Morgan Stanley-Asia Quantitative Strategy - Alpha Briefing Market Washout ...-109660179
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Asia Quantitative Strategy - Alpha Briefing | Asia
Pacific
Market Washout - Move
Defensive and Wait for Soft
Landing Green Light
Daniel K Blake
!"#$#%&'(" "#)(' *+*,-./*+01
Jonathan F Garner
2("3"4"&'(" "#)(' *+*,-./,516
Kristal Ji
7 #2&'(" "#)(' *+*,-./*0.0
89:
Jason Ng, CFA
;"<
2 ("!#=&'(" "#)(' ,+66,.,/,,.+
Crystal Ng
> #=&'(" "#)(' ,+666-0/5.*,
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Sho Nakazawa
3(=%DE&'(" "#'F)(' ,5-*,-*/,06*
Ayako Tanaka
%(G"%&'(" "#'F)(' ,5-*,-*/,.50
Exhibit 1 : ?!H2IJ"') /K)(
'L F<#3 F##"(M5.N
<""(E"JFF"# CE3#>@G>
O( (""#((% ###<##("?!H2I
A global growth scare and hawkish policy surprise saw a sharp
unwind of strongly performing YTD trades (Japan and Taiwan
equities, Asia Semis/Equipment, USDJPY). We see potential for
further downside in the near term and move more defensive,
reiterating our call to switch from Semis to Staples.
We remain cautious on 3
drivers of the market volatility on 1-2 August. 1) We expect further rotation out of
Semis for the reasons we laid out on 21 July. 2) Global growth concerns may remain
elevated over the coming weeks given a paucity of tier 1 data and G7+China policy
meetings. 3) Our macro strategists expect further USD/JPY carry trade unwinds. We
recommend shifting defensive and highlight the low beta and down-market
outperformance of India and ASEAN. We also screen for high quality, low beta and
low momentum equities.
We do not recommend bottom-fishing in Asia semis
given still high positioning, valuations, and relative performance. Instead, we think
the indiscriminate weakness across Japan equities is presenting opportunities that
should prove compelling if our US economics team's house call of a soft landing
plays out. We retain exposure to Japan's nominal GDP reflation and corporate
reform themes, with our new "Reaction to Earnings" dataset showing a skew toward
strengthening investment theses and upward N12M EPS revisions.
Our Macro Strategy team expect a further unwind of USD/
JPY carry trades, with their estimated fair value moving down to ¥140. We highlight
FX sensitivity by sector and stocks in Exhibit 22 . In our Japan Focus List, we now
remove Renesas Electronics (6723.T), UT Group (2146.T), and Isetan Mitsukoshi
Holdings (3099.T), following our earlier removal of Tokyo Electron and Tokyo
Semitsu on 21 July. In their place, we add NTT (9432.T), Kansai Electric Power
(9503.T), and Fast Retailing (9983.T), increasing our defensive/domestic bias.
!"# EM recorded inflows driven by China, Taiwan, and South Korea.
China inflows were largely contributed by domestic China funds, while offshore
China funds and active long-only US and EU funds sold further. Underweights on
India in EM fund allocations stand at 81bps given the sharply rising index weight.
China now stands at 67bps underweight vs. benchmark for EM funds, while Global
funds are 52bps underweight on Japan equities as of end-June. Japan saw foreign
sell-off in the past week (ended July 26, 2024), with foreign investors net selling US
$9.9bn s. US$5.0bn inflow from retail investors.
Morgan Stanley does and seeks to do business with
companies covered in Morgan Stanley Research. As a result,
investors should be aware that the firm may have a conflict of
interest that could affect the objectivity of Morgan Stanley
Research. Investors should consider Morgan Stanley
Research as only a single factor in making their investment
decision.
For analyst certification and other important disclosures,
refer to the Disclosure Section, located at the end of this
report.
+= Analysts employed by non-U.S. affiliates are not registered
with FINRA, may not be associated persons of the member
and may not be subject to FINRA restrictions on
communications with a subject company, public appearances
and trading securities held by a research analyst account.
August 4, 2024 09:00 PM GMT
M
2
Table of Contents
Fund Flows and Positioning Top of the Agenda
Japan Equity Strategy
Fund Flows and Positioning
MS Strategy Recommendations
Earnings, Valuations and Returns
Thematic Dynamics
Catalyst Calendar
PMI Tracker
M
!" 3
Top of the Agenda
Four drivers of a consensus trade washout
Last week saw a confluence of factors buffeting Asia/EM equity markets, all of which
formed a quadruple whammy for Japan. We think the four most important drivers are:
• Reversal of semiconductor market leadership
• Global growth scare and geopolitical risks
• USD/JPY carry trade unwinds
• Equity momentum drawdown (particularly in Japan)
We have been concerned about all these aspects of the market and on 21 July we called
for rotation out of Semis (Asia EM Equity Strategy: Shifting Risk-Reward – Take Profits on
IT, Upgrade Consumer Staples to OW, July 21, 2024). Weakening global growth signals
were one of the catalysts, alongside high valuations, crowded positioning, hyperbolic price
patterns, and a historical pattern of defensive market rotation around the timing of first
Fed cuts.
Exhibit 2: HPGOF('")#<(< <(F?<) "J
"F)"PQI(I4(E3
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Average of US Manuf. PMI and Services PMI; YoY Growth
MSCI EM IT ,Total Return Relative to MSCI EM, Total Return; YoY Growth
()R@) C! 'C(""#S )3=(R! (F2#"JC6N6.
In our last Alpha Briefing, we highlighted the narrow equity market breadth and risk of an
momentum reversal given impending BoJ and FOMC meetings and our Macro Strategists'
bullish JPY views (Asia Quantitative Strategy - Alpha Briefing: Correction: Weaker Risk-
Reward on Semis; Pivot to Low Beta and High Shareholder Returns, 24 Jul 2024). In that
note, we also trimmed our OW recommendation on Japan equities to +150bps, bringing it
back in line with our bullish stance on Indian equities (see Exhibit 66 for our latest
allocation).
Where do we stand on these debates?
Last week was another reminder of the fat tail nature of markets, particularly as they
adjust to a new risk/reward outlook without valuation or fund flow support. Here we
outline our views on the key market debates:
摘要：
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作者：大数据2024
分类：外资研报
价格：免费
属性：55 页
大小：2.36MB
格式：PDF
时间：2024-08-15
