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>The lows have likely been established for this correction, but a bottoming process would likely take weeks or potentially months and could come with more tests of the lows.</li>
<li>Japan's TOPIX and Nikkei 225 are each testing their respective downtrends. The EURO STOXX 50 is testing resistance in the 4040-4090 range. Germany's DAX is testing major resistance at 14,815-14,950.</li>
<li>It is likely that this initial 2-3 week bounce has run its course; stick with cyclical value and defensives, areas we have been focused on for most of 2022.</li>
</ul>


The lows have likely been established for this correction, but a bottoming process would likely take weeks or potentially months and could come with more tests of the lows.
Japan's TOPIX and Nikkei 225 are each testing their respective downtrends. The EURO STOXX 50 is testing resistance in the 4040-4090 range. Germany's DAX is testing major resistance at 14,815-14,950.
It is likely that this initial 2-3 week bounce has run its course; stick with cyclical value and defensives, areas we have been focused on for most of 2022.


Sticking With Cyclical Value and Defensives; Adding Large-Cap Japan Technology

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>China allocations fall to a 2-year low, driven by widespread closures in <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a> New Oriental Education (EDU US), China Mobile (941 HK) and CNOOC Ltd.</li>
<li>Active GEM Managers head in to 2022 with Consumer Discretionary and Communication Services the key China sector exposures, though Industrial stocks stand out the main overweight.</li>
<li>On a stock level, the most widely held company is Tencent, held by 81% of the managers in our analysis and taking the crown from Alibaba Group in 2021. </li>
</ul>


China allocations fall to a 2-year low, driven by widespread closures in Alibaba Group (BABA US) New Oriental Education (EDU US), China Mobile (941 HK) and CNOOC Ltd.
Active GEM Managers head in to 2022 with Consumer Discretionary and Communication Services the key China sector exposures, though Industrial stocks stand out the main overweight.
On a stock level, the most widely held company is Tencent, held by 81% of the managers in our analysis and taking the crown from Alibaba Group in 2021. 


China:  EM Active Fund Positioning Update.  BABA Drives Allocations Lower

Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Quantitative Analysis

<ul>
<li>We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of July 17th.</li>
<li>The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.</li>
<li>We highlight flows for Knowledge Atlas, Alibaba, Ntes, Iluvatar Corex, Gigadevice, Kingboard Laminates, Tencent, Sinopec, Hua Hong Semi.</li>
</ul>


We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of July 17th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We highlight flows for Knowledge Atlas, Alibaba, Ntes, Iluvatar Corex, Gigadevice, Kingboard Laminates, Tencent, Sinopec, Hua Hong Semi.


HK Connect Flows Weekly (Jul 17th): Knowledge Atlas, Alibaba, Ntes, Iluvatar Corex, Gigadevice

HK/China Equity Long-Short

Osbert Tang, CFA

Thematic (Sector/Industry)

<ul>
<li>We expect more supportive measures to be rolled out on hydrogen energy development in 2022, and the recently announced MIIT Plan already showed an escalation of its industrial use. </li>
<li>Hydrogen may potentially account for 5% of final energy consumption in 2030 and 20% in 2060. Industrial use may represent 60% of total, driving tremendous opportunities for the players.</li>
<li>We think <a href="https://www.smartkarma.com/entities/dongfang-electric-corporation-limited" target="_blank" data-smartkarma-citation="entities:1251:1" rel="noopener">Dongfang Electric (1072 HK)</a>, <a href="https://www.smartkarma.com/entities/cimc-enric-holdings-ltd" target="_blank" data-smartkarma-citation="entities:47:1" rel="noopener">Cimc Enric Holdings (3899 HK)</a> and <a href="https://www.smartkarma.com/entities/weichai-power-co-ltd-h" target="_blank" data-smartkarma-citation="entities:12508:1" rel="noopener">Weichai Power Co Ltd H (2338 HK)</a> are the prime beneficiaries and they have made good progress lately.</li>
</ul>


We expect more supportive measures to be rolled out on hydrogen energy development in 2022, and the recently announced MIIT Plan already showed an escalation of its industrial use. 
Hydrogen may potentially account for 5% of final energy consumption in 2030 and 20% in 2060. Industrial use may represent 60% of total, driving tremendous opportunities for the players.
We think Dongfang Electric (1072 HK), Cimc Enric Holdings (3899 HK) and Weichai Power Co Ltd H (2338 HK) are the prime beneficiaries and they have made good progress lately.


China's Hydrogen Economy: More Excitements into 2022

Energy is a lightly held sector, a bit part player in a world dominated by Tech, Financials and the EM Consumer.  The average holding weight among the active EM funds in our analysis stands at just 3.81%, underweight the benchmark by -2.11% on average.The fact that nearly a quarter of active EM managers have no exposure to the Energy sector is perhaps the most telling statistic of just how under-owned the sector is.  Part of that reason, we believe, lies in the risk of not holding Energy when index weights are so low. With Oil prices at multi-year highs, the Energy sector has started to outperform in a big way, with EM Energy outperforming the broader MSCI EM index by over 30% over the last 12 months.  With just 22.7% of funds overweight the benchmark, active EM managers are feeling the pinch.  The risk of being underweight or avoiding the sector completely has moved significantly higher.One of the factors that has driven Energy to the margins of EM investment is the rise of secular growth opportunities in Technology, Consumer Discretionary and Communication Services.  Indeed, the current investor base in Energy is heavily skewed towards the Value and Yield end of the spectrum.  Instead, Aggressive Growth managers have rotated towards the secular growth opportunities within Packaged Software, Internet Retail, Biotechnology and Internet Software/Services.Can the lure of a cyclical growth opportunity such as Energy be enough to win back investment from Growth investors?  If Energy keeps outperforming it will undoubtedly push Growth investors to look for opportunities within the sector.  We identify 2 stocks that already have an investor base among both Aggressive Growth and Growth funds, whilst also appealing to Value investors.  As such, we would expect both to be on the shortlist of the many underweights and non-investors looking to ramp up allocations in the Energy sector as we shift to a new ownership regime.Analysis taken from our EM research, covering 247 active GEM funds with combined AUM of $500bn

Energy is a lightly held sector, a bit part player in a world dominated by Tech, Financials and the EM Consumer.  The average holding weight among the active EM funds in our analysis stands at just 3.81%, underweight the benchmark by -2.11% on average.The fact that nearly a quarter of active EM managers have no exposure to the Energy sector is perhaps the most telling statistic of just how under-owned the sector is.  Part of that reason, we believe, lies in the risk of not holding Energy when index weights are so low. With Oil prices at multi-year highs, the Energy sector has started to outperform in a big way, with EM Energy outperforming the broader MSCI EM index by over 30% over the last 12 months.  With just 22.7% of funds overweight the benchmark, active EM managers are feeling the pinch.  The risk of being underweight or avoiding the sector completely has moved significantly higher.One of the factors that has driven Energy to the margins of EM investment is the rise of secular growth opportunities in Technology, Consumer Discretionary and Communication Services.  Indeed, the current investor base in Energy is heavily skewed towards the Value and Yield end of the spectrum.  Instead, Aggressive Growth managers have rotated towards the secular growth opportunities within Packaged Software, Internet Retail, Biotechnology and Internet Software/Services.Can the lure of a cyclical growth opportunity such as Energy be enough to win back investment from Growth investors?  If Energy keeps outperforming it will undoubtedly push Growth investors to look for opportunities within the sector.  We identify 2 stocks that already have an investor base among both Aggressive Growth and Growth funds, whilst also appealing to Value investors.  As such, we would expect both to be on the shortlist of the many underweights and non-investors looking to ramp up allocations in the Energy sector as we shift to a new ownership regime.Analysis taken from our EM research, covering 247 active GEM funds with combined AUM of $500bn

China

CNOOC Limited, through its subsidiaries, explores, develops, produces, and sells crude oil and natural gas. The Company focuses in the areas such as Bohai, Western South China Sea, Eastern South China Sea and East China Sea in offshore China. Internationally, the Group has oil and gas assets in Asia, Africa, North America, South America, and Oceania.

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CNOOC Ltd (ADR) (CEO US)

Sticking With Cyclical Value and Defensives; Adding Large-Cap Japan Technology

Sticking With Cyclical Value & Defensives; Adding Large-Cap Japan Technology. 2-3 week bounce has likely run its course with $TOPIX $Nikkei 225,...

Vermilion Research

China: EM Active Fund Positioning Update. BABA Drives Allocations Lower

China allocations fall to 2-year low, driven by widespread closures in Alibaba Group, New Oriental Education, China Mobile and CNOOC Ltd.

Steven Holden

HK Connect Flows Weekly (Jul 17th): Knowledge Atlas, Alibaba, Ntes, Iluvatar Corex, Gigadevice

We analyzed southbound Hong Kong connect flows in the past week and highlighted flows for Knowledge Atlas (2513 HK), Alibaba (9988 HK), Ntes (9999...

Ke Yan, CFA, FRM

China's Hydrogen Economy: More Excitements into 2022

China's push for hydrogen energy use is likely to further escalate in 2022, following a soon-to-be announcement of top-level design plan for the...

Osbert Tang, CFA

EM Energy: Regime Shift

A quarter of active EM managers have no exposure to the Energy sector and only 23% are overweight. With Oil prices at multi-year highs, active EM...

Steven Holden

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