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.

Thematic (Sector/Industry)

<ul><li>Most active funds tout their ability to discriminate between good and poor quality management, and accordingly weight their portfolios towards businesses that they consider to be well managed.&nbsp; In the past decade, portfolio managers have also boasted of their ability to identify and invest in companies that score strongly across environment, governance and social (ESG) dimensions.</li></ul><ul><li>In the second instalment of Evidente's Dissecting Quality series, I show that management quality and corporate governance matter more for complex companies, where shareholders face high monitoring costs. To that end, I develop a systematic model of complexity and agency costs for the ASX200 based on eight company specific factors.</li><li>Some of the industrials that make up the top 20 complex stocks include: Qantas, Amcor, Computershare, Seek and Brambles. Investors can use the model to integrate their assessments of company management and corporate governance. In particular, investors should avoid complex stocks that score poorly across management quality and governance practices.</li></ul>

Most active funds tout their ability to discriminate between good and poor quality management, and accordingly weight their portfolios towards businesses that they consider to be well managed.&nbsp; In the past decade, portfolio managers have also boasted of their ability to identify and invest in companies that score strongly across environment, governance and social (ESG) dimensions.In the second instalment of Evidente's Dissecting Quality series, I show that management quality and corporate governance matter more for complex companies, where shareholders face high monitoring costs. To that end, I develop a systematic model of complexity and agency costs for the ASX200 based on eight company specific factors.Some of the industrials that make up the top 20 complex stocks include: Qantas, Amcor, Computershare, Seek and Brambles. Investors can use the model to integrate their assessments of company management and corporate governance. In particular, investors should avoid complex stocks that score poorly across management quality and governance practices.

Dissecting Quality: When Does Management Quality and Corporate Governance Matter Most?

Macroeconomics

The market is firmly expecting another rate cut from the RBA at today&rsquo;s Board meeting. The domestic data flow has not delivered any large negative surprises, but the key swing factor over the past month appears to have been the 25% slide in the iron ore price, reflecting lower steel demand associated with renewed weakness in Chinese housing markets but also a lift in expected future iron ore production. Importantly, short-term gyrations in volatile commodity markets are unlikely to sway the RBA, nor does the the slide in the iron ore price provide a positive narrative to ease monetary policy. The RBA has plenty of scope to cut interest rates: the economy remains stuck in a nominal recession, revenue conditions are subdued, there is still considerable slack in the labour market, growth in private sector wages has reached a record low and the inflation outlook does not pose an obstacle to another rate cut.&nbsp;&nbsp; But the central bank will likely wait for another month.

The market is firmly expecting another rate cut from the RBA at today&rsquo;s Board meeting. The domestic data flow has not delivered any large negative surprises, but the key swing factor over the past month appears to have been the 25% slide in the iron ore price, reflecting lower steel demand associated with renewed weakness in Chinese housing markets but also a lift in expected future iron ore production. Importantly, short-term gyrations in volatile commodity markets are unlikely to sway the RBA, nor does the the slide in the iron ore price provide a positive narrative to ease monetary policy. The RBA has plenty of scope to cut interest rates: the economy remains stuck in a nominal recession, revenue conditions are subdued, there is still considerable slack in the labour market, growth in private sector wages has reached a record low and the inflation outlook does not pose an obstacle to another rate cut.&nbsp;&nbsp; But the central bank will likely wait for another month.

Another line ball decision for the RBA, but expect no change in April

The March non-farm payrolls release confirmed that employment in the United States continues to expand but at a more moderate pace over the past three months.&nbsp;The Phillips curve has flattened since the financial crisis, which confirms that inflation has become less responsive to changes in the unemployment rate. A structurally lower participation rate associated with the demographics of ageing suggests that there is far more slack in the labour market than implied by the unemployment rate of 5.5%.&nbsp; The performance of premium rated growth stocks around the taper &lsquo;tantrum&rsquo; in May 2013 reveals just how sensitive these stocks are to the future course of US monetary policy. The worst four performing stocks among the ASX200 at the time were: CTD, DMP, IIN and REA, reflecting their long duration attributes. Discount rate shocks therefore represent a key risk for growth investors. But the recent moderation&nbsp;of US&nbsp;employment growth, still considerable slack in the US labour market, and little prospect that core inflation will move back to the Fed Reserve's 2% objective anytime soon, should buy more time for not just the Fed but also growth investors.

The March non-farm payrolls release confirmed that employment in the United States continues to expand but at a more moderate pace over the past three months.&nbsp;The Phillips curve has flattened since the financial crisis, which confirms that inflation has become less responsive to changes in the unemployment rate. A structurally lower participation rate associated with the demographics of ageing suggests that there is far more slack in the labour market than implied by the unemployment rate of 5.5%.&nbsp; The performance of premium rated growth stocks around the taper &lsquo;tantrum&rsquo; in May 2013 reveals just how sensitive these stocks are to the future course of US monetary policy. The worst four performing stocks among the ASX200 at the time were: CTD, DMP, IIN and REA, reflecting their long duration attributes. Discount rate shocks therefore represent a key risk for growth investors. But the recent moderation&nbsp;of US&nbsp;employment growth, still considerable slack in the US labour market, and little prospect that core inflation will move back to the Fed Reserve's 2% objective anytime soon, should buy more time for not just the Fed but also growth investors.

US employment growth moderates, buying the Fed and growth investors more time

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>For the month of June 2024, 8 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$6bn.</li>
<li>The average premium for the new transactions announced (or first discussed) in June was ~52%. The average premium YTD is ~47%. </li>
<li>This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.</li>
</ul>


For the month of June 2024, 8 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$6bn.
The average premium for the new transactions announced (or first discussed) in June was ~52%. The average premium YTD is ~47%. 
This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.


(Mostly) Asia M&A, June 2024: Fancl, Capitol Health, Infocom,Jeisys Medical, Nagatanien, Henlius Bio

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<ul>
<li>We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.</li>
<li>Highest spreads: <a href="https://www.smartkarma.com/entities/yichang-hec-changjiang-pharmaceutical" target="_blank" data-smartkarma-citation="entities:21040:1" rel="noopener">Yichang HEC Changjiang Pharma (1558 HK)</a>, <a href="https://www.smartkarma.com/entities/hollysys-automation-technologies" target="_blank" data-smartkarma-citation="entities:26078:1" rel="noopener">Hollysys Automation Technologies (HOLI US)</a>, <a href="https://www.smartkarma.com/entities/fancl-corp" target="_blank" data-smartkarma-citation="entities:15862:1" rel="noopener">Fancl Corp (4921 JP)</a>, <a href="https://www.smartkarma.com/entities/asia-cement-china-holdings" target="_blank" data-smartkarma-citation="entities:3374:1" rel="noopener">Asia Cement China (743 HK)</a>, <a href="https://www.smartkarma.com/entities/ansarada-group-ltd" target="_blank" data-smartkarma-citation="entities:30718:1" rel="noopener">Ansarada Group Ltd (AND AU)</a>. </li>
<li>Lowest spreads: <a href="https://www.smartkarma.com/entities/tatsuta-electric-wire-cable-co-ltd" target="_blank" data-smartkarma-citation="entities:12509:1" rel="noopener">Tatsuta Electric Wire &amp; Cable (5809 JP)</a>, <a href="https://www.smartkarma.com/entities/mma-offshore-ltd" target="_blank" data-smartkarma-citation="entities:594:1" rel="noopener">Mma Offshore (MRM AU)</a>, <a href="https://www.smartkarma.com/entities/great-eastern-holdings-ltd" target="_blank" data-smartkarma-citation="entities:13993:1" rel="noopener">Great Eastern Holdings (GE SP)</a>, <a href="https://www.smartkarma.com/entities/alumina-ltd" target="_blank" data-smartkarma-citation="entities:939:1" rel="noopener">Alumina Ltd (AWC AU)</a>, <a href="https://www.smartkarma.com/entities/nagatanien-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:8059:1" rel="noopener">Nagatanien Holdings (2899 JP)</a>.
</li>
</ul>


We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), Fancl Corp (4921 JP), Asia Cement China (743 HK), Ansarada Group Ltd (AND AU). 
Lowest spreads: Tatsuta Electric Wire &amp; Cable (5809 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Alumina Ltd (AWC AU), Nagatanien Holdings (2899 JP).



Merger Arb Mondays (17 Jun) - Fancl, Tatsuta, A8, China TCM, GAPack, CPMC, Malaysia Airports, Bapcor

Australia

Adbri Limited supplies construction materials. The Company distributes cement, concrete, aggregates, industrial lime, clinker, and other related products. Adbri serves customers in Australia.

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Adbri (ABC AU)

Dissecting Quality: When Does Management Quality and Corporate Governance Matter Most?

Most active funds tout their ability to discriminate between good and poor quality management, and accordingly weight their portfolios towards...

Sam Ferraro

Another line ball decision for the RBA, but expect no change in April

The market is firmly expecting another rate cut from the RBA at today’s Board meeting. The domestic data flow has not delivered any large negative...

Sam Ferraro

US employment growth moderates, buying the Fed and growth investors more time

The March non-farm payrolls release confirmed that employment in the United States continues to expand but at a more moderate pace over the past...

Sam Ferraro

(Mostly) Asia M&A, June 2024: Fancl, Capitol Health, Infocom,Jeisys Medical, Nagatanien, Henlius Bio

For the month of June, 8 new deals were discussed on Smartkarma with an overall deal size of ~US$6bn. The average premium for the new deals...

David Blennerhassett

Merger Arb Mondays (17 Jun) - Fancl, Tatsuta, A8, China TCM, GAPack, CPMC, Malaysia Airports, Bapcor

This week, the highest gross spreads are HEC Pharma (127.1%), Hollysys (26.1%), Fancl (17.8%), Asia Cement China (13.4%), Ansarada (11.1%),...

Arun George

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