Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Thematic (Sector/Industry)

<ul>
<li>We stick with Brazilian exchange B3 as our core value pick; it has a growing share of data revenues, its post-trade revenues are understated and equity fee pressure is easing</li>
<li>We keep Hong Kong Exchange as a buy, with its high share of post-trade revenues; HKEx shares have been highly volatile, but they represent relative value combined with growth potential</li>
<li>Philippines Stock Exchange (PSE) and BSE are new additions to our coverage of EM exchanges with PSE being one to watch; MexBolsa is deep value, but lacking a re-rating catalyst</li>
</ul>


We stick with Brazilian exchange B3 as our core value pick; it has a growing share of data revenues, its post-trade revenues are understated and equity fee pressure is easing
We keep Hong Kong Exchange as a buy, with its high share of post-trade revenues; HKEx shares have been highly volatile, but they represent relative value combined with growth potential
Philippines Stock Exchange (PSE) and BSE are new additions to our coverage of EM exchanges with PSE being one to watch; MexBolsa is deep value, but lacking a re-rating catalyst


Emerging Market Exchanges – Brazilian Exchange B3 (B3SA3 BZ) Stands Out

Equity Bottom-Up

Bolsa Mexicana De Valores Sab / Equity Bottom-Up

Bolsa Mexicana De Valores Sab (BOLSAA MM)

<ul>
<li>We upgrade BolsaMex to a buy rating; we believe that it is too cheap to ignore and that it has sound growth credentials with its healthy share of post-trade revenues</li>
<li>We downgrade B3 Exchange to a neutral from buy, after its strong share price performance since mid-October lows; we feel it is still attractive but not as compelling as BolsaMex</li>
<li>We upgrade BSE to a neutral rating from sell despite it trading on rich fundamental valuations; India’s strong IPO pipeline is one major factor in de-railing our sell recommendation</li>
</ul>


We upgrade BolsaMex to a buy rating; we believe that it is too cheap to ignore and that it has sound growth credentials with its healthy share of post-trade revenues
We downgrade B3 Exchange to a neutral from buy, after its strong share price performance since mid-October lows; we feel it is still attractive but not as compelling as BolsaMex
We upgrade BSE to a neutral rating from sell despite it trading on rich fundamental valuations; India’s strong IPO pipeline is one major factor in de-railing our sell recommendation


GEM Exchanges –Bolsa Mexicana (BOLSAA MM) Is Our Top Pick

<ul>
<li>We stick with Brazilian exchange B3 as our buy pick, as the scorecard indicates; data represents the highest share of total revenues versus peers and its post-trade revenues are understated</li>
<li>We downgrade Hong Kong Exchange to a neutral from buy, after its strong share price performance YTD; we feel much growth potential is discounted at current valuations</li>
<li>We downgrade BSE to a sell rating as it trades on rich fundamental valuations making it vulnerable to negative earnings surprises; its EBITDA margin no longer lags its peer group</li>
</ul>


We stick with Brazilian exchange B3 as our buy pick, as the scorecard indicates; data represents the highest share of total revenues versus peers and its post-trade revenues are understated
We downgrade Hong Kong Exchange to a neutral from buy, after its strong share price performance YTD; we feel much growth potential is discounted at current valuations
We downgrade BSE to a sell rating as it trades on rich fundamental valuations making it vulnerable to negative earnings surprises; its EBITDA margin no longer lags its peer group


GEM Exchanges –Scorecard Confirms Brazilian Exchange B3 (B3SA3 BZ) As Our Top Pick

<ul>
<li>Our core pick is Brazilian exchange B3; this is a contrarian call, given its poor share price performance year to date, but it is attractively priced versus its peers</li>
<li>B3’s share of post-trade revenue is understated, and it is a well-diversified exchange in terms of the product offering, which includes cash equities, equity derivatives, FX, interest rates and commodities</li>
<li>We also like Hong Kong Exchange, with its high share of post-trade revenues; HKEx should benefit from improving investor sentiment towards China, boosted by the Chinese government’s recent economic stimulus</li>
</ul>


Our core pick is Brazilian exchange B3; this is a contrarian call, given its poor share price performance year to date, but it is attractively priced versus its peers
B3’s share of post-trade revenue is understated, and it is a well-diversified exchange in terms of the product offering, which includes cash equities, equity derivatives, FX, interest rates and commodities
We also like Hong Kong Exchange, with its high share of post-trade revenues; HKEx should benefit from improving investor sentiment towards China, boosted by the Chinese government’s recent economic stimulus


Emerging Market Exchanges – Attractive Valuations with Defensive Qualities

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

Cross Asset Strategy

<ul>
<li>Rotation is underway in the EM Financial sector, with selling in Brazil Financials funding rotation in to Greece, UAE and Argentinian financials.</li>
<li>Brazil Financials remain an overweight for the majority of EM funds, but conviction is falling, with selling in key names Banco Bradesco and Banco BTG Pactual.</li>
<li>Itau Unibanco Holding remains the flagship holding, owned by 43.7% of funds, though remains well below its 2010 ownership peak.</li>
</ul>


Rotation is underway in the EM Financial sector, with selling in Brazil Financials funding rotation in to Greece, UAE and Argentinian financials.
Brazil Financials remain an overweight for the majority of EM funds, but conviction is falling, with selling in key names Banco Bradesco and Banco BTG Pactual.
Itau Unibanco Holding remains the flagship holding, owned by 43.7% of funds, though remains well below its 2010 ownership peak.


Brazil Financials: Losing Ground Amid Global Financials Rotation

Brazil

B3 S.A. – Brasil, Bolsa, Balcão is a prominent financial market infrastructure company that provides trading services in an exchange and over-the-counter (OTC) environment. It organizes markets for securities, commodities, and futures, and offers post-trade services including settlement, clearing, deposit, and registration. The company also provides technological solutions and data analytics services. B3 is headquartered in São Paulo, Brazil, and was founded on August 23, 1890.

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B3 (B3SA3 BR)

Emerging Market Exchanges – Brazilian Exchange B3 (B3SA3 BZ) Stands Out

Our core value pick is B3 in Brazil, with its well spread product offering; buy HKEx with its high post-trade revenues, whilst PSE is one to watch,...

Victor Galliano

GEM Exchanges –Bolsa Mexicana (BOLSAA MM) Is Our Top Pick

We Upgrade BolsaMex to buy for its deep value, strong post-trade revenues, more attractive than downgraded-to-neutral B3; BSE upgraded to neutral...

Victor Galliano

GEM Exchanges –Scorecard Confirms Brazilian Exchange B3 (B3SA3 BZ) As Our Top Pick

In GEM exchanges, stick with B3 as our buy due to attractive value and low PEG, downgrade HKEx to neutral, and downgrade BSE to sell due to rich...

Victor Galliano

Emerging Market Exchanges – Attractive Valuations with Defensive Qualities

B3’s share of post-trade revenue is understated, it is a well-diversified exchange in terms of the product offering; HKEx has a high share of post...

Victor Galliano

Brazil Financials: Losing Ground Amid Global Financials Rotation

Rotation in EM financial sector sees selling in Brazil funding rotation into Greece, UAE, and Argentina financials, with Itau Unibanco Holding as...

Steven Holden

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Emerging Market Exchanges – Brazilian Exchange B3 (B3SA3 BZ) Stands Out

Our core value pick is B3 in Brazil, with its well spread product offering; buy HKEx with its high post-trade revenues, whilst PSE is one to watch,...

Victor Galliano

GEM Exchanges –Bolsa Mexicana (BOLSAA MM) Is Our Top Pick

​We Upgrade BolsaMex to buy for its deep value, strong post-trade revenues, more attractive than downgraded-to-neutral B3; BSE upgraded to neutral...

Victor Galliano

GEM Exchanges –Scorecard Confirms Brazilian Exchange B3 (B3SA3 BZ) As Our Top Pick

​In GEM exchanges, stick with B3 as our buy due to attractive value and low PEG, downgrade HKEx to neutral, and downgrade BSE to sell due to rich...

Victor Galliano

Emerging Market Exchanges – Attractive Valuations with Defensive Qualities

​B3’s share of post-trade revenue is understated, it is a well-diversified exchange in terms of the product offering; HKEx has a high share of post...

Victor Galliano

Brazil Financials: Losing Ground Amid Global Financials Rotation

​Rotation in EM financial sector sees selling in Brazil funding rotation into Greece, UAE, and Argentina financials, with Itau Unibanco Holding as...

Steven Holden

We Upgrade BolsaMex to buy for its deep value, strong post-trade revenues, more attractive than downgraded-to-neutral B3; BSE upgraded to neutral...

In GEM exchanges, stick with B3 as our buy due to attractive value and low PEG, downgrade HKEx to neutral, and downgrade BSE to sell due to rich...

B3’s share of post-trade revenue is understated, it is a well-diversified exchange in terms of the product offering; HKEx has a high share of post...

Rotation in EM financial sector sees selling in Brazil funding rotation into Greece, UAE, and Argentina financials, with Itau Unibanco Holding as...