Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Technical Analysis

<ul>
<li>EEM stage is set for a rise from 38.20/37.80 but will find it hard to get back above 42. Intermediate risk to 36.50 from which point we are more constructive.</li>
<li>USD and yield pullbacks are primary inputs amid weak EEM buy volume. Bull yield wedge breakout on the back of high degree bull divergence in yield and the USD.</li>
<li>DXY trendline support turn. USD rise has not been aggressive and needs yield to clear 4.25% with a 4.70% target. Risk of a dual yield top exists.</li>
</ul>

<ul>
<li>EEM topped ahead of the DXY 101 bottom (lead) showing strong synergy with our bull DXY and bullish yield charts from last week.</li>
<li>Bull divergence implies a 2-3 month USD and yield up cycle is in store. EEM rising channel breakdown due.</li>
<li>HK was the first to crack trendline support. Korea is a weak link. India is one of the clearer shorts. Australia, Taiwan and then Japan are set to roll over.</li>
</ul>

Joe Jasper

Technical Analyst

Vermilion Research

Technical and Quantitative Research

<ul>
<li>The MSCI ACWI (ACWI-US), ACWI ex-US (ACWX-US), EAFE (EFA-US), and EM (EEM-US) are all reversing topside their 2-month downtrends.</li>
<li>Despite this being a bullish short-term development, we still expect $93 to cap upside on the ACWI-US, leaving about 4-5% upside from here (at time of writing)</li>
<li>As a result, we would use any further strength as an opportunity to get more defensive. Actionable Themes: REA-AU, GFL-CA, GFL-US, Consumer Staples, Health Care, and Gold Miners</li>
</ul>

Brian Freitas

Pan-Asia Index Rebalances/Events/Delta One

Periscope Analytics

Event-Driven

<ul>
<li>The review period for the MSCI November SAIR started during the week and will run till 31 October. The <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">TPX INDEX</a> October rebalance will be implemented close on 28 October.</li>
<li>The HDFC/ HDFCB merger is progressing faster than expected. NSE Indices has started a market consultation on treatment of mergers and demergers in their indices.</li>
<li>There have been big redemptions in <a href="https://www.smartkarma.com/entities/ishares-msci-emerging-markets" target="_blank" data-smartkarma-citation="entities:438:1" rel="noopener">iShares MSCI Emerging Markets (EEM US)</a> and <a href="https://www.smartkarma.com/entities/ishares-core-msci-emerging-markets-etf" target="_blank" data-smartkarma-citation="entities:32967:1" rel="noopener">iShares Core MSCI Emerging Markets ETF (IEMG US)</a> during the week. <a href="https://www.smartkarma.com/entities/tracker-fund-of-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:29257:1" rel="noopener">Tracker Fund</a> had big inflows.</li>
</ul>

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Asset Allocation - Global and GEM Equity

Thematic (Sector/Industry)

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

United States

iShares MSCI Emerging Markets ETF is an exchange-traded fund incorporated in the USA. The ETF tracks the performance of the MSCI TR Emerging Markets Index. The ETF holds emerging market stocks that can predominantly be classified as large and mid-cap. It weights the holdings using a market capitalization methodology and rebalances quarterly.

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iShares MSCI Emerging Markets - EEM US

EEM Reaction Rise

EEM stage is set for a rise from 38.20/37.80 but will find it hard to get back above 42. Intermediate risk to 36.50 from which point we are more...

Thomas Schroeder

EM Thematic Short

EEM topped ahead of the DXY 101 bottom (lead) showing strong synergy with our bull DXY and bullish yield charts with a 2-3 month duration. USD...

Thomas Schroeder

Shift To Defensives as $ACWI Makes Push for $93; Remain Overweight Europe; Opptys in China/HK, Japan

$ACWI, $ACWX, $EFA, and $EEM all reversing topside their 2-month downtrends. Despite this bullish short-term development, we still expect $93 to...

Vermilion Research

Index Rebalance & ETF Flow Recap: SZSE1000, NIFTY, HDFC/HDFCB, Ming Yuan, Blibli, KMB IN

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

Brian Freitas

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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