Global Multi-Asset Investment Strategist, True Insights

Jeroen Blokland

Global Multi-Asset Investment Strategist

Build Well-Diversified Multi-Asset Portfolios

True Insights

Our research helps investors build well-diversified multi-asset portfolios and profit from market developments. In addition, our unique and proven Macro – Sentiment – Valuation (MSV) investment framework ensures a consistent flow of new investment opportunities. Together with our market views, these opportunities will be reflected in our live ETF-based Global Multi-Asset Portfolios.

Cross Asset Strategy

<ul>
<li>Cracks are appearing in the US labor market, bringing relief for the Federal Reserve concerning inflation. But higher unemployment significantly increases the odds of a US recession.</li>
<li>The increase in Federal Reserve liquidity is keeping markets afloat. But assuming the banking crisis does not worsen from here, liquidity will reverse.</li>
<li>Our Fear &amp; Frenzy Sentiment Index moved away from ‘Frenzy’ but remains in Neutral territory. Futures positioning and equity flows worsened, pushing the Fear &amp; Frenzy Sentiment Index toward ‘Fear.’</li>
</ul>


Cracks are appearing in the US labor market, bringing relief for the Federal Reserve concerning inflation. But higher unemployment significantly increases the odds of a US recession.
The increase in Federal Reserve liquidity is keeping markets afloat. But assuming the banking crisis does not worsen from here, liquidity will reverse.
Our Fear &amp; Frenzy Sentiment Index moved away from ‘Frenzy’ but remains in Neutral territory. Futures positioning and equity flows worsened, pushing the Fear &amp; Frenzy Sentiment Index toward ‘Fear.’


Weekly Market Monitor 14 - Did the Fed Finally Break the US Labor Market?

Research from Water Tower Research, Water Tower Research

Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Equity Research Firm

Thematic (Sector/Industry)

<ul><li>Global stocks rose again this week, with the MSCI World index and the S&amp;P 500 gaining 3.61% and 3.33%, respectively.</li><li>The small-cap Russell 2000 gained 3.71% and the NASDAQ was up a similar 3.36%.</li><li>Cannabis stocks as represented by the MSOS ETF fell 2.28% on the week.</li></ul>

Global stocks rose again this week, with the MSCI World index and the S&amp;P 500 gaining 3.61% and 3.33%, respectively.The small-cap Russell 2000 gained 3.71% and the NASDAQ was up a similar 3.36%.Cannabis stocks as represented by the MSOS ETF fell 2.28% on the week.

Marketing Director, Asia Frontier Capital

Asia Frontier Capital

Marketing Director

Investing in high growth Asian frontier economies.

Asia Frontier Capital Ltd. is a pioneering fund management company based in Hong Kong that specializes in investing in high growth Asian frontier economies by managing the AFC Asia Frontier Fund , AFC Iraq Fund and the AFC Vietnam Fund.

The AFC Asia Frontier Fund invests in public equities of Asian frontier countries that are seeing increasing consumption due to favorable demographic trends, rising incomes and high GDP growth. The fund invests in listed equities of companies that have their principal business activities in Bangladesh, Bhutan, Cambodia, Iraq, Laos, Maldives, Mongolia, Myanmar (Burma), Nepal, Pakistan, Papua New Guinea, Sri Lanka and Vietnam. The AFC Asia Frontier Fund is positioned to take advantage of the continuing economic shifts in these countries and offers high returns combined with significant diversification opportunities. This fund is directed by the founder and CEO of Asia Frontier Capital, Thomas Hugger, who has been investing in frontier markets across Asia and Africa for more than 20 years.

The AFC Iraq Fund was launched on the 26th June 2015 and aims to achieve long-term capital appreciation for investors by capturing value and growth potential in the post conflict high-growth & resource rich Iraq market. The fund emphasises long term investment horizon to truly capture the opportunity in Iraq. The fund's investable universe consists of locally listed companies that have their principal business activities in Iraq as well as foreign listed companies that have the majority of the business in Iraq as a whole including the prosperous Kurdish Region of Iraq (KRI). The AFC Iraq Fund offers access to investments in post conflict recovery potential of Iraq, including the KRI, and/or stability in its territory. The AFC Iraq Fund is managed by Asia Frontier Capital (Iraq) Limited, Cayman Islands under the executive leadership team of Thomas Hugger (CEO & Fund Manager) and Ahmed Tabaqchali (CIO) who have more than 47 years of investment experience as well as an extensive background covering global, emerging, frontier and MENA markets.

The AFC Vietnam Fund invests exclusively in listed Vietnamese equities to capture value in growth companies with a focus on the small to medium size companies. This market segment offers a unique investment opportunity as the valuation gap between large- and small-cap stocks in Vietnam is presently much wider than in comparable neighboring markets and the valuations are significantly depressed versus their regional peers. The fund adopts a fundamental-quantitative approach and employs an in-house earnings model to identify attractive companies where we see high growth opportunities. In conjunction with targeting the maximum upside potential the portfolio has been structured to mitigate corporate government and liquidity risks. The fund invests in a diversified portfolio of 70-90 attractively valued companies to carefully control concentration risk.  This approach allows the fund to sell, or buy, positions without having a significant market impact. The fund is directed under the executive leadership of Thomas Hugger and Andreas Vogelsanger who have more than 50 years combined experience managing investments in frontier markets, Asia and around the world.

For more information about the fund, management team and investment strategy please contact us at info@asiafrontiercapital.com.

<ul><li>The AFC Iraq Fund was up an estimated 4.1% in March, outperforming its benchmark, the Rabee Securities RSISX USD Index, which was up 2.3% for the month.</li><li>For the year, the AFC Iraq Fund is up an estimated 27.7%, outperforming the index’s increase of 21.5%.</li><li>The market’s and the fund’s solid performance, on the back of last month’s super performance, enhanced by a revalued currency, underscores the underlying strength of the market’s recovery that is in the process of looking through and discounting the currency’s volatility as discussed here recently.</li></ul>

The AFC Iraq Fund was up an estimated 4.1% in March, outperforming its benchmark, the Rabee Securities RSISX USD Index, which was up 2.3% for the month.For the year, the AFC Iraq Fund is up an estimated 27.7%, outperforming the index’s increase of 21.5%.The market’s and the fund’s solid performance, on the back of last month’s super performance, enhanced by a revalued currency, underscores the underlying strength of the market’s recovery that is in the process of looking through and discounting the currency’s volatility as discussed here recently.

AFC Iraq Fund March 2023 Update: "The Budget, and the Stock Market's Next Move"

<ul>
<li>Unsurprisingly, the (required) equity risk premium on bank stocks has increased, but especially in the case of US banks, it is not at extreme levels. </li>
<li>The forward P/E ratio of European bank stocks has dropped to distressed/recessionary levels, while the forward P/E of US bank stocks is 'seriously low' at 8.</li>
<li>However, based on the Price-to-Book ratio, bank valuation is average.  Given elevated contagion risks and increased regulatory scrutiny, bank stock valuation alone is insufficient to overweight the sector.</li>
</ul>


Unsurprisingly, the (required) equity risk premium on bank stocks has increased, but especially in the case of US banks, it is not at extreme levels. 
The forward P/E ratio of European bank stocks has dropped to distressed/recessionary levels, while the forward P/E of US bank stocks is 'seriously low' at 8.
However, based on the Price-to-Book ratio, bank valuation is average.  Given elevated contagion risks and increased regulatory scrutiny, bank stock valuation alone is insufficient to overweight the sector.


Banks Vs. Market: A Closer Look at Equity Risk Premia and Other Valuation Measures

<ul>
<li>Monday market dynamics suggest more liquidity is needed to limit contagion risks.</li>
<li>5% is the magic level at which things start to break. The Fed needs time to make things whole again before resuming rate hikes.</li>
<li>Recent events will profoundly impact consumer and business confidence and increase the odds of a recession. Just watch oil!</li>
</ul>


Monday market dynamics suggest more liquidity is needed to limit contagion risks.
5% is the magic level at which things start to break. The Fed needs time to make things whole again before resuming rate hikes.
Recent events will profoundly impact consumer and business confidence and increase the odds of a recession. Just watch oil!


Monetary Policy Update! Federal Reserve Unlikely to Hike Rates in March

United States

The MSCI World Index is a free-float weighted equity index. It was developed with a base value of 100 as of December 31, 1969. MXWO includes developed world markets, and does not include emerging markets. MXWD includes both emerging and developed markets.

MSCI World Index (MXWO INDEX)

Weekly Market Monitor 14 - Did the Fed Finally Break the US Labor Market?

Welcome to the weekly Market Monitor, keeping you updated on the week’s most important charts and developments in financial markets.

Jeroen Blokland

The Highlights

Global stocks rose again this week, with the MSCI World index and the S&P 500 gaining 3.61% and 3.33%, respectively. The small-cap Russell 2000...

Water Tower Research

AFC Iraq Fund March 2023 Update: "The Budget, and the Stock Market's Next Move"

The AFC Iraq Fund was up an estimated 4.1% in March, outperforming its benchmark, the Rabee Securities RSISX USD Index, which was up 2.3% for the...

Asia Frontier Capital

Banks Vs. Market: A Closer Look at Equity Risk Premia and Other Valuation Measures

Given the high uncertainty related to contagion risks and increased regulatory scrutiny, we think bank stock valuation alone is insufficient to...

Jeroen Blokland

Monetary Policy Update! Federal Reserve Unlikely to Hike Rates in March

Elevated contagion risks, ongoing liquidity needs, and lack of trust likely force the Fed to pause, not end hiking rates.

Jeroen Blokland