巴黎银行-全球-股票策略-2019年Q1股票展望：环境改变-20181204-62页_3mb

Q1 2019 EQUITY OUTLOOK: A CHANGE OF AIR Summary

Core Content

This document provides a comprehensive outlook for global equities in Q1 2019, focusing on macroeconomic trends, inflation, geopolitical risks, and specific trade ideas. It is authored by BNP Paribas and outlines key themes and strategies for investors to consider in the coming months.

Main Themes

• Opportunities in 2019: Earnings growth, especially in European small and mid-cap equities, is expected to drive equity performance. However, caution is advised for US and Japanese markets.
• Volatility Outlook: 2019 is anticipated to be a more volatile year, particularly in the US and Europe, driven by late-cycle factors and political risks.
• Inflation Impact: Rising inflation is not necessarily a headwind for equities, especially in Europe, where value stocks may benefit. Inflation remains below 5%, supporting earnings growth.
• Geopolitical Risks: The BNP Paribas geopolitical risk index is expected to normalize, potentially leading to equity market upside. Key events include the European Parliament elections and ongoing trade tensions.
• Equity Strategies: The document highlights specific trade ideas, including long/short baskets, volatility strategies, and tail hedging instruments.

Key Points

Macro Overview

• Opportunities persist in 2019: Earnings growth in Europe, particularly in small and mid-caps, is expected to drive equity performance.
• Volatility expected to rise: US volatility is likely to increase in the later stages of the bull market, while European volatility is influenced by political risks.
• Global equity risk premia at five-year high: This suggests potential for a market rebound.
• Market pull-back in October: Generated attractive opportunities for dividend strategies and long volatility positions.

Inflation

• Equities can recover even if bond yields rise: Historical data shows equities can perform positively despite rising yields.
• Value stocks may benefit from inflation: In Europe, value stocks, especially those with strong fundamentals, are expected to outperform.
• Oil prices and inflation: OPEC spare capacity is at a 10-year low, and robust oil demand may support a rebound in oil prices, which could benefit the energy sector.
• Inflation at 3%: Above this level may become a risk to equity valuations, but remains below 5% for now.

Geopolitics

• Eurozone geopolitical risk index: Has remained high for 20 weeks and is expected to normalize, which historically has been accompanied by equity market upside.
• Brexit impact: UK domestic stocks may underperform, while the FTSE could benefit from GBP under pressure.
• European Parliament elections: Expected to be a catalyst for political uncertainty, potentially affecting EU governance and stability.

Equity Strategies

• European Value Sector: Expected to recover, with free cash flow and EBIT-based valuation metrics showing better performance than traditional metrics.
• Dividend Risk Premium: SX5E dividends are attractive, with potential for upside in Santander and Ahold Delhaize.
• Volatility strategies: Consider long-term volatility positions, especially in HSCEI, NKY, and SX5E.
• Tail hedging: Strategies such as SPX put contingent on higher rates and best-of-put options (SPX and TLT) are suggested to hedge against inflation and correlated equity/bond sell-offs.

Key Trade Ideas

1. Dividend Strategy

• Long 1x DEDZ1 and short 0.6x DEDZ4
• Rationale: Mid-term maturities are more impacted in the market pull-back, while long-term liquidity risk premium appears undervalued.

2. Long BNP Paribas Buyback QARP basket (BNPPBOT4 Index) / Short European High Leverage basket (BNPPEHL1)

• Rationale: Companies with strong balance sheets and high free cash flow yield are expected to outperform, while highly leveraged firms face profitability risks from rising bond yields.

3. Long Dec20/Dec21 offered at 17.2vols

• Rationale: SX5E put option strategy offers positive carry and long volatility exposure.

4. Hedging NKY with Jun20 90/110% collar

• Rationale: A potential yen appreciation and falling share prices could be hedged using this strategy.

5. Long Dec19/20 SPX forward variance offered at 21.4

• Rationale: Forward starting variance is seen as a better tail hedge than FVA due to lower convexity and potential for higher volatility.

6. Call on dispersion (DAX vs SMI)

• Rationale: DAX implied volatility is relatively cheap versus SMI, suggesting a potential outperformance of Value stocks.

7. Long CSI300 vs short HSCEI

• Rationale: A relatively range-bound market in China is expected, with a preference for long/short pair trade to reduce market beta.

Key Baskets

• Short European High Leverage basket: Vulnerable to rising bond yields and lower profitability.
• Long Eurozone QARP basket: Companies with strong balance sheets and high free cash flow yield are best positioned.
• Short Global Asset Managers basket: Structural shift to ETFs threatens the asset management industry.

Conclusion

The outlook for Q1 2019 suggests that European equities may benefit from earnings growth and inflation, while US and Japanese markets remain cautious. Volatility is expected to rise, and specific trade ideas are outlined to capitalize on these trends. Geopolitical risks are likely to normalize, offering potential for equity upside. The document also highlights the importance of tail hedging and strategic positioning in the face of potential market corrections and inflationary pressures.