Alpha-Centric ESG Research

Kyle Rudden

<ul>
<li>Despite the rough market for ESG-related indexed funds recently, <a href="https://www.smartkarma.com/entities/msci-inc" target="_blank" data-smartkarma-citation="entities:17865:1" rel="noopener">MSCI (MSCI US)</a> continues to increase its market share and solidify its already dominant position as the top indexer.</li>
<li>MSCI ESG-related indexes currently have a 67% (and still growing) market share of the overall ESG indexing ecosystem with nearly US$250 billion in index-linked ETF assets globally.</li>
<li>MSCI's dominant market position is even stronger in important ESG niches/verticals, and two in particular: 1) climate change-focused indexes, and 2) Asia-Pacific ESG markets.</li>
</ul>


Despite the rough market for ESG-related indexed funds recently, MSCI (MSCI US) continues to increase its market share and solidify its already dominant position as the top indexer.
MSCI ESG-related indexes currently have a 67% (and still growing) market share of the overall ESG indexing ecosystem with nearly US$250 billion in index-linked ETF assets globally.
MSCI's dominant market position is even stronger in important ESG niches/verticals, and two in particular: 1) climate change-focused indexes, and 2) Asia-Pacific ESG markets.


MSCI ESG Indexes Gaining in Market Share Despite ESG's Recent "Bear Market"

New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

<ul><li>Mercury (MCY) reported a strong FY26 result as expected, but also provided a positive dividend surprise and lifted its FY30 EBITDAF target; we raise our target price +7.5% and upgrade our rating to OUTPERFORM from NEUTRAL.</li><li>The big positive surprise was a final dividend above guidance and FY27 dividend guidance significantly ahead of consensus, signalling a stronger dividend outlook.</li><li>In a further confidence signal, MCY lifted the bottom of its FY30 EBITDAF target range.</li></ul>

Mercury (MCY) reported a strong FY26 result as expected, but also provided a positive dividend surprise and lifted its FY30 EBITDAF target; we raise our target price +7.5% and upgrade our rating to OUTPERFORM from NEUTRAL.The big positive surprise was a final dividend above guidance and FY27 dividend guidance significantly ahead of consensus, signalling a stronger dividend outlook.In a further confidence signal, MCY lifted the bottom of its FY30 EBITDAF target range.

Mercury Upgrading Dividends and Rating—FY26 Result

<ul>
<li>The Monetary Authority of Singapore (MAS) recently launched a public consultation regarding a Code of Conduct for ESG ratings providers and ESG data product providers in Singapore.</li>
<li>It is the right approach for Singapore – a <em>voluntary</em> best-practices framework furthering one of the world's most credible "green" economies, not a regulatory force-fix of something broken.</li>
<li>No surprise ratings methodology changes. No <em>en masse</em> upgrades/downgrades. No acute shocks to the system. Just slow and steady progress for ESG investing and finance in Singapore.</li>
</ul>


The Monetary Authority of Singapore (MAS) recently launched a public consultation regarding a Code of Conduct for ESG ratings providers and ESG data product providers in Singapore.
It is the right approach for Singapore – a voluntary best-practices framework furthering one of the world's most credible "green" economies, not a regulatory force-fix of something broken.
No surprise ratings methodology changes. No en masse upgrades/downgrades. No acute shocks to the system. Just slow and steady progress for ESG investing and finance in Singapore.


Singapore Code of Conduct for ESG Ratings Is Less Risk and More Reward

<ul>
<li>We believe Spark NZ (SPK) needs to present a clearer plan for its balance sheet at its upcoming FY26 result.</li>
<li>Given our subdued EBITDAI growth outlook and limited free cash flow retention, we struggle to see SPK deleveraging organically.</li>
<li>Asset sales, notably a sale of its Digital Services segment, are one option SPK appears to be considering; while this could provide balance sheet headroom, we do not believe it would unlock capital returns on its own given SPK has meaningful (&gt;NZ$300m) spectrum renewals to fund over the next decade.</li>
</ul>


We believe Spark NZ (SPK) needs to present a clearer plan for its balance sheet at its upcoming FY26 result.
Given our subdued EBITDAI growth outlook and limited free cash flow retention, we struggle to see SPK deleveraging organically.
Asset sales, notably a sale of its Digital Services segment, are one option SPK appears to be considering; while this could provide balance sheet headroom, we do not believe it would unlock capital returns on its own given SPK has meaningful (&gt;NZ$300m) spectrum renewals to fund over the next decade.


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

Communication Services Select Sector SPDR Fund / Technical Analysis

Communication Services Select Sector SPDR Fund (XLC US)

Communication Services Select Sector SPDR Fund

<ul>
<li>In our January 10th Compass, we discussed a break above 3910 on SPX would signal a tradable rally, with 4100-4165 our target, the top-end of our expected 2023 trading range.</li>
<li>We believe equities are still in the midst of a rally/short squeeze, but that the rally is likely to fizzle in the 4100-4165 area.</li>
<li>After being underweight Communications (XLC) since Nov 2021, sidestepping 20% underperformance vs. SPX, we now see signs of price and RS bottoms, and we are upgrading to market weight. Buy.</li>
</ul>


In our January 10th Compass, we discussed a break above 3910 on SPX would signal a tradable rally, with 4100-4165 our target, the top-end of our expected 2023 trading range.
We believe equities are still in the midst of a rally/short squeeze, but that the rally is likely to fizzle in the 4100-4165 area.
After being underweight Communications (XLC) since Nov 2021, sidestepping 20% underperformance vs. SPX, we now see signs of price and RS bottoms, and we are upgrading to market weight. Buy.


Upgrading Communications, Downgrading Staples - Both to Market Weight; US Dollar Major Top

United States

S&P Global Inc. provides clients with financial information services. The Company offers information regarding ratings, benchmarks, and analytics in the global capital and commodity markets. S&P Global operates worldwide.

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S&P Global (SPGI US)

Mercury Upgrading Dividends and Rating—FY26 Result

Mercury (MCY) reported a strong FY26 result as expected, but also provided a positive dividend surprise and lifted its FY30 EBITDAF target; we...

Forsyth Barr

Singapore Code of Conduct for ESG Ratings Is Less Risk and More Reward

Singapore's Code of Conduct for ESG ratings is more light-handed than other regulation-based approaches, but therein lies the "less risk and more...

Kyle Rudden

Spark NZ Disconnected From Its Rating

We believe Spark NZ (SPK) needs to present a clearer plan for its balance sheet at its upcoming FY26 result. Given our subdued EBITDAI growth...

Forsyth Barr

Upgrading Communications, Downgrading Staples - Both to Market Weight; US Dollar Major Top

We believe equities are still in the midst of a rally/short squeeze, but that the rally is likely to fizzle in the $SPX 4100-4165 area. Upgrading...

Vermilion Research

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

MSCI ESG Indexes Gaining in Market Share Despite ESG's Recent "Bear Market"

It's been rough for ESG index funds and the ESG indexers that index them. Not for MSCI, though. MSCI continues to gain market share and solidify...

Kyle Rudden

Mercury Upgrading Dividends and Rating—FY26 Result

Mercury (MCY) reported a strong FY26 result as expected, but also provided a positive dividend surprise and lifted its FY30 EBITDAF target; we...

Forsyth Barr

Singapore Code of Conduct for ESG Ratings Is Less Risk and More Reward

Singapore's Code of Conduct for ESG ratings is more light-handed than other regulation-based approaches, but therein lies the "less risk and more...

Kyle Rudden

Spark NZ Disconnected From Its Rating

We believe Spark NZ (SPK) needs to present a clearer plan for its balance sheet at its upcoming FY26 result. Given our subdued EBITDAI growth...

Forsyth Barr

Upgrading Communications, Downgrading Staples - Both to Market Weight; US Dollar Major Top

We believe equities are still in the midst of a rally/short squeeze, but that the rally is likely to fizzle in the $SPX 4100-4165 area. Upgrading...

Vermilion Research