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Multi-Asset Team

Chris Turner
Head of Multi-Asset Strategy
Dorothee Deck
Multi-Asset Strategist
David McBain
Head of Technical Strategy
Stefano Di Domizio
Head of Fixed Income Strategy

Multi-Asset Research

Multi-Asset Products: Absolute Strategy Weekly, Absolute Essentials, Multi-Asset Strategy Monthly, Sentix Survey Essentials, Trade Alerts.

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Absolute Essentials: Sentiment support for EM Europe vs. Asia and USD/MXN
19 Jun 2017
: David McBain

EQUITIES: Sentiment suggests room for EM Europe rally vs. EM Asia (P3)

SECTORS: Stretched optimism a relative risk for Global Transport (P8)

BONDS: US30Y-2Y yield curve oversold; specs’ flattening bias big (P9/17)

Sentiment support for EM Europe rally vs. Asia; USD/MXN bounce

While Asian equities have been supported by positive surprises on global growth, ASR’s Equity Strategy team recently noted, when recommending taking profits on Asia ex-Japan (see here), that waning activity surprises may soon begin to act as a drag on Asia. This has implications within EM regions.

EM Europe versus EM Asia ($ terms) has reached the lower end of its relative 2015-17 range. At the same time, the EM Europe/EM Asia SBI recently dropped  to levels that have since 2009 been followed by a rise in the relative over the next 65D on 67% of occasions (by average 3.9%). EM Europe is well placed for a near-term rally vs. EM Asia off a key support area. Charts p3.

Chart of the Week: Mexican peso strength has been a notable feature this year as the spectre of US politics has faded. The trend bias of USD/MXN is negative – with the cross-rate below a flat 200DMA. However, the degree of MXN optimism looks stretched. Speculators’ net long positions are at levels last seen in 2014 in 10Y z-score terms. The USD/MXN SBI is below 2: at levels that in the past 10Y have seen a rise in the cross-rate over the next 30D on 65% of occasions (by average +1.5%) and on 69% of times over the next 65D (average +2.3%). USD/MXN looks oversold - room for a near-term rally

ASR Sentix Survey Analysis - 19th June 2017
19 Jun 2017
: David McBain
ASR Investment Weekly - 15th June 2017
15 Jun 2017
: Philip Isherwood, Chris Turner, Stefano Di Domizio, David McBain, Dominic White, Ben Blanchard, Michael Hessel
Watch: ASR Investment Weekly - 15th June 2017
Multi-Asset Strategy Monthly - Trade ideas in a sticky summer for equity risk
14 Jun 2017
: Chris Turner, Stefano Di Domizio, David McBain, Dorothee Deck

Multi-Asset Themes
• The scale of the global equity rally in H1 looks increasingly out of line with moves in other asset classes. We recommend put spreads on equity indices to cover the next 3+ months.
• Long AUD/TWD, paired with long Japan / short EM equities – a convergence trade that chimes with several ASR views, including consolidation for Technology, struggles for resource-heavy EM equity markets and TWD dearness. 

Interest Rates and Bonds
• The BoJ's monetary easing has been gaining traction. We stick with a short 10-year JGBs recommendation.
• Rather than Brexit and UK politics, our analysis suggests the ECB’s QE has had a powerful impact on 10-year Gilt yields. Selling 2-year Gilts is still our favoured way of positioning on UK government bonds.
• Early elections in Italy can still not be ruled out, but we see more positives than negatives driving BTPs over the coming months. We view 10-year BTP valuations as cheap and recommend retaining a long bias.

Currencies
• USD may be set for a temporary reprieve versus EUR over the summer.
• As global risk appetite comes off further, we expect the G3 (EUR, JPY and USD) to be strong relative to Emerging Market currencies. We choose CLP, KRW and THB for our short basket.
• A UK risk premium is concentrated in Sterling. A move above EUR/GBP 0.90 in coming months is likely to be a staging post on the way to parity before Brexit negotiations conclude.

Equities
• US corporate credit quality peaked in 2014, which has hampered small caps relative to large caps ever since. Eurozone small caps have seen stronger returns versus large caps over the past two years, which could continue as long as domestic demand prospects remain resilient.

Commodities
• Copper looks overbought on our proprietary Sentiment Barometer Indicator versus the Bloomberg commodity index – we recommend a short position in copper versus the index via futures.
• Sentiment/positioning data suggest contrarian support for Soybeans. 

ASR Sentix Survey Analysis - 12th June 2017
12 Jun 2017
: David McBain
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