Global Asset Allocation, Politics & Governance, Ecstrat

John-Paul Smith

Global Asset Allocation, Politics & Governance

Ecstrat

Ecstrat is a consultancy advising on asset allocation between global equity markets, with a focus on the intersection of governments, geopolitics, governance and markets.
 
Over the past few years and more especially since the Great Financial Crisis (GFC), investors have become more focused on short-term market movements and real-time returns and have consequently neglected the analysis of the underlying structural themes that underpin longer term performance.
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More specifically we believe that the evolution of governance-based relationships between investors, controlling shareholders, labour and the state is one of the primary determinants of both relative and absolute performance between individual equity markets.
 
We will endeavour to provide investors with some of the context surrounding governance-related issues which encompass many different disciplines including history, economics and political science, as well as the financial metrics which are the most obvious manifestation of the structural characteristics of each market.
 
We will pay particular attention to the shifts and potential inflection points for governance in individual markets as these are often the best lead indicators for both economic and market performance.

Cross Asset Strategy

Mark and JP once again highlight the fault lines that run through what they consider to be the most vulnerable part of the listed Chinese corporate sector, namely the industrial and materials companies which are the most symptomatic of the broader economy.Whilst there are a number of indications that the rate of economic growth may pick up a little over the short term (property sales, land sales, consumption incentives, fiscal policy), these sectors are indicative of a deep malaise at the heart of the economy.We are especially concerned about the blow out in working capital and the ongoing deterioration in the efficacy of credit growth.&nbsp;

Mark and JP once again highlight the fault lines that run through what they consider to be the most vulnerable part of the listed Chinese corporate sector, namely the industrial and materials companies which are the most symptomatic of the broader economy.Whilst there are a number of indications that the rate of economic growth may pick up a little over the short term (property sales, land sales, consumption incentives, fiscal policy), these sectors are indicative of a deep malaise at the heart of the economy.We are especially concerned about the blow out in working capital and the ongoing deterioration in the efficacy of credit growth.&nbsp;

China: Short-term stabilization possible but underlying fault lines remain

EM PM, Ecstrat

Emad Mostaque

EM PM

Thematic (Sector/Industry)

Despite recent weakness Gulf markets have proved to be some of the most resilient in EM in the face of collapsing oil prices. There is evidence that Qatar and Abu Dhabi in particular may provide a safe haven in turbulent markets and other regional markets look to be approaching a market even in a low oil price environment. Societal change has also started, potentially resulting in more resilient nations in the future.

Despite recent weakness Gulf markets have proved to be some of the most resilient in EM in the face of collapsing oil prices. There is evidence that Qatar and Abu Dhabi in particular may provide a safe haven in turbulent markets and other regional markets look to be approaching a market even in a low oil price environment. Societal change has also started, potentially resulting in more resilient nations in the future.

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Although we continue to believe that crude oil prices are well below the levels required to incentivize sufficient investment to meet demand beyond 2017, we are reducing our long-term price outlook by $5 per barrel to $70 Brent and $64 WTI to reflect bearish developments in recent quarters in the outlook for low-cost supply and industrywide cost deflation.While $5 represents a relatively small adjustment to our long-term oil price assumption, we are also adjusting our near-term activity and pricing forecasts to reflect our belief that industry oversupply is making it very likely that crude markets will not approach any semblance of normalcy until 2017.Taken together, these changes have a meaningful impact on a handful of our energy sector fair value estimates, particularly firms that currently employ large amounts of leverage.&nbsp;We are beginning to publish new fair value estimates today, and all companies will be live two weeks from today.Analyst: Mark TaylorSector Head: Mathew HodgeFull report below the fold....

Although we continue to believe that crude oil prices are well below the levels required to incentivize sufficient investment to meet demand beyond 2017, we are reducing our long-term price outlook by $5 per barrel to $70 Brent and $64 WTI to reflect bearish developments in recent quarters in the outlook for low-cost supply and industrywide cost deflation.While $5 represents a relatively small adjustment to our long-term oil price assumption, we are also adjusting our near-term activity and pricing forecasts to reflect our belief that industry oversupply is making it very likely that crude markets will not approach any semblance of normalcy until 2017.Taken together, these changes have a meaningful impact on a handful of our energy sector fair value estimates, particularly firms that currently employ large amounts of leverage.&nbsp;We are beginning to publish new fair value estimates today, and all companies will be live two weeks from today.Analyst: Mark TaylorSector Head: Mathew HodgeFull report below the fold....

Oil Price Outlook: All Signs Point to a Brutal Near-Term and a Meaningful Long-Term Recovery

In line with our expectations from a few months ago Saudi has ramped up production into the summer to drive down oil prices, adding 0.9mbpd since the start of the year to go 2.5mbpd above their historic quota, equivalent to the expected return of Iranian crude. This should drag down energy stocks and the whole curve, both of which should bottom this summer.

In line with our expectations from a few months ago Saudi has ramped up production into the summer to drive down oil prices, adding 0.9mbpd since the start of the year to go 2.5mbpd above their historic quota, equivalent to the expected return of Iranian crude. This should drag down energy stocks and the whole curve, both of which should bottom this summer.

Saudi is flooding the oil market, not Iran

While slightly later than expected, a comprehensive deal on Iran's nuclear weapons program has now been reached. We think this is a good deal that stops nuclear breakout. Iran offers exceptional investment opportunities with the TSE at 6x PE and yielding double digit dividends, but the near term impact will be to continue oil's decline back to its lows, potentially taking energy stocks with it.

While slightly later than expected, a comprehensive deal on Iran's nuclear weapons program has now been reached. We think this is a good deal that stops nuclear breakout. Iran offers exceptional investment opportunities with the TSE at 6x PE and yielding double digit dividends, but the near term impact will be to continue oil's decline back to its lows, potentially taking energy stocks with it.

United States

Occidental Petroleum Corporation explores for, develops, produces, and markets crude oil and natural gas.  The Company also manufactures and markets a variety of basic chemicals, vinyls and performance chemicals. Occidental also gathers, treats, processes, transports, stores, trades and markets crude oil, natural gas, NGLs, condensate and carbon dioxide (CO2) and generates and markets power.

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Occidental Petroleum (OXY US)

China: Short-term stabilization possible but underlying fault lines remain

Mark and JP once again highlight the fault lines that run through what they consider to be the most vulnerable part of the listed Chinese corporate...

John-Paul Smith

Will the Gulf remain resilient?

Despite recent weakness Gulf markets have proved to be some of the most resilient in EM in the face of collapsing oil prices. There is evidence...

Emad Mostaque

Oil Price Outlook: All Signs Point to a Brutal Near-Term and a Meaningful Long-Term Recovery

Although we continue to believe that crude oil prices are well below the levels required to incentivize sufficient investment to meet demand beyond...

Morningstar, Inc.

Saudi is flooding the oil market, not Iran

In line with our expectations from a few months ago Saudi has ramped up production into the summer to drive down oil prices, adding 0.9mbpd since...

Emad Mostaque

Iranian deal done

While slightly later than expected, a comprehensive deal on Iran's nuclear weapons program has now been reached. We think this is a good deal that...

Emad Mostaque

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