:1">Apple Inc (AAPL US)</a> is designing its own main power management chips for use in iPhones as early as in 2018, cutting dependence on <a href="https://www.smartkarma.com/entities/21607" target="_blank" data-smartkarma-citation="entities:21607:1">Dialog Semiconductor PLC (DLG GR)</a>, according to industry sources, as shares in the U.K. developer plunged after the news out. The main power management chip controls an iPhone's charging function, battery management, and energy consumption. "Based on Apple's current plan, they are set to replace partially, or around half of its power…</p>

What's new?Nikkei News reported Apple Inc (AAPL US) is designing its own main power management chips for use in iPhones as early as in 2018, cutting dependence on Dialog Semiconductor PLC (DLG GR), according to industry sources, as shares in the U.K. developer plunged after the news out. The main power management chip controls an iPhone's charging function, battery management, and energy consumption. "Based on Apple's current plan, they are set to replace partially, or around half of its power…

Nikkei Said Apple Cuts Dialog on Power ICs Supply; We Highlighted This in May and More to Come

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

<p>Global Emerging Market fund managers are, on average, underweight technology stocks.  In fact, though tech positioning among EM managers is at its highest in absolute terms, it is at its lowest in relative terms when measured against the MSCI Emerging Markets Index.  In this report, we analyse the level to which this record tech underweight has affected average fund performance this year, whilst also highlighting the sectors that have contributed positively.  On a stock level, underweights in <a href="https://www.smartkarma.com/entities/26" target="_blank" data-smartkarma-citation="entities:26:1">Tencent Holdings Ltd (700 HK)</a> and <a href="https://www.smartkarma.com/entities/787" target="_blank" data-smartkarma-citation="entities:787:1">Alibaba Group Holding Ltd (BABA US)</a> have caused the most pain, yet this isn't the case for all managers.  Baillie Gifford and Hermes stand out as early allocators of tech, long before it became the dominant force it is today.</p>

Global Emerging Market fund managers are, on average, underweight technology stocks.  In fact, though tech positioning among EM managers is at its highest in absolute terms, it is at its lowest in relative terms when measured against the MSCI Emerging Markets Index.  In this report, we analyse the level to which this record tech underweight has affected average fund performance this year, whilst also highlighting the sectors that have contributed positively.  On a stock level, underweights in Tencent Holdings Ltd (700 HK) and Alibaba Group Holding Ltd (BABA US) have caused the most pain, yet this isn't the case for all managers.  Baillie Gifford and Hermes stand out as early allocators of tech, long before it became the dominant force it is today.

Semiconductor Manufacturing International Corp (SMIC) / Equity Bottom-Up

Semiconductor Manufacturing International Corp (SMIC)

<h2>SMIC guides likely 4Q17 losses?</h2><p>After an inline 3Q17 sales/earning numbers, <a href="https://www.smartkarma.com/entities/14231" target="_blank" data-smartkarma-citation="entities:14231:1">Semiconductor Manufacturing (981 HK)</a> guides 4Q17 sales growth of 1-3% q/q and -5% to -3% y/y (vs. Bloomberg consensus' 7% q/q and 2% y/y) together with 5ppts miss on the gross margin and 12ppts miss on operating margin guidance. We thus expect coverage analysts to cut their 4Q17 estimates sharply to a loss level from a US$31mn gain forecast at the Bloomberg now. We attribute the likely 4Q17 losses to utilization falling…</p>

SMIC guides likely 4Q17 losses?After an inline 3Q17 sales/earning numbers, Semiconductor Manufacturing (981 HK) guides 4Q17 sales growth of 1-3% q/q and -5% to -3% y/y (vs. Bloomberg consensus' 7% q/q and 2% y/y) together with 5ppts miss on the gross margin and 12ppts miss on operating margin guidance. We thus expect coverage analysts to cut their 4Q17 estimates sharply to a loss level from a US$31mn gain forecast at the Bloomberg now. We attribute the likely 4Q17 losses to utilization falling…

SMIC Guides Likely 4Q17 Losses? No Wonder Dr. Liang Is Needed

<h2>Summary</h2><p><em>Despite we are seeing a major sell-off in US semiconductor index to decline 2% overnight to 1,295 and <a href="https://www.smartkarma.com/entities/5891" target="_blank" data-smartkarma-citation="entities:5891:1">Nvidia Corp (NVDA US)</a> to fall 1.84% before earnings (please see our earlier report "<a href="https://www.smartkarma.com/insights/semiconductor-couple-of-early-signs-confirm-a-seasonal-correction-to-kick-in" target="_blank" data-smartkarma-citation="insights:14682">Semiconductor - Couple of Early Signs Confirm a Seasonal Correction to Kick In"</a>, Nvidia reports a double-digit sales/EPS beat result and provides a nearly double-digit sales/EPS beat guidance. On the back of Nvidia's dominated platform position on AI training and inferencing and autonomous driving with</em>…</p>

SummaryDespite we are seeing a major sell-off in US semiconductor index to decline 2% overnight to 1,295 and Nvidia Corp (NVDA US) to fall 1.84% before earnings (please see our earlier report "Semiconductor - Couple of Early Signs Confirm a Seasonal Correction to Kick In", Nvidia reports a double-digit sales/EPS beat result and provides a nearly double-digit sales/EPS beat guidance. On the back of Nvidia's dominated platform position on AI training and inferencing and autonomous driving with…

Nvidia - Another Double-Digit Sales/EPS Beat for Gaming and Datacenter

Taiwan

Taiwan Semiconductor Manufacturing Company Ltd. manufactures integrated circuits based on its proprietary designs.  The Company offers a comprehensive set of integrated circuit fabrication processes to manufacture CMOS logic, mixed-mode, volatile and non-volatile memory and BiCMOS chips.  Taiwan Semiconductor is an affiliate of Philips Electronics N.V.

Taiwan Semiconductor (TSMC) - ADR (TSM US)

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Taiwan Semiconductor (TSMC) - ADR (TSM US)

Global Equities: China, Technology and Politics to Dominate 2018

Bull markets are born when the prevailing sentiment is one of disgust and die amidst hubris. The post-GFC run-up in equity prices has been rightly...

John-Paul Smith

Nikkei Said Apple Cuts Dialog on Power ICs Supply; We Highlighted This in May and More to Come

What's new?Nikkei News reported Apple Inc (AAPL US) is designing its own main power management chips for use in iPhones as early as in 2018,...

Andrew Lu

EM Tech: The Pain Trade Of 2017

Global Emerging Market fund managers are, on average, underweight technology stocks. In fact, though tech positioning among EM managers is at its...

Steven Holden

SMIC Guides Likely 4Q17 Losses? No Wonder Dr. Liang Is Needed

SMIC guides likely 4Q17 losses?After an inline 3Q17 sales/earning numbers, Semiconductor Manufacturing (981 HK) guides 4Q17 sales growth of 1-3%...

Andrew Lu

Nvidia - Another Double-Digit Sales/EPS Beat for Gaming and Datacenter

SummaryDespite we are seeing a major sell-off in US semiconductor index to decline 2% overnight to 1,295 and Nvidia Corp (NVDA US) to fall 1.84%...

Andrew Lu

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