In today’s briefing:
- Contrarian Bargains Among Santa’s Discards
- [ETP 2024/52] WTI Recovers on China’s Stimulus Plans, Henry Hub Falls on Volatile Weather Forecasts
- Estimating Downside Risk
- Asia Ex-Japan Funds: Country Positioning Update
- Supply Shortage Boost Likely Short Lived; Caution Prevails Around 2025 Outlook
Contrarian Bargains Among Santa’s Discards
- The stock market is likely to advance during the Santa Claus rally window, which began on December 24 and ends January 3.
- But the rally is attributed to an oversold bounce and marked by narrow leadership. Either the rebound fizzles in January or broadens into lagging issues.
- We identified selected contrarian value opportunities for bulls among Santa’s discards for potential outperformance into January and beyond.
[ETP 2024/52] WTI Recovers on China’s Stimulus Plans, Henry Hub Falls on Volatile Weather Forecasts
- For the week ending 20/Dec, U.S. crude inventories fell by 4.2m barrels, beating expectations of a 0.7m barrel decrease. Distillate stocks fell more than expected, while gasoline inventories unexpectedly rose.
- U.S. natural gas inventories fell by 93 Bcf for the week ending 20/Dec, missing analyst expectations of a 98 Bcf drawdown. Inventories are 4.9% above the 5-year seasonal average.
- Chevron signed a 20-year deal with Energy Transfer for 2 million tonnes of LNG annually. Stifel lowered Schlumberger’s 12-month price target while maintaining a Buy rating.
Estimating Downside Risk
- The U.S. equity is highly vulnerable because of overvaluation and excessive growth expectations, but valuation is not very predictive of returns over a one-year time horizon.
- We estimate downside risk on the S&P 500 in the 20–30% range in the event of a major bear market.
- Despite our concerns, we see no immediate bearish triggers for investors to adopt defensive positioning in their portfolios.
Asia Ex-Japan Funds: Country Positioning Update
- China dominates allocations, India and Taiwan are equal 2nd, while South Korea lags a further 7% behind after seeing a big drop in exposure.
- Indonesia leads the ASEAN region, emerging as the top overweight country as a record 79.8% of funds are ahead of the benchmark.
- India sees 62% underweight the benchmark. Vietnam hits new highs in average fund weight (0.97%) and fund participation (34%).
Supply Shortage Boost Likely Short Lived; Caution Prevails Around 2025 Outlook
- Possibility of short peak can result in short-lived shortage
- Declining Chinese TSR inventory can lend demand support
- Uncertainty around policies weighs upon the market confidence
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