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

Market dynamics remain healthy which suggests a new broad-based bull market is not far off. With that said, we are still waiting for confirmation in the form of breakouts or bullish price inflections on the broad global indexes (ACWI-US, ACWX-US, EFA-US, and EEM-US) in order to turn bullish.<ul type="disc">
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Actionable Theme: Major Autos/Auto Parts. Global automobile stocks display bullish price and RS inflections with many breaking out to new highs -- add exposure... see pages 3 and 5-6.</li>
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Actionable Theme: Financials. There continues to be a plethora of attractive Financial stocks globally, ranging from banks and insurance to financial services -- add exposure... see pages 4 and 6-14.</li>
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Market dynamics remain healthy which suggests a new broad-based bull market is not far off. With that said, we are still waiting for confirmation in the form of breakouts or bullish price inflections on the broad global indexes (ACWI-US, ACWX-US, EFA-US, and EEM-US) in order to turn bullish.

Actionable Theme: Major Autos/Auto Parts. Global automobile stocks display bullish price and RS inflections with many breaking out to new highs -- add exposure... see pages 3 and 5-6.

Actionable Theme: Financials. There continues to be a plethora of attractive Financial stocks globally, ranging from banks and insurance to financial services -- add exposure... see pages 4 and 6-14.


Buying Global Financials & Autos/Auto Parts

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

Nexteer's share price was plagued by the auto chip shortage that causes its share price to fall from HKD 14to 7, a fall of 50% in the span of 3 months, presenting an excellent opportunity to add or initiate a position in the portfolio due to 1) the ending of the chip shortage is near thus auto-related stocks will benefit from the positive sentiment thus multiples will be higher and 2) the management has confirmed that 2H 2021 will have much bigger revenue (around 9x) although the reality could be different, nevertheless, it presents growth potential for <a href="https://www.smartkarma.com/entities/nexteer-automotive-group-ltd" target="_blank" data-smartkarma-citation="entities:15483:1" rel="noopener">Nexteer Automotive (1316 HK)</a> .

Nexteer's share price was plagued by the auto chip shortage that causes its share price to fall from HKD 14to 7, a fall of 50% in the span of 3 months, presenting an excellent opportunity to add or initiate a position in the portfolio due to 1) the ending of the chip shortage is near thus auto-related stocks will benefit from the positive sentiment thus multiples will be higher and 2) the management has confirmed that 2H 2021 will have much bigger revenue (around 9x) although the reality could be different, nevertheless, it presents growth potential for Nexteer Automotive (1316 HK) .

Nexteer (1316): Positive Sentiment and Exciting 2H 2021

Fuyao Glass Industry Group / Equity Bottom-Up

<div class="content-remarks">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/210/904/original/image_62803801921622698789619.png?1622698789" class="editor-image img-responsive" data-smartkarma-image-id="210904"></figure>source: Reuters
</div>The above chart indicates that the correlation between Fuyao and Xinyi Glass broke in Q1 2021 as the former hit a break while the latter kept on accelerating further. The initial reaction is that Fuyao Glass will surely play catch up to Xinyi Glass and the trade is to go Long Fuyao Glass and Short Xinyi Glass. However, the fundamental tells a different story. Xinyi Glass has a small part of their business in the energy-saving architectural glass that ticked the ESG box while Fuyao Glass's largest exposure is in auto glass, which has suffered due to the chip shortage but may soon bounce if the semiconductors ramp up their production activities.


source: Reuters
The above chart indicates that the correlation between Fuyao and Xinyi Glass broke in Q1 2021 as the former hit a break while the latter kept on accelerating further. The initial reaction is that Fuyao Glass will surely play catch up to Xinyi Glass and the trade is to go Long Fuyao Glass and Short Xinyi Glass. However, the fundamental tells a different story. Xinyi Glass has a small part of their business in the energy-saving architectural glass that ticked the ESG box while Fuyao Glass's largest exposure is in auto glass, which has suffered due to the chip shortage but may soon bounce if the semiconductors ramp up their production activities. 

MSCI Emerging Markets Index / Technical Analysis

Emerging markets (EEM-US) are breaking above major $46.30 resistance to hit highs not seen since June 2018. Additionally, RS on EEM-US is near 1-year highs -- a positive risk-on signal. Stocks doing business in China, India, Taiwan, and South Korea continue to be a major focus when it comes to individual stock recommendations.

Emerging markets (EEM-US) are breaking above major $46.30 resistance to hit highs not seen since June 2018. Additionally, RS on EEM-US is near 1-year highs -- a positive risk-on signal. Stocks doing business in China, India, Taiwan, and South Korea continue to be a major focus when it comes to individual stock recommendations.

With the ongoing COVID-19 cases in the US, its auto sector is unlikely to recover this year that is a drag to <a href="https://www.smartkarma.com/entities/nexteer-automotive-group-ltd" target="_blank" data-smartkarma-citation="entities:15483:1" rel="noopener">Nexteer Automotive (1316 HK)</a> 's earnings but it has recently penetrated the Chinese auto market, supplying to <a href="https://www.smartkarma.com/entities/geely-automobile-holdings-ltd" target="_blank" data-smartkarma-citation="entities:127:1" rel="noopener">Geely Auto (175 HK)</a> for Electric Power Steering component, that could help to increase the company's overall profitability. From a credit perspective, Nexteer's debt-to-equity ratio is also very low compared to the Japanese small-cap peers such as Futaba and KYB and even compared to its two largest customers, <a href="https://www.smartkarma.com/entities/general-motors-co" target="_blank" data-smartkarma-citation="entities:18811:1" rel="noopener">General Motors Co (GM US)</a> and <a href="https://www.smartkarma.com/entities/ford-motor-co" target="_blank" data-smartkarma-citation="entities:19225:1" rel="noopener">Ford Motor Co (F US)</a> at 202% and 390% debt to equity ratio respectively. 
Nexteer is trading at a 30-37% discount to its peers and compared to the Chinese auto suppliers such as Minth, Fuyao and Huayu, Nexteer is also trading at a 55% discount in EV/EBITDA, 33% discount in PER, and 61% in PBR. 
As the Chinese auto sector recovers earlier compared to the US, the company's earnings should start to recover and its profitability should also increase, therefore, its share price should increase correspondingly. BUY.

With the ongoing COVID-19 cases in the US, its auto sector is unlikely to recover this year that is a drag to Nexteer Automotive (1316 HK) 's earnings but it has recently penetrated the Chinese auto market, supplying to Geely Auto (175 HK) for Electric Power Steering component, that could help to increase the company's overall profitability. From a credit perspective, Nexteer's debt-to-equity ratio is also very low compared to the Japanese small-cap peers such as Futaba and KYB and even compared to its two largest customers, General Motors Co (GM US) and Ford Motor Co (F US) at 202% and 390% debt to equity ratio respectively. 
Nexteer is trading at a 30-37% discount to its peers and compared to the Chinese auto suppliers such as Minth, Fuyao and Huayu, Nexteer is also trading at a 55% discount in EV/EBITDA, 33% discount in PER, and 61% in PBR. 
As the Chinese auto sector recovers earlier compared to the US, the company's earnings should start to recover and its profitability should also increase, therefore, its share price should increase correspondingly. BUY. 

China

Huayu Automotive Systems Company Limited manufactures and sells auto parts. The Company's main products include interior and exterior auto parts, functional assembly autoparts and thermo processed auto parts etc.

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Huayu Automotive Systems A (600741 CH)

Buying Global Financials & Autos/Auto Parts

Global automobile stocks display bullish price and RS inflections with many breaking out to new highs. Financials are attractive globally, ranging...

Vermilion Research

Nexteer (1316): Positive Sentiment and Exciting 2H 2021

Nexteer's share price was plagued by the auto chip shortage as its share price fell 50% in the span of 3 months, presenting an excellent...

Henry Soediarko

Fuyao Glass Vs Xinyi Glass: Which One?

The short-term outlook for Fuyao Glass Industry Group (3606 HK)is much more positive compared to Xinyi Glass as it has exposure to the auto sector,...

Henry Soediarko

Emerging Markets Breaking Out

Emerging markets (EEM-US) are breaking above major $46.30 resistance to hit highs not seen since June 2018. Additionally, RS on EEM-US is near 1...

Vermilion Research

Nexteer (1316): China Recovery to Help

As the Chinese auto sector recovers earlier compared to the US, Nexteer's revenues start to recover and its profitability should also increase,...

Henry Soediarko

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