Founder and Strategist, Entext Economics & Strategy

Sean Maher

Founder and Strategist

Entext Economics & Strategy

Entext provides institutional investors with distinctive, actionable asset allocation and thematic research, which typically challenges the market consensus. Our clients range from credit, equity and multi-asset hedge and pension funds to family offices and sovereign funds. 
 
We focus on identifying key inflection points in macro data and relative asset performance amid the 'groupthink'  and confirmation bias that characterizes most investment bank analysis.

Macro Driven Investment Insight

Macroeconomics

<ul><li>The view a year ago was that the USD rally would reverse as US reflation euphoria faded, 10-yr Treasuries were more likely to test 2% than 3 and to overweight global tech and materials.</li><li>The stance was overweight EM, Japan and Europe - like the bullish oil view, Japan belatedly delivered in Q4 but remains the only major market not to have seen multiple expansion.</li><li>Belated recognition of the Asian challenge to US tech dominance and the capitulation of leading macro funds in markets characterized by a low volatility ‘melt up’ were striking trends this year.</li><li>Japan and Europe should close their valuation discount with the US (on 14.5x forward versus 18.5x); Japan still has the best DM earnings momentum as well as pay-out ratio upside. </li><li>A global business investment surge would be reflationary – in 2016, investment growth fell under 2% y/y but is now running at above 4% and accelerating - thematic exposure remains attractive.</li><li>While core inflation is lagging, the US, Eurozone and particularly Japanese economies are growing above potential – theoretical ‘output gaps’ are closing fast and inflation risks skewed to the upside.</li><li>A sharper than anticipated China slowdown, US ‘national security’ trade measures as well as fears of a faster QE unwind imply markets will be more volatile and asset dispersion will rise.</li><li>Policy normalization will pressure DM yields 50bps plus higher, but the prospect that China’s capital markets could within a decade overtake the US will start to become a focus for asset allocation.</li></ul>

The view a year ago was that the USD rally would reverse as US reflation euphoria faded, 10-yr Treasuries were more likely to test 2% than 3 and to overweight global tech and materials.The stance was overweight EM, Japan and Europe - like the bullish oil view, Japan belatedly delivered in Q4 but remains the only major market not to have seen multiple expansion.Belated recognition of the Asian challenge to US tech dominance and the capitulation of leading macro funds in markets characterized by a low volatility ‘melt up’ were striking trends this year.Japan and Europe should close their valuation discount with the US (on 14.5x forward versus 18.5x); Japan still has the best DM earnings momentum as well as pay-out ratio upside. A global business investment surge would be reflationary – in 2016, investment growth fell under 2% y/y but is now running at above 4% and accelerating - thematic exposure remains attractive.While core inflation is lagging, the US, Eurozone and particularly Japanese economies are growing above potential – theoretical ‘output gaps’ are closing fast and inflation risks skewed to the upside.A sharper than anticipated China slowdown, US ‘national security’ trade measures as well as fears of a faster QE unwind imply markets will be more volatile and asset dispersion will rise.Policy normalization will pressure DM yields 50bps plus higher, but the prospect that China’s capital markets could within a decade overtake the US will start to become a focus for asset allocation.

2018 Outlook: Part 2 – Global Investment Cycle Turning?

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

TSE Tokyo Price Index TOPIX / Technical Analysis

Economic data finally confirms what the charts have been saying all year: global growth in the major regions is now in sync.  We see the bullish advance in equities continuing well into 2018, a continuation of a long-term trend. However, the Sectors that propel this trend may be different.In our December International Strategy, we explore these and the following themes in further detail: <ul><li>Overweight Japan. </li><li>Cyclicals continue to lead, defensive continues to lag. </li><li>Actionable Sector/Group themes:<ol><li>Global banks are breaking out/bullishly inflecting. </li><li>Energy is bottoming – still a non-consensus view. </li><li>Pullback opportunity in metals &amp; mining.</li></ol></li></ul>

Economic data finally confirms what the charts have been saying all year: global growth in the major regions is now in sync.  We see the bullish advance in equities continuing well into 2018, a continuation of a long-term trend. However, the Sectors that propel this trend may be different.In our December International Strategy, we explore these and the following themes in further detail: Overweight Japan. Cyclicals continue to lead, defensive continues to lag. Actionable Sector/Group themes:Global banks are breaking out/bullishly inflecting. Energy is bottoming – still a non-consensus view. Pullback opportunity in metals &amp; mining.

International Equity Strategy: Bullish Big Picture

Deputy Chief Economist

Sharmila Whelan

Independent and original Asian investment research

Aletheia Capital

Aletheia Capital (HK) Ltd. (previously known as Asianomics) combines the extensive knowledge of its experienced team with technology and regulatory changes to disrupt Global Markets business in Asia. The firm is completely independent with no conflicts of interest either on Investment Banking advisory or Capital Markets execution.

Exports and investment spending remain the main drivers of the economic upswing underway in Japan. They are the bright spots. In the third quarter in volume terms exports rose by a solid 1.5% QoQ. Meanwhile private non­-residential investment spending rose for the fourth straight quarter by 0.2% QoQ or 3% YoY. Overall investment spending, gross fixed capital formation, contracted by 0.5% in the quarter on the back of falling public investment (a positive in our book) and private residential…

Exports and investment spending remain the main drivers of the economic upswing underway in Japan. They are the bright spots. In the third quarter in volume terms exports rose by a solid 1.5% QoQ. Meanwhile private non­-residential investment spending rose for the fourth straight quarter by 0.2% QoQ or 3% YoY. Overall investment spending, gross fixed capital formation, contracted by 0.5% in the quarter on the back of falling public investment (a positive in our book) and private residential…

Managing Director, MTS Research

Peter Beuttell

Managing Director

MTS Research

MTS Research Limited is an independent investment research company specialising in technical analysis. 

MTS Research provides technical analysis services in the form of regular publications and consultancy advice, catering for a number of different investment approaches from absolute or relative returns to long-only and long/short.  The company has a global client base of blue-chip financial institutions ranging in size and stretching from Los Angeles to Tokyo, via New York, London, Frankfurt and Hong Kong.  

MTS was founded in 1989 at the request of Morgan Grenfell Investment Services Limited (MGIS), the ERISA arm of Morgan Grenfell Asset Management (subsequently Deutsche Asset Management), by Peter Beuttell, a Portfolio Manager at MGIS between 1987 and 1989. 

Peter is a qualified Chartered Accountant and self-taught market technician with over 30 years experience.  At MGIS, Peter managed money in European, Australasian and Far East markets for US clients, such as American Airlines and American Petrofina.  He achieved first quartile perfomance on their behalf by blending fundamental and technical analysis in his investment decision-making.  

After an initial focus on the EAFE markets (Europe, Australasia and Far East), the company has recently expanded its coverage to include the Americas, thanks to the recently-completed two-year Knowledge Transfer Partnership with the University of Plymouth.  The resulting software – the Technical Overlay Program (TOP) – allows fund managers to access an immediate Technical view on any market, sector, stock, bond yield, currency or commodity within their selected universe.

MTS Research consists of a team of five based in Penzance and London. 

What is certainly clear is that both the Topix wave pattern and the momentum extremes which occurred in October point to new highs above 1,844 to come eventually. The first chart shows that the advance from the April low contains 4 waves of what should be a 5-wave pattern - i.e. as a minimum, one more rally leg is due.  In addition, the recent correction down from 1,844 hit a textbook target at 1,743, and had the a-b-c pattern of a completed correction.  (But see also below the third chart).The…

What is certainly clear is that both the Topix wave pattern and the momentum extremes which occurred in October point to new highs above 1,844 to come eventually. The first chart shows that the advance from the April low contains 4 waves of what should be a 5-wave pattern - i.e. as a minimum, one more rally leg is due.  In addition, the recent correction down from 1,844 hit a textbook target at 1,743, and had the a-b-c pattern of a completed correction.  (But see also below the third chart).The…

Thematic (Sector/Industry)

<ul>
<li>On my Asian trip, the sharp rallies in Japanese equities and oil which surprised the consensus were a frequent topic of discussion – while extended, both look supported by fundamentals into 2018.</li>
<li>The IEA forecasts for a sustained US shale boom look complacent – new well productivity is slumping while the sector is finally seeing capital discipline as executive incentives shift.</li>
<li>With Saudi challenging Iran for regional dominance, further EM demand growth upside combined with disappointing shale…</li>
</ul>


On my Asian trip, the sharp rallies in Japanese equities and oil which surprised the consensus were a frequent topic of discussion – while extended, both look supported by fundamentals into 2018.
The IEA forecasts for a sustained US shale boom look complacent – new well productivity is slumping while the sector is finally seeing capital discipline as executive incentives shift.
With Saudi challenging Iran for regional dominance, further EM demand growth upside combined with disappointing shale…


Oil and Japan Rallies Justified by Fundamentals, Indonesia Trip Notes…

Japan

The TOPIX, also known as the Tokyo Stock Price Index, is a capitalization-weighted index of all companies listed on the First Section of the Tokyo Stock Exchange. The index is supplemented by the subindices of the 33 industry sectors. The index calculation excludes temporary issues and preferred stocks, and has a base value of 100 as of January 4, 1968.

TSE Tokyo Price Index TOPIX (TPX INDEX)

2018 Outlook: Part 2 – Global Investment Cycle Turning?

The view a year ago was that the USD rally would reverse as US reflation euphoria faded, 10-yr Treasuries were more likely to test 2% than 3 and...

Sean Maher

International Equity Strategy: Bullish Big Picture

Economic data finally confirms what the charts have been saying all year: global growth in the major regions is now in sync. We see the bullish...

Vermilion Research

Japan – Improving Fortunes

Exports and investment spending remain the main drivers of the economic upswing underway in Japan. They are the bright spots. In the third quarter...

Sharmila Whelan

Topix: Correction Completed? Or Not?

What is certainly clear is that both the Topix wave pattern and the momentum extremes which occurred in October point to new highs above 1,844 to...

Peter Beuttell

Oil and Japan Rallies Justified by Fundamentals, Indonesia Trip Notes…

On my Asian trip, the sharp rallies in Japanese equities and oil which surprised the consensus were a frequent topic of discussion – while...

Sean Maher