20130915-富瑞金融香港公司-Global_Equity_Strategy_Global__A_Turning_Point_in_the_Cycle_76页_2mb

Global Equity Strategy Summary

Core Content

This document outlines the global equity strategy as of September 12, 2013, emphasizing a shift in focus from emerging markets (EM) to developed markets (DM), particularly the US and Europe. The strategy is characterized by a preference for cyclical stocks and real economy beneficiaries, with a specific tilt towards domestic capex and consumer discretionary sectors in the developed world.

Key Takeaways

• Equity Preference Over Fixed Income: The strategy remains bullish on equities, expecting them to outperform fixed income.
• Currency Outlook: The US dollar is expected to remain strong, the yen weak, and EM currencies to soften.
• Regional Performance: Europe is expected to outperform the US and EM, with the US S&P 500 forecast to reach 1,735 by year-end.
• Market Rotation: A significant rotation towards US demand themes and away from multinationals and quality issues is anticipated.
• Emerging Markets: EM is seen as underperforming due to overheating and unsustainable credit booms, with countries like India, Turkey, and Indonesia as major casualties.
• Cyclical Tilt: There is a stronger focus on cyclical stocks, especially in the US, Germany, and the UK.

Main Points

Asset Allocation Overview

*Note: * stands for MSCI HK. Ratings in highlights are changed from last time, countries in highlights are newly added ones.

Stock Selection Highlights

United States

• Top Picks: Financials (WFC, OFG, RF), Capex beneficiaries (IP, OI, RKT), and consumer discretionary (HD, PIR).
• Themes: Improved lending standards, US competitiveness, US financials, and sustainable equity income.

Europe

• Top Picks: UK consumer discretionary (BET, PAP, WPP), German chemicals (LIN GR), and Swiss financials (Nestle, Roche).
• Themes: Quality, corporate spending, and real economy beneficiaries.

Japan

• Top Picks: Exporters and beneficiaries of Abonomics (Bridgestone, Mitsubishi Heavy Industries).
• Themes: Abonomics, domestic capex, and real interest rate benefits.

Hong Kong

• Top Picks: Domestic property interests (Hang Lung Properties, Sino Land).
• Themes: As a proxy for China, with a focus on domestic-focused equities.

Emerging Markets

• Bearish Countries: Singapore, Thailand, South Africa, India, Turkey, Indonesia.
• Bullish Countries: Mexico, Myanmar, New Zealand, Norway, Philippines, Russia, Vietnam.

Cyclical Stock Recommendations

Key Market Indicators

• OECD Total Composite Leading Indicator % y-y: Indicates improving global economic conditions.
• OECD Belgium Composite Leading Indicator % y-y: Suggests positive economic momentum in Belgium.
• US 10 Year Treasury Yield minus 2 Year Treasury Yield since 1976 (%): Shows a steepening yield curve, supportive for US equities.
• Philadelphia Fed Business Outlook Survey: Highlights positive capital expenditure trends in the US.

Conclusion

The strategy is shifting towards a more cyclical and domestic-focused approach, with a strong preference for the US and Europe. Emerging markets are seen as underperforming due to overheating and policy issues, while the US and European economies are expected to benefit from improved macroeconomic conditions and a rotation towards more cyclical sectors.