The accounting research firm, GMT Research

Lisa Mangkornkarn

The accounting research firm

GMT Research

GMT Research provides independent insight into markets, sectors and companies throughout Asia. Our unique method of mining a comprehensive collection of corporate financial statements for key data allows us to evaluate the financial health of a company, sectors and the market at large. We also investigate the application of accounting standards by companies and sectors, shedding light on the quality of reported profits. Armed with this information, we help investment professionals navigate the financial landscape.

Thematic (Sector/Industry)

Sometimes stock markets don’t bounce back. They just hit the bottom and then crawl sideways for years. Take Greece, its stock market is still 87% below its 2007 peak. Over 20 years later and Thailand’s is still below its 1994 peak! The problem in both instances was that a major part of the economy was over-leveraged and needed to down-pay debt. This necessitated slower economic growth. In Asia back in 1997, as it is in Greece today, an over-leveraged corporate sector was a major contributing factor. And yet scant attention is paid to this part of the economy…but that’s where we come in handy.Whilst we might be best known for our accounting reports on the likes of <a href="http://www.smartkarma.com/insights/noble-group-what-new-disclosure" target="_blank">Noble Group </a>and <a href="http://www.smartkarma.com/insights/airasia-just-answer-the-questions" target="_blank">AirAsia</a>, we also conduct detailed analysis of the listed corporate sector with a focus on capex, free cash flows and leverage. This enables us to tell whether the corporate sector is in a position to support an investment up-cycle or whether a prolonged down-cycle is likely. We gather data from over 32,000 listed non-financials across 43 markets over a 20 year horizon.

Sometimes stock markets don’t bounce back. They just hit the bottom and then crawl sideways for years. Take Greece, its stock market is still 87% below its 2007 peak. Over 20 years later and Thailand’s is still below its 1994 peak! The problem in both instances was that a major part of the economy was over-leveraged and needed to down-pay debt. This necessitated slower economic growth. In Asia back in 1997, as it is in Greece today, an over-leveraged corporate sector was a major contributing factor. And yet scant attention is paid to this part of the economy…but that’s where we come in handy.Whilst we might be best known for our accounting reports on the likes of Noble Group and AirAsia, we also conduct detailed analysis of the listed corporate sector with a focus on capex, free cash flows and leverage. This enables us to tell whether the corporate sector is in a position to support an investment up-cycle or whether a prolonged down-cycle is likely. We gather data from over 32,000 listed non-financials across 43 markets over a 20 year horizon.

CORPORATE LEVERAGE: An Inconvenient Truth

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.

<ul><li>Annualised volatility in the S&amp;P500 spiked to 27% in August, its highest level since November 2011. &nbsp;Nonetheless, the 6 month moving average of volatility of 14% remains broadly in line with historical trends over the sweep of the past 45 years.</li><li>The positive surprise on 2Q US real GDP concealed the five year long stall in nominal GDP growth.&nbsp; The US Federal Reserve&rsquo;s unwillingness to combat disinflation has contributed to the growth stall.&nbsp; Investors remain unnerved by the Fed&rsquo;s willingness to tighten monetary policy at a time when inflation continues to undershoot its 2% target.</li><li>I expect financial market volatility to remain high until the Fed more clearly enunciates the goals of monetary policy and why it remains indifferent to achieving its inflation target.</li><li>In Australia, the poor 2Q capex survey confirmed that the economy is on the precipice of a 20% slump in business investment in FY2015/16.&nbsp; The long and drawn out transition from mining to non-mining capex continues to weigh on growth and frustrate the RBA.&nbsp; In my view, the re-balancing of growth will need an assist from further monetary stimulus.</li></ul>

Annualised volatility in the S&amp;P500 spiked to 27% in August, its highest level since November 2011. &nbsp;Nonetheless, the 6 month moving average of volatility of 14% remains broadly in line with historical trends over the sweep of the past 45 years.The positive surprise on 2Q US real GDP concealed the five year long stall in nominal GDP growth.&nbsp; The US Federal Reserve&rsquo;s unwillingness to combat disinflation has contributed to the growth stall.&nbsp; Investors remain unnerved by the Fed&rsquo;s willingness to tighten monetary policy at a time when inflation continues to undershoot its 2% target.I expect financial market volatility to remain high until the Fed more clearly enunciates the goals of monetary policy and why it remains indifferent to achieving its inflation target.In Australia, the poor 2Q capex survey confirmed that the economy is on the precipice of a 20% slump in business investment in FY2015/16.&nbsp; The long and drawn out transition from mining to non-mining capex continues to weigh on growth and frustrate the RBA.&nbsp; In my view, the re-balancing of growth will need an assist from further monetary stimulus.

United States

Walgreens Boots Alliance, Inc., operates retail drugstores that offer a wide variety of prescription and non-prescription drugs as well as general goods. Walgreens' also offers health services, including primary and acute care, wellness, pharmacy and disease management services and health and fitness.

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Walgreens Boots Alliance (WBA US)

CORPORATE LEVERAGE: An Inconvenient Truth

Sometimes stock markets don’t bounce back. They just hit the bottom and then crawl sideways for years. Take Greece, its stock market is still 87%...

GMT Research

Weekly Impressions

Annualised volatility in the S&P500 spiked to 27% in August, its highest level since November 2011. Nonetheless, the 6 month moving average...

Sam Ferraro

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