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

MSCI Emerging Markets Index / Technical Analysis

This report highlights actionable themes across the EM universe, including: bullish inflections in the Russian and Thai markets, and a pullback opportunity in India's SENSEX.  We also highlight actionable setups in MSCI EM Energy and Materials sectors and within Taiwanese Financials/Banks.  Finally we uncover a number of attractive bottoms-up opportunities, sorted by sector and market-cap.

This report highlights actionable themes across the EM universe, including: bullish inflections in the Russian and Thai markets, and a pullback opportunity in India's SENSEX.  We also highlight actionable setups in MSCI EM Energy and Materials sectors and within Taiwanese Financials/Banks.  Finally we uncover a number of attractive bottoms-up opportunities, sorted by sector and market-cap.

EM Strategy: Russia and Thailand Bullishly Inflecting; Pullback Opportunity in India

In this report we provide a synopsis of EM markets. We also scour the EM universe for attractive and actionable opportunities, highlighting opportunities within India's SENSEX, global energy and materials sectors, and Asian banks.

In this report we provide a synopsis of EM markets. We also scour the EM universe for attractive and actionable opportunities, highlighting opportunities within India's SENSEX, global energy and materials sectors, and Asian banks.

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

Equity Bottom-Up

<ul>
<li>ChatGPT said: HDFC Bank is now held by 71% of active EM funds — an all-time high, with steady inflows and just one exit in six months.</li>
<li>Aggressive Growth funds show strongest conviction, with multiple holders above a 7% weight.</li>
<li>Post-Merger, HDFC has widened its lead over ICICI and regional peers, cementing its role as EM managers’ core financials exposure.</li>
</ul>


ChatGPT said: HDFC Bank is now held by 71% of active EM funds — an all-time high, with steady inflows and just one exit in six months.
Aggressive Growth funds show strongest conviction, with multiple holders above a 7% weight.
Post-Merger, HDFC has widened its lead over ICICI and regional peers, cementing its role as EM managers’ core financials exposure.


HDFC Bank Limited:  Record Ownership and Dominance Among EM Financials

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of high dividend yield stocks within emerging markets.</li>
<li>The changes at the October rebalance were announced after market close on 4 October with implementation scheduled at the close on 16 October.</li>
<li>There are 241 adds and 208 deletes for the index with an estimated round-trip trade of US$2.5bn. There are many stocks with over 2x ADV to trade.</li>
</ul>


The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of high dividend yield stocks within emerging markets.
The changes at the October rebalance were announced after market close on 4 October with implementation scheduled at the close on 16 October.
There are 241 adds and 208 deletes for the index with an estimated round-trip trade of US$2.5bn. There are many stocks with over 2x ADV to trade.


WisdomTree Emerging Markets High Dividend Index Rebalance: US$2.5bn Round-Trip Trade

Global Bank Equity Specialist, Creative Portfolios

Paul Hollingworth

Global Bank Equity Specialist

Creative Portfolios

Powszechna Kasa Oszczednosci B / Equity Bottom-Up

LTM results at PKO may not look pretty given the hugely distorting effects of CHF mortgage provisioning. With 6.7 billion zlotys already set aside for potential settlements with Swiss franc mortgage holders, the lender's top managers recently said the bank currently has no plans to create additional loan loss provisions on its Swiss franc mortgage portfolio and would like to return to dividend payments as soon as possible, subject to the decision of Poland's Financial Supervision Authority. Including the aforementioned provisions in OPEX, as our data supplier does, generates very poor Efficiency ratios. Stripping these out of OPEX shows a bank making gradual improvements on the Efficiency front. This means that rather than scoring “0” on Efficiency, the bank should perhaps score a “1.1” in our binary PH Score™ model. If we were to do this, PKO would score 3.3 rather than 2.2. Either way, this is a subpar outcome given the deterioration, not helped by the provisions, in Profitability as well erosion in Common Equity/Assets (though not all Capitalisation ratios), in NIM/Spread, and in Asset Quality. Provisioning was better though while Liquidity improved on account of reining back credit provision. Stripping out CHF provisions, PT Profit was some 8% lower YoY which is reasonable given the C-19 backdrop though underlying Profitability revealed a downward trajectory given Asset growth (accumulation of debt instruments).PKO specialises in consumer credit (61% of Loans), mainly mortgages, though the bank has a (receding) corporate credit book (39%), backed by transactional account funding (84% of Deposits). Under Zbigniew Jagielło's respected tenure, <span title="" data-toggle="tooltip" data-offset="10%" data-trigger="manual" data-html="true" data-container="body" data-template='&lt;div class="tooltip" role="tooltip"&gt;&lt;div class="news-article-tooltip-arrow tooltip-arrow"&gt;&lt;/div&gt;&lt;div class="tooltip-inner"&gt;&lt;/div&gt;&lt;/div&gt;' data-original-title="">PKO made a string of acquisitions and more than doubled its asset size, but the CEO's surprise resignation has raised questions about whether Poland's largest bank will face growing political interference. PKO has been a state-controlled financial institution since its inception. But Poland's ruling party PiS has, since coming to power in 2015, <span title="" data-toggle="tooltip" data-offset="10%" data-trigger="manual" data-html="true" data-container="body" data-template='&lt;div class="tooltip" role="tooltip"&gt;&lt;div class="news-article-tooltip-arrow tooltip-arrow"&gt;&lt;/div&gt;&lt;div class="tooltip-inner"&gt;&lt;/div&gt;&lt;/div&gt;' data-original-title="">intensified efforts to increase state control of the financial sector. The "redomestication" of banks promises greater national autonomy though in reality the participation of government has also led to concerns by investors that banks might be used to finance unprofitable entities or sectors. Jagiełło's leadership of PKO over the last 12 years has been seen by the market as a sign of stability, and helped reposition it as a modern, digital financial institution and strengthen its leading position in the banking sector. During his tenure, the bank's assets increased from less than €40 billion in 2009 to more than €80 billion in 2020. It strengthened its position in various markets via M&amp;A, including the purchase of Nordea’s Polish banking and insurance units, the Polish leasing operation at Raiffeisen, and the Polish asset management at KBC while branches were opened in Germany, the Czech Republic, and Slovakia<div class="content-highlight">A FV of 19% and a PBV of 1.2x are not attractive given the respective thresholds of 10% and 1.0x. The bank commands subpar fundamental momentum despite the headline CIR and lack of Profitability being more optical than real within a low PH Score™. Management autonomy generates uncertainty and is a risk moving forward.</div>

LTM results at PKO may not look pretty given the hugely distorting effects of CHF mortgage provisioning. With 6.7 billion zlotys already set aside for potential settlements with Swiss franc mortgage holders, the lender's top managers recently said the bank currently has no plans to create additional loan loss provisions on its Swiss franc mortgage portfolio and would like to return to dividend payments as soon as possible, subject to the decision of Poland's Financial Supervision Authority. Including the aforementioned provisions in OPEX, as our data supplier does, generates very poor Efficiency ratios. Stripping these out of OPEX shows a bank making gradual improvements on the Efficiency front. This means that rather than scoring “0” on Efficiency, the bank should perhaps score a “1.1” in our binary PH Score™ model. If we were to do this, PKO would score 3.3 rather than 2.2. Either way, this is a subpar outcome given the deterioration, not helped by the provisions, in Profitability as well erosion in Common Equity/Assets (though not all Capitalisation ratios), in NIM/Spread, and in Asset Quality. Provisioning was better though while Liquidity improved on account of reining back credit provision. Stripping out CHF provisions, PT Profit was some 8% lower YoY which is reasonable given the C-19 backdrop though underlying Profitability revealed a downward trajectory given Asset growth (accumulation of debt instruments).PKO specialises in consumer credit (61% of Loans), mainly mortgages, though the bank has a (receding) corporate credit book (39%), backed by transactional account funding (84% of Deposits). Under Zbigniew Jagielło's respected tenure, PKO made a string of acquisitions and more than doubled its asset size, but the CEO's surprise resignation has raised questions about whether Poland's largest bank will face growing political interference. PKO has been a state-controlled financial institution since its inception. But Poland's ruling party PiS has, since coming to power in 2015, intensified efforts to increase state control of the financial sector. The "redomestication" of banks promises greater national autonomy though in reality the participation of government has also led to concerns by investors that banks might be used to finance unprofitable entities or sectors. Jagiełło's leadership of PKO over the last 12 years has been seen by the market as a sign of stability, and helped reposition it as a modern, digital financial institution and strengthen its leading position in the banking sector. During his tenure, the bank's assets increased from less than €40 billion in 2009 to more than €80 billion in 2020. It strengthened its position in various markets via M&amp;A, including the purchase of Nordea’s Polish banking and insurance units, the Polish leasing operation at Raiffeisen, and the Polish asset management at KBC while branches were opened in Germany, the Czech Republic, and SlovakiaA FV of 19% and a PBV of 1.2x are not attractive given the respective thresholds of 10% and 1.0x. The bank commands subpar fundamental momentum despite the headline CIR and lack of Profitability being more optical than real within a low PH Score™. Management autonomy generates uncertainty and is a risk moving forward.

PKO: Not as Bad as It Looks but Still Unappealing

Poland

Powszechna Kasa Oszczednosci Bank Polski S.A. attracts deposits and offers commercial banking services. The Bank offers all types of banking services present on the Polish banking market, money market and capital market for institutional and individual clients.

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Powszechna Kasa Oszczednosci B (PKO PW)

EM Strategy: Russia and Thailand Bullishly Inflecting; Pullback Opportunity in India

This report highlights actionable themes across the EM universe, including: bullish inflections in the Russian and Thai markets, and a pullback...

Vermilion Research

EM Strategy: Remain Overweight India

In this report we provide a synopsis of EM markets. We also scour the EM universe for attractive and actionable opportunities, highlighting...

Vermilion Research

HDFC Bank Limited: Record Ownership and Dominance Among EM Financials

HDFC Bank has become the core EM financials holding, owned by 71% of funds at record highs. Post-merger strength and Aggressive Growth conviction...

Steven Holden

WisdomTree Emerging Markets High Dividend Index Rebalance: US$2.5bn Round-Trip Trade

There are 241 adds/208 deletes for the WisdomTree Emerging Markets High Dividend Index. The round-trip trade is around US$2.5bn and there are a...

Brian Freitas

PKO: Not as Bad as It Looks but Still Unappealing

PKO faces diverse headwinds in the form of subpar fundamental trends, risk to management autonomy, and stretched valuations relative to peers.

Paul Hollingworth

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