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

<ul>
<li>We are starting to see early signs of a potential bottom on MSCI EM (EEM-US).</li>
<li>Specifically, the EEM-US has reversed topside its 6-month downtrend. If MSCI EM has indeed bottomed, we want to be buying the leaders; that is where this report comes in.</li>
<li>Specific themes include attractive opportunities in India and Thailand, and also many in Taiwan and South Korea. Attractive Sectors include Energy, Financials, Materials, and Industrials.</li>
</ul>


We are starting to see early signs of a potential bottom on MSCI EM (EEM-US).
Specifically, the EEM-US has reversed topside its 6-month downtrend. If MSCI EM has indeed bottomed, we want to be buying the leaders; that is where this report comes in.
Specific themes include attractive opportunities in India and Thailand, and also many in Taiwan and South Korea. Attractive Sectors include Energy, Financials, Materials, and Industrials.


Finding Leadership Within Emerging Markets

<ul>
<li>This is now the third Int'l Compass/third week in a row where we are discussing an increasing number of country indexes experiencing bullish 3.5-9-month downtrend reversals.</li>
<li>Importantly, all of the previously mentioned indexes are holding above their breakout levels (i.e., there has yet to be any failed breakouts).</li>
<li>Now, the U.S. dollar (DXY) is starting to show early signs of topping. We continue to believe that global equities are going through a bottoming process.</li>
</ul>


This is now the third Int'l Compass/third week in a row where we are discussing an increasing number of country indexes experiencing bullish 3.5-9-month downtrend reversals.
Importantly, all of the previously mentioned indexes are holding above their breakout levels (i.e., there has yet to be any failed breakouts).
Now, the U.S. dollar (DXY) is starting to show early signs of topping. We continue to believe that global equities are going through a bottoming process.


U.S. Dollar Topping?; Bullish Reversals Continue; Ideas in Growth/Cyclicals, Financials

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 think of value based on traditional valuation metrics, such as PE multiples and PBV ratios, and supplement these by metrics like PE to growth ratios to identify the more attractive names amongst growth – including FinTech – stocks</li>
<li>In Brazil, we continue to like <a href="https://www.smartkarma.com/entities/banco-do-brasil-sa" target="_blank" data-smartkarma-citation="entities:24564:1" rel="noopener">Banco Do Brasil Sa (BBAS3 BZ)</a>  and we add <a href="https://www.smartkarma.com/entities/banco-bradesco-sa" target="_blank" data-smartkarma-citation="entities:24569:1" rel="noopener">Banco Bradesco Sa (BBDC4 BZ)</a> to the attractive value category</li>
<li>We turn cautious on Brazilian challenger <a href="https://www.smartkarma.com/entities/banco-inter-sa" target="_blank" data-smartkarma-citation="entities:28162:1" rel="noopener">Banco Inter SA (BIDI11 BZ)</a>, based on valuation; it trades on a consensus 2022E PBV ratio of 17.8x and even compared to Nubank’s estimated valuation, and those of other digital banks, Inter seems expensive</li>
<li>In Mexico, <a href="https://www.smartkarma.com/entities/grupo-financiero-banorte-o" target="_blank" data-smartkarma-citation="entities:24780:1" rel="noopener">Grupo Financiero Banorte-O (GFNORTEO MF)</a> is much more of a positive consensus recommendation, yet we still believe that the stock has further to run</li>
<li>There is heightened political risk in Peru; <a href="https://www.smartkarma.com/entities/credicorp-ltd" target="_blank" data-smartkarma-citation="entities:25963:1" rel="noopener">Credicorp Ltd (BAP US)</a>  has de-rated and is a stock to watch</li>
<li>Among the LatAm payments companies, we are positive on <a href="https://www.smartkarma.com/entities/pagseguro-digital-ltd" target="_blank" data-smartkarma-citation="entities:27939:1" rel="noopener">Pagseguro Digital Ltd (PAGS US)</a> </li>
<li>Despite its premium growth in AUM, we are cautious on <a href="https://www.smartkarma.com/entities/xp-inc" target="_blank" data-smartkarma-citation="entities:28619:1" rel="noopener">XP Inc (XP US)</a>, due to eroding take rate and rising IFA costs</li>
<li>In exchanges, <a href="https://www.smartkarma.com/entities/b3-sa-brasil-bolsa-balcao" target="_blank" data-smartkarma-citation="entities:24580:1" rel="noopener">B3 Sa - Brasil Bolsa Balcao (B3SA3 BZ)</a>’s valuations have descended from the stratosphere but we believe that this stock could have further downside risk</li>
<li>Risks to our positive view on Banco do Brasil and Bradesco include higher than expected NPLs and lower than expected credit spreads, as well as soft fee growth; similar risks apply to Banorte, BanBajio and in the case of Credicorp we also add political risk; Banco Inter’s upside risks include better than expected opex control especially on new customer acquisition driving better than expected returns; XP upside risks include higher than expected take rate and lower than expected opex, and B3 could deliver stronger than expected revenue growth in FICC and derivatives especially</li>
</ul>


We think of value based on traditional valuation metrics, such as PE multiples and PBV ratios, and supplement these by metrics like PE to growth ratios to identify the more attractive names amongst growth – including FinTech – stocks
In Brazil, we continue to like Banco Do Brasil Sa (BBAS3 BZ)  and we add Banco Bradesco Sa (BBDC4 BZ) to the attractive value category
We turn cautious on Brazilian challenger Banco Inter SA (BIDI11 BZ), based on valuation; it trades on a consensus 2022E PBV ratio of 17.8x and even compared to Nubank’s estimated valuation, and those of other digital banks, Inter seems expensive
In Mexico, Grupo Financiero Banorte-O (GFNORTEO MF) is much more of a positive consensus recommendation, yet we still believe that the stock has further to run
There is heightened political risk in Peru; Credicorp Ltd (BAP US)  has de-rated and is a stock to watch
Among the LatAm payments companies, we are positive on Pagseguro Digital Ltd (PAGS US) 
Despite its premium growth in AUM, we are cautious on XP Inc (XP US), due to eroding take rate and rising IFA costs
In exchanges, B3 Sa - Brasil Bolsa Balcao (B3SA3 BZ)’s valuations have descended from the stratosphere but we believe that this stock could have further downside risk
Risks to our positive view on Banco do Brasil and Bradesco include higher than expected NPLs and lower than expected credit spreads, as well as soft fee growth; similar risks apply to Banorte, BanBajio and in the case of Credicorp we also add political risk; Banco Inter’s upside risks include better than expected opex control especially on new customer acquisition driving better than expected returns; XP upside risks include higher than expected take rate and lower than expected opex, and B3 could deliver stronger than expected revenue growth in FICC and derivatives especially


LatAm Financials Review: Focus on the Value Opportunities

Our bullish outlook continues to be supported by ongoing positive market dynamics and the absence of breakdowns for major indexes around the globe. The path of least resistance remains higher and we continue to believe a melt-up is likely in the weeks/months ahead. The global Technology, Discretionary, and Manufacturing Sectors remain leadership -- add exposure/remain overweight. The Financial Sector has been playing catch-up and continues to show signs of price and RS bottoms as expectations rise for a global recovery -- add exposure.

Our bullish outlook continues to be supported by ongoing positive market dynamics and the absence of breakdowns for major indexes around the globe. The path of least resistance remains higher and we continue to believe a melt-up is likely in the weeks/months ahead. The global Technology, Discretionary, and Manufacturing Sectors remain leadership -- add exposure/remain overweight. The Financial Sector has been playing catch-up and continues to show signs of price and RS bottoms as expectations rise for a global recovery -- add exposure.

Global Equity Strategy: Santa Claus Rally Underway

<ul><li>EM Bank shares have lifted off their recent lows, as investor sentiment turns in favour of value in general, and attractive value EM assets in particular</li></ul><ul><li>We highlight 5 EM banks we see as standouts on our bank screens, and in which EM investors have reduced weightings throughout 2020, and are likely to rebuild positions going forward; <a href="https://www.smartkarma.com/entities/credicorp-ltd" target="_blank" data-smartkarma-citation="entities:25963:1" rel="noopener">Credicorp Ltd (BAP US)</a>, <a href="https://www.smartkarma.com/entities/banco-do-brasil-sa" target="_blank" data-smartkarma-citation="entities:24564:1" rel="noopener">Banco Do Brasil Sa (BBAS3 BZ)</a>, <a href="https://www.smartkarma.com/entities/grupo-financiero-banorte-o" target="_blank" data-smartkarma-citation="entities:24780:1" rel="noopener">Grupo Financiero Banorte-O (GFNORTEO MF)</a>, <a href="https://www.smartkarma.com/entities/sberbank-of-russia-pjsc-cde59529-fb78-4659-85d0-127942b44ba7" target="_blank" data-smartkarma-citation="entities:27581:1" rel="noopener">Sberbank of Russia PJSC (SBER RM)</a> and <a href="https://www.smartkarma.com/entities/turkiye-garanti-bankasi-as" target="_blank" data-smartkarma-citation="entities:25026:1" rel="noopener">Turkiye Garanti Bankasi As (GARAN TI)</a> </li></ul><ul><li>We like <a href="https://www.smartkarma.com/entities/shinhan-financial-group-adr" target="_blank" data-smartkarma-citation="entities:4534:1" rel="noopener">Shinhan Financial Group Adr (SHG US)</a> and <a href="https://www.smartkarma.com/entities/bank-of-china-ltd-h" target="_blank" data-smartkarma-citation="entities:656:1" rel="noopener">Bank Of China Ltd (H) (3988 HK)</a> as other positive re-rating plays, based on attractive valuations and sound balance sheet metrics</li></ul><ul><li>We also believe that EM bank core holdings throughout the pandemic crisis, such as <a href="https://www.smartkarma.com/entities/kotak-mahindra-bank-ltd" target="_blank" data-smartkarma-citation="entities:126:1" rel="noopener">Kotak Mahindra Bank (KMB IN)</a> and <a href="https://www.smartkarma.com/entities/bank-central-asia-tbk-pt" target="_blank" data-smartkarma-citation="entities:440:1" rel="noopener">Bank Central Asia (BBCA IJ)</a>, may, in valuation terms, now be more exposed to negative rotation</li></ul><ul><li>Risks to our view include a worsening of sentiment towards EM equities and banks in particular, due to a deterioration in the pandemic outlook and a worsening of the macro-economic outlook for emerging markets</li></ul>

EM Bank shares have lifted off their recent lows, as investor sentiment turns in favour of value in general, and attractive value EM assets in particularWe highlight 5 EM banks we see as standouts on our bank screens, and in which EM investors have reduced weightings throughout 2020, and are likely to rebuild positions going forward; Credicorp Ltd (BAP US), Banco Do Brasil Sa (BBAS3 BZ), Grupo Financiero Banorte-O (GFNORTEO MF), Sberbank of Russia PJSC (SBER RM) and Turkiye Garanti Bankasi As (GARAN TI) We like Shinhan Financial Group Adr (SHG US) and Bank Of China Ltd (H) (3988 HK) as other positive re-rating plays, based on attractive valuations and sound balance sheet metricsWe also believe that EM bank core holdings throughout the pandemic crisis, such as Kotak Mahindra Bank (KMB IN) and Bank Central Asia (BBCA IJ), may, in valuation terms, now be more exposed to negative rotationRisks to our view include a worsening of sentiment towards EM equities and banks in particular, due to a deterioration in the pandemic outlook and a worsening of the macro-economic outlook for emerging markets

EM Banks: Screening for Value and Resilience

Brazil

Banco do Brasil is a Brazilian financial services company offering a wide range of banking products and services, including retail and corporate banking, investment management, insurance, and agribusiness loans. It serves individuals, companies, and the public sector, with a strong leadership position in retail banking in Brazil. The company is headquartered in Brasília, Brazil, and was founded on October 12, 1808.

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Banco do Brasil (BBAS3 BR)

Finding Leadership Within Emerging Markets

We are starting to see early signs of a potential bottom on $EEM. Specifically, the EEM has reversed topside its 6-month downtrend. If EEM has...

Vermilion Research

U.S. Dollar Topping?; Bullish Reversals Continue; Ideas in Growth/Cyclicals, Financials

This is now the third week in a row where we are discussing an increasing number of country indexes with bullish 3.5-9-month downtrend reversals,...

Vermilion Research

LatAm Financials Review: Focus on the Value Opportunities

We identify the most attractive LatAm financials on value and GARP metrics; Banco do Brasil, Bradesco, Banorte, BanBajio, PagSeguro; we are...

Victor Galliano

Global Equity Strategy: Santa Claus Rally Underway

Our bullish outlook continues to be supported by ongoing positive market dynamics and the absence of breakdowns across indexes, and we continue to...

Vermilion Research

EM Banks: Screening for Value and Resilience

We highlight 5 EM banks we see as standouts on our bank screens, Credicorp, Banco do Brasil, Banorte, Sberbank and Garanti. EM investors reduced...

Victor Galliano

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