Cyclicals vs Defensives

Highlights China’s PMIs continue to flash a positive signal, but the hard data trend remains negative. There has been a notable improvement in China’s cyclical sectors (versus defensives) over the past month, but broad equity market performance has been flat-to-down. China’s lackluster equity index performance in the face of rising PMIs suggests that investors can afford to wait for an improvement in the hard economic data before tactically upgrading to overweight. Cyclically, we continue to recommend an overweight stance towards both the investable and A-share markets versus the global benchmark, favoring the former over the latter. Feature Tables 1 and 2 on pages 2 and 3 highlight key developments in China’s economy and its financial markets over the past month. On the growth front, China’s November PMIs were clearly positive, and the rise in the official manufacturing PMI above the 50 mark is notable. However, the odds continue to favor a bottoming in the economy in Q1 rather than Q4, in large part because China’s “hard” economic data has continued to deteriorate during the time that the Caixin PMI has been signaling an expansion in manufacturing activity. In this vein, China’s November update for producer prices and total imports have high potential to be market-moving, and should be closely monitored. Table 1China Macro Data Summary Table 2China Financial Market Performance Summary Within financial markets, China’s cyclical sectors have outperformed defensives, which is consistent with the positive message from China’s PMIs. But China’s broad equity markets have been flat-to-down versus the global index over the past month, suggesting that investors can afford to wait for confirmation of a hard data improvement before upgrading their tactical stance to overweight (from neutral). Cyclically, we continue to recommend an overweight stance towards both the investable and A-share markets, but favor the former over the latter in a trade truce scenario. In reference to Tables 1 and 2, we provide below several detailed observations concerning developments in China’s macro and financial market data: Both measures of the Li Keqiang index (LKI) that we track indicated no obvious improvement in Chinese economy activity in October. The BCA China Activity indicator, a broader coincident measure of China’s economy, also moved sideways in October and (for now) remains in a downtrend. Thus, based on the “hard data”, Chinese economic activity has not yet bottomed. Chart 1A Moderate Strength Economic Recovery Will Begin In Q1 The components of our LKI leading indicator continue to tell a story of easy monetary conditions and sluggish money & credit growth (Chart 1). The indicator itself remains in an uptrend, but it is a shallow one that does not match the intensity of previous credit cycles. While the uptrend in the indicator suggests that China’s economy will soon bottom, the shallow pace suggests that the coming rebound in growth will be less forceful than during previous economic recoveries. The uptrend in headline CPI is a notable macro development, with prices having risen 3.8% year-over-year in Oct (the fastest pace in almost eight years). This rise has been driven almost entirely by a surge in pork prices, which have risen over 60% relative to last year (panel 1 of Chart 2). While some investors have questioned whether the rise in headline inflation will cause the PBoC to tighten its stance at the margin, we argued with high conviction in our November 20 Weekly Report that this will not occur.1 Panel 2 of Chart 2 shows that periods of easy monetary policy line up strongly with periods of deflating producer prices, arguing that the PBoC will see through transient shocks to headline inflation. China’s October housing market data highlighted three points: housing sales are modestly improving, the pace of housing construction has again deviated from the trend in sales, and housing price appreciation is slowing in Tier 2 and Tier 3 markets. For now, we are inclined to discount the surge in floor space started, given previous divergences that proved to be unsustainable. The bigger question is whether investors should be concerned about slowing housing prices. Chart 3 shows that floor space sold and property prices have been negatively correlated over the past three years, in contrast to a previously positive relationship. Deteriorating affordability and tight housing regulations have contributed to this shift in correlation, which helps explain why the PBoC’s Pledged Supplementary Lending (PSL) program has been so closely related to housing sales over the past few years. While the growth in PSL injections is becoming less negative, it has not risen to the point that it would be associated with a strong trend in sales. As such, we continue to see poor affordability as a threat to further housing price appreciation, absent stronger funding assistance. Poor affordability will continue to be a headwind for China’s housing market. Chart 2The PBoC Will See Through Transient Shocks To Headline Inflation Chart 3Poor Affordability Will Continue To Weigh On Housing Demand Chart 4Investors Need To See Concrete Signs Of A Hard Data Improvement China’s November PMIs were quite positive, which legitimately increases the odds that China’s economy is beginning the process of recovery. However, we see two reasons to believe that the odds continue to favor a bottoming in the economy in Q1 rather than Q4. First, while they improved in November, several important elements of the official PMI remain in contractionary territory, particularly the new export orders subcomponent. Second, while the Caixin PMI has now been above the 50 mark for 4 consecutive months, China’s hard data has continued to deteriorate since the summer (Chart 4). Given the historical volatility of the Caixin PMI, we advise investors to wait for concrete signs of a hard data improvement before firmly concluding that China’s economy is recovering. Over the last month, China’s investable stock market has rallied roughly 1% in absolute terms, while domestic stocks have fallen about 3%. In relative terms, A-shares underperformed the global benchmark, while the investable market moved sideways. In our view, the underperformance of China’s domestic market reflects increased sensitivity to monetary conditions and credit growth compared with the investable market,2 and a weaker credit impulse in October appears to have been the catalyst for A-share underperformance. Over the cyclical horizon, earnings will improve in both the onshore and offshore markets in response to a modest improvement in economic activity, suggesting that an overweight stance is justified for both markets. But we think the investable market has more upside potential in a trade truce scenario. The outperformance of cyclical versus defensive sectors is sending a positive signal, but investors can afford to wait for better economic data before tactically upgrading. Chart 5A Positive Sign From Cyclicals Versus Defensives Within China’s investable stock market, it is quite notable that cyclicals have outperformed defensives over the past month on an equally-weighted basis (Chart 5). Interestingly, key defensive sectors such as investable health care and utilities have sold off significantly, and equally-weighted cyclicals have also outperformed defensives in the domestic market. The outperformance of cyclicals and underperformance of defensives is consistent with the positive message from China’s PMIs, but the fact that this improvement is occurring against the backdrop of flat-to-down relative performance for China’s equity market suggests that investors can afford to wait for confirmation of a hard data improvement before upgrading their tactical stance to overweight. In this vein, China’s November update for producer prices and total imports have high potential to be market-moving, and should be closely monitored. China’s government bond yields fell slightly in November, potentially reflecting expectations of further modest easing. Our view that monetary policy will likely remain easy over the coming year even in a modest recovery scenario suggests that Chinese interbank rates and government bond yields are likely to range-trade over the coming 6-12 months. We expect onshore corporate bonds to continue to outperform duration-matched government bonds in 2020. Chinese onshore corporate bond spreads eased modestly over the past month. Despite continued concerns about onshore corporate defaults, the yield advantage offered by onshore corporate bonds have helped the asset class generate a 5.4% year-to-date return in local currency terms. Barring a substantial intensification of the pace of defaults, we expect onshore corporate bonds to continue to outperform duration-matched government bonds in 2020. The RMB has moved sideways versus the US dollar over the last month. USD-CNY had fallen below 7 in October following the announcement of the intention to sign a “phase one” trade deal, but the move ultimately proved temporary given the deferral of an agreement. We would expect the RMB to appreciate following a deal of any kind (a truce or something more), and it is also likely to be supported next year by improving economic activity. Still, it would not be in the PBoC’s best interests to let the RMB appreciate too rapidly, because an appreciating Chinese currency would act as a deflationary force on China’s export and manufacturing sectors. As such, we expect a modest downtrend in USD-CNY over the coming year.   Qingyun Xu, CFA Senior Analyst qingyunx@bcaresearch.com Jing Sima China Strategist jings@bcaresearch.com   Footnotes 1    Please see China Investment Strategy Weekly Report "Questions From The Road: Timing The Turn," dated November 20, 2019, available at cis.bcaresearch.com 2   Please see China Investment Strategy Special Report "A Guide To Chinese Investable Equity Sector Performance," dated November 27, 2019, available at cis.bcaresearch.com Cyclical Investment Stance Equity Sector Recommendations

Highlights BCA still sees green shoots: Our latest view meeting reinforced BCA strategists’ optimistic global outlook, and we are methodically adding international and cyclical exposures to reflect it. Relatively modest M&A activity is not a sign of a top, … : Last Monday was the busiest Merger Monday of the year, but relative merger volumes are not anywhere near the peaks that coincided with the end of the last two expansions. … and neither is small-cap equity underperformance: There is no empirical basis for concluding that small-cap underperformance heralds economic weakness, stock market weakness or heightened risk aversion. Feature Onward. At our latest editorial view meeting, held last week, we completed the step we first began discussing in the spring, upgrading Eurozone equities to overweight in global equity portfolios. BCA continues to recommend investors remain underweight sovereign bonds in balanced and dedicated fixed income portfolios, and we expect that a top in the dollar versus the more cyclical major currencies is coming soon. We downgraded US equities to underweight to make room for the Eurozone overweight, along with new overweights in British and Japanese equities. The move reflects the BCA consensus that global growth has bottomed and is poised to accelerate. Against an improved growth backdrop, the dollar should cede leadership to more cyclically sensitive currencies, providing non-US equities with a relative tailwind.1 The narrowing of the growth differential between the US and the rest of the world should give international equities an additional boost. A revived growth outlook, and a cooling of trade tensions signaled by a signed Phase 1 China-US agreement, would ease some of the safe-haven demand for sovereign bonds, and help interest rates unwind some of the downward pull that dragged them lower across the first eight months of the year. The US equity downgrade is only a relative call, however; US Investment Strategy remains constructive on the absolute return outlook for US stocks. Other economies with a greater reliance on trade will benefit more from a global upswing than the US, which suffered less from the global slowdown than its peers. The S&P 500 has much more exposure to the rest of the world than the US economy, though, and its earnings would get a boost from accelerating global growth and a weaker dollar. At the same time that the fundamental picture is poised to improve, the wall of worry continues to renew itself, and this week we discuss concerns about M&A activity and small-cap stocks’ underperformance, which have come to the fore as Sino-American tensions have relaxed their grip on the collective investor psyche. Mergers And Animal Spirits Mergers and acquisitions (M&A) generated some attention-getting headlines last month. Just last Monday, nearly $60 billion of deals were struck: Charles Schwab purchased TD Ameritrade for $26 billion, LVMH bought jewelry icon Tiffany for $18 billion, Novartis paid nearly $10 billion for drugmaker Medicines Company, and Ebay sold StubHub for $4 billion. Earlier last month, Xerox launched a hostile bid for HP ($32 billion), and KKR reportedly discussed an acquisition of Walgreens that could top $70 billion. A Walgreens transaction is a long shot, as it would potentially be the largest leveraged buyout of all time, but it has set tongues wagging in investment banking and private equity circles and fingers wagging among observers with an inclination to be scolds. M&A overtures cannot be viewed as a pure proxy for animal spirits, but M&A activity has aligned closely with the business cycle over the past two full cycles. The value of completed transactions as a share of equity values and GDP has troughed soon after the recession ends and peaked just before the recession begins, both here and abroad (Chart 1). In early 2016, proportional M&A volumes approached the levels that marked a top in 2000 and 2007, but the signal turned out to be a head fake, at least in terms of the US business cycle. Today’s volumes do not appear to be a concern, especially when compared to equity market value, which has consistently outpaced M&A activity since the 2016 peaks. Chart 1Peaks In M&A Activity Coincide With Business Cycle Peaks, ... It makes intuitive sense that peaks and troughs, or surges and slowdowns, in M&A might provide some insight into corporate confidence. Insight into confidence might in turn offer a preview of capex and hiring activity. Chart 2... But M&A Isn't Predictive Otherwise The empirical record does not support the intuition, however, as non-residential fixed investment growth has not shown much of a relationship with M&A volume as a share of GDP (Chart 2, top panel). Since the crisis, M&A volume has oscillated around the steady climb in hiring intentions (Chart 2, middle panel) and job openings (Chart 2, bottom panel) without exhibiting a clear relationship. What Is Small-Cap Performance Saying? The S&P 500 has made thirteen new all-time highs, or about one every other day, since the last week of October. The S&P SmallCap 600, on the other hand, just narrowly topped its year-to-date high, and remains more than 9% from its all-time high, set at the end of August 2018. Small-caps are more volatile than large-caps and many investors treat relative small-cap performance as a proxy for overall risk aversion. When small-caps are outperforming, investors are presumed to be more willing to embrace risk; when they’re underperforming, investors are supposedly more prone to shun it, with implications for all equities. Small-cap indices are simply too jumpy to predict large-cap equity moves. The empirical record does not support the view that relative small-cap underperformance leads broader market downturns. Because small-cap market cycles tend to be more compressed than large-cap market cycles, there are many more of them. There have been seven complete S&P 500 market cycles since 1970 (Table 1), versus fifteen complete market cycles for the equal-weighted all-cap Value Line Index2 (Table 2). Simple logic holds that all fifteen small-cap events can’t be portents of seven large-cap events, and the S&P 500 has been largely indifferent to small-cap outperformance and underperformance over time (Chart 3). Table 1The S&P 500 Is On Its Eighth Bull Market Since 1970 … Table 2… While The Value Line Index Is On Its Sixteenth Chart 3Independent Events We do not believe that small-cap relative performance is a reliable indicator of investor risk tolerance/aversion, or a proxy for animal spirits. We have found that relative performance is best explained by more prosaic elements like sector composition, valuation and earnings discrepancies, domestic/global performance shifts and cyclical/defensive performance shifts. These elements have sent mixed signals as group so far this year, but sector composition is likely to support small-caps going forward if our constructive economic view pans out. Relative small-cap performance doesn't tell us anything about the S&P 500's future direction. Compositional Factors: The S&P SmallCap 600 Index is not just a mini-me version of the S&P 500 because the benchmarks’ sector composition often varies considerably. The SmallCap 600 currently has much heavier weightings than the S&P 500 in Industrials, Financials, Consumer Discretionaries and Real Estate, and much lighter weightings in Technology, Communication Services and Consumer Staples stocks (Table 3). The small-cap index has a greater share of early cyclicals than the S&P 500, and an equivalently smaller share of defensives, but that hasn’t mattered this year, as small-caps have underperformed large-caps in every sector but Health Care (Table 4). Small-cap underperformance in Energy, Communication Services, Staples, and Financials has been especially stark. Table 3Not Quite Apples To Apples Table 4Year-To-Date Sector Performance Valuation/Earnings Discrepancies: Disparities in index valuation may bear on small- and large-cap performance without revealing anything about underlying business or economic trends, or without providing much insight into investors’ broader appetites for risk. Relative valuation does not appear to have been much of a factor for small- and mid-cap stocks’ relative performance this year, as standardized relative multiples have stayed close to the mean (Chart 4). Both of the SMID indexes have experienced relative de-rating this year, but their underperformance is better explained by lagging earnings growth. According to Refinitiv/I/B/E/S, MidCap 400 and SmallCap 600 earnings are expected to decline by 7% and 19%, respectively, versus the S&P 500’s modest 1% contraction. Chart 4Relative Valuations Are In Line Domestic/Global Discrepancies: Smaller companies are less likely to derive significant portions of earnings and revenues from overseas, and multinationals tend to be mega-caps. The formerly decent correlation between small-cap relative performance and domestic-versus-global industry group performance has unraveled since the 2016 presidential election (Chart 5, bottom panel). It’s possible that investors bid too eagerly for small-caps on expected policy changes after the election and in early 2018, following the cut in the top marginal corporate income tax rate that stood to disproportionately benefit small-caps with effective tax rates equivalent to the top marginal rate.3 It is much easier to buy a small-cap index ETF than it is to assemble portfolios of domestically- and globally-exposed industry groups, which may explain why small-caps decoupled from domestic-versus-global industry groups in two pronounced spikes. A continued small-cap slide would be consistent with BCA’s sanguine global view. Small-caps' relative performance has decoupled from global-facing stocks' relative performance. Could tariffs be hurting them more than expected? Chart 5Small Caps May Not Be Immune To Global Pressures After All Cyclical/Defensive Discrepancies: Differences in exposure to cyclical and defensive sectors offer another perspective on differences in sector composition. The SmallCap 600 Index has just 60% of the S&P 500’s exposure to defensive sectors. Absolute small-cap performance has moved with cyclical-to-defensive performance this year (Chart 6, top panel), but the relative breakdown in small-cap performance that began when defensives took the lead failed to reverse when cyclicals recently revived (Chart 6, bottom panel). We expect cyclicals to outperform defensives in line with our constructive view on global growth, which should translate to a boost for relative small-cap performance. Chart 6Cyclicals Investment Implications The conventional wisdom that small-cap underperformance signals a broader equity downturn does not hold up to examination. Small- and mid-cap earnings have contracted considerably more than S&P 500 earnings, and SMID stocks have de-rated versus large-caps since the fourth quarter of last year, but it is not clear why either of those trends will continue this year. We suspect that SMID underperformance largely reflects a downward revision in expectations that ran a little too high in the wake of the tax cut and the assumption that small-caps would emerge relatively unscathed from new tariff barriers. Large-caps are more globally-oriented, but it’s possible that overweights in Industrials and Discretionaries render small-caps more vulnerable to increased tariff-related input costs. M&A volumes as a share of market cap or GDP have served as a much more reliable proxy for overheated animal spirits. Peaks and troughs in M&A have aligned closely with peaks and troughs in the last two completed business cycles. M&A headlines have revved up in the last month, but the volume of completed deals is not yet at worrisome levels. Our main takeaway from last week’s internal view meeting is that 2019’s worldwide easing of monetary conditions will manifest itself in a pickup in global activity in the first half of 2020. Our bond strategists expect that the Fed’s primary concern is getting inflation expectations up to a level consistent with its inflation target, and that it will strive to maintain policy settings that are perceived as accommodative until it gets the inflation expectations response it seeks. Unless signs of financial instability compel it to tighten policy to contain bubble-like excesses, they expect the Fed to remain on hold for nearly all of 2020. We concur, and therefore expect the monetary backdrop to remain conducive for risk asset outperformance at least into 2021. Investors should maintain risk-friendly positioning against that backdrop.   Doug Peta, CFA Chief US Investment Strategist dougp@bcaresearch.com Footnotes 1 All of BCA’s global recommendations are made from a common-currency perspective. 2 A complete market cycle encompasses a completed bull market (at least 20% closing trough to closing peak gain) and a completed bear market (at least 20% closing peak to closing trough decline). We use the Value Line Index as a small-cap proxy here because it has a 50-year history, unlike the Russell 2000 or SmallCap 600. 3 Multinationals’ effective tax rates are often reduced by their ability to shift income among tax jurisdictions.

Informe especial

The Hidden Sales Recession Of 2015 In 2015, the nominal sales of global listed companies shrank by -11.3 percent, marginally worse than the -11.0 contraction suffered during the Great Recession of 2008.  But because few people are aware of the depth of this latter sales recession, we are calling it the ‘hidden sales recession of 2015’ (Feature Chart).  Chart I-1The Hidden Sales Recession Of 2015 Significantly, all of the major stock markets suffered sales recessions in 2015, even when their domestic economies were expanding healthily (Chart I-2). Which starkly illustrates that the performance of stock markets often has little, or no, connection with the performance of their domestic economies. Chart I-2All The Major Stock Markets Suffered Sales Recessions In 2015 The euro area and UK economies grew strongly in 2015, yet the nominal sales of listed European companies contracted by -7 percent. Meanwhile, the sales of listed companies in the US shrank -3 percent, and in China by -10 percent. However, among the major stock markets, the worst pain was felt by the UK stock market where total nominal sales plunged -20 percent (Charts 3-5). Chart I-3US Listed Companies' Sales Shrank 3 Percent Despite A Growing Economy Chart I-4European Listed Companies' Sales Shrank 7 Percent Despite A Growing Economy Chart I-5UK Listed Companies' Sales Shrank 20 Percent Despite A Growing Economy The particularly sharp contraction in UK stock market sales, with their heavy exposure to the oil and resource sectors, points to the cause of the sales recession of 2015: the interrelated weakness in emerging markets, oil and other commodity prices, and a surging dollar. What Caused The Hidden Sales Recession Of 2015? In 2015, Chinese policymakers started tightening policy to lean against a putative credit bubble. This exacerbated a slowdown in Chinese growth that was already underway. In turn, China’s slowdown set off a domino effect in other emerging economies which relied on China as a major export market. Meanwhile, the Federal Reserve signalled its intention to exit its extended period of zero interest rate policy, arguing that extraordinarily easy monetary policy was no longer appropriate for a US economy that had returned to normality. On the other sides of the Atlantic and Pacific though, the ECB and the BoJ were moving monetary policy in the opposite direction, obsessed by the persistent undershoot of inflation relative to the two percent target. This combination of tighter monetary policy in the US combined with looser policy in the euro area and Japan precipitated a surge in the value of the dollar. The surging dollar worsened China’s problems. With the yuan pegged to the dollar, the stronger dollar hurt the competitiveness of Chinese companies. But when China loosened the peg in August 2015, it just unleashed another problem: capital outflows.  The price of WTI plunged from a $107 peak in mid-2014 to just $27 in early 2016. Crucially, the synchronized slowdown across emerging economies hit the demand for commodities, catalysing a collapse in prices across the whole commodity complex. The price of WTI plunged from a $107 peak in mid-2014 to just $27 in early 2016 (Chart I-6); metal markets also suffered, the copper price fell from $7000 to $4500; as did agricultural commodities like soybeans whose prices almost halved. This collapse in commodity prices simply added further pressure on emerging economies that are major commodity producers, like Brazil. Chart I-6The Sales Recession Of 2015 Was About A Collapse In Prices In Key Sectors Of The Economy In turn, the problems in the emerging economies and commodity complex set off other negative feedback loops that further hurt prices. For the significant portion of emerging market debt that is denominated in dollars, a stronger dollar meant a greater debt burden and danger of default. At the same time, the collapse in the oil price endangered the financial viability of the heavily indebted US shale oil producers and thereby their corporate bonds.     To summarise, the stock market sales recession of 2015 was partly about a slowdown in sales volumes. But it was more about a collapse in the prices in certain key sectors of the economy, namely oil, materials, and industrials. And as nominal sales are the product of sales volumes and prices, the nominal sales of listed companies suffered as sharp a recession in 2015 as in 2008. Why Does The Hidden Sales Recession Of 2015 Matter Today? The experience of 2015 painfully illustrates that the nominal sales of the dominant companies in a stock market may have little, or no, connection with their domestic economy, or indeed with conventional measures of the global economy. The reason is that the stock market, which by definition only includes publicly listed companies, has different sector skews compared with the whole economy. This is particularly true for those European stock markets where sector skews make them over exposed to the oil, materials, and industrial sectors, whose output prices can show wild swings that swamp the impact of sales volumes. The years 2010-11 and 2017-18 witnessed a strong catch-up in listed companies’ nominal sales. But after this snapback phase, nominal sales revert to a more moderate trend-like rate of growth. Chart I-7After A Sales Recession, There Is A Snapback There is another important message for today. After a sharp contraction in nominal sales caused by either volumes or prices plunging, as in 2008 and 2015, the first part of the recovery from overly-depressed levels tends to be the sharpest. This sharp snapback phase tends to last no more than two years. So the years 2010-11 and 2017-18 witnessed a strong catch-up in listed companies’ nominal sales. But after this snapback phase, nominal sales revert to a more moderate trend-like rate of growth (Chart I-7). Clearly, the sharp snapback phase is most powerful for the most beaten-up sectors during the nominal sales recession, such as energy and materials. For such ‘value cyclicals’, nominal sales growth tends to outperform that of the aggregate stock market in the snapback, and then underperform once the snapback is over (Chart I-8 and Chart I-9). Chart I-8Energy Outperforms In The Snapback, Then Underperforms Chart I-9Materials Outperform In The Snapback, Then Underperform Chart I-10Healthcare Underperforms In The Snapback, Then Outperforms The corollary is that the sectors that did not suffer much during the sales recession, such as healthcare do not have a snapback phase. Hence, for such a ‘growth defensive’, nominal sales strongly underperform the aggregate market during the two year snapback, and then outperform once the snapback is over (Chart I-10). Let’s conclude with some brief investment thoughts. First, for mainstream stock markets, nominal sales and earnings can grow in 2020, but the growth rate will not be as strong as in the snapback phase of 2017-18. Without any support from lower bond yields and the associated multiple expansion for stocks, this means that stock markets are likely to deliver low single digit returns. Second, value cyclicals such as energy and materials outperformed in the snapback phase from 2017 to mid-2019, but now appear to be rolling over into an underperformance phase. Structurally underweight energy and materials. For mainstream stock markets, nominal sales and earnings can grow in 2020, but the growth rate will not be as strong as in the snapback phase of 2017-18.  Third, a growth defensive such as healthcare underperformed sharply in the snapback phase, but now appears to be back in an outperformance phase. Stay structurally overweight healthcare.   Dhaval Joshi Chief European Investment Strategist dhaval@bcaresearch.com

Informe especial

Highlights Building on a previous special report focused on the investable market, in this report we construct and present models designed to predict the odds of Chinese domestic equity sector outperformance. BCA Research's China Investment Strategy service will aim to use our newly developed sector outperformance probability models to better understand the drivers of performance at any given moment, and to make more active equity sector recommendations in the future. Episodes of domestic equity sector outperformance over the past decade appear to be more idiosyncratic (or sector specific) than has been the case for the investable market, suggesting that periods of “abnormal” relative sector performance may occur more frequently than in the investable universe. Among the predictors included in our model, our Li Keqiang leading indicator (based on monetary conditions, money, and credit growth) has been the most important. Our base case view argues in favor of domestic cyclicals over defensives over the coming year, but recent sector performance suggests that domestic consumer discretionary and tech should be favored within a cyclical equity portfolio over energy, materials, and industrials barring a surge in oil prices or a capitulation by Chinese policymakers in favor of “flood irrigation-style” stimulus. Over the long-term, we argue that investors have a good reason to favor domestic defensives over cyclicals until the latter demonstrates meaningfully better earnings performance. Feature We examined China’s investable equity sector performance in detail in our October 30 Special Report,1 with a particular emphasis on understanding the specific macroeconomic or equity market factors that have historically predicted relative sector performance. In today’s report, we extend our approach to China’s A-share market. Our research focused on constructing and presenting models that quantify a checklist-based approach to determining the odds of equity sector performance. The aim is to use these models to better understand the drivers of performance at any given moment, and to make more active equity sector recommendations in the future. These recommendations will not mechanically follow the models; rather, we plan to use them as a stand in for what typically would be expected given the macro and financial market environment, and as a basis to investigate “abnormal” relative performance. We find that episodes of domestic equity sector outperformance over the past decade appear to be more idiosyncratic (or sector specific) that has been the case for the investable market, suggesting that periods of “abnormal” relative sector performance may occur more frequently than in the investable universe. Among the macroeconomic and equity market factors that we found to be important predictors, our Li Keqiang leading indicator was the most significant. This confirms that China’s domestic market is more sensitive to monetary conditions, money, and credit growth than its investable peer. We also note the sharp difference in the relative performance of cyclicals versus defensives in the domestic market compared with the investable market, and what this means for investors over the coming 6-12 months. Finally, we argue that investors should maintain a structural bias towards defensive stocks in the domestic market until cyclicals demonstrate meaningfully better earnings performance, and point to an existing position in our trade book for investors interested in strategically allocating to the A-share market. Detailing Our Approach In our effort to better understand historical periods of domestic sector performance, we have chosen to model the probability of outperformance of each level 1 GICS sector (plus banks) based on a set of macro and equity market variables. Specifically, we use an analytical tool called a logistic regression, which forecasts the probability of a discrete event rather than forecasting the value of a dependent variable. We utilized this approach when building our earnings recession model for China (first presented in our January 16 Special Report).2 The “events” that we modeled are historical periods of individual Chinese investable sector outperformance from 2010 to 2018, relative to the MSCI China index (the “broad market”). We find that episodes of domestic equity sector outperformance over the past decade appear to be more idiosyncratic (or sector specific) than has been the case for the investable market. Chart I-1A and Chart I-1B illustrate these periods with shading in each panel. We then attempt to explain these episodes of outperformance with the following macro predictors: Chart I-1AThis Report Builds Models ##br##Aimed At... Chart I-1B...Predicting The Shaded Regions Of These Charts Periods of accelerating economic activity, represented by our BCA's China Activity Index Periods of rising leading indicators of economic activity, represented by our BCA Li Keqiang (LKI) Leading Indicator Episodes of tight monetary policy, defined as periods where China’s 3-month interbank repo rate is rising Periods of accelerating inflation, measured both by headline and core inflation We also include several equity market variables: uptrends in relative sector earnings, periods of rising broad market stock prices, uptrends in broad market earnings, and episodes of extreme technical conditions and relative over/undervaluation for the sector in question. In the case of energy stocks, we also include oil prices as a predictor. Chart I-2A and Chart I-2B illustrate these periods as well as the macro & market variables that we have included as predictors. Chart I-2AWe Use These Macroeconomic And Equity Market Factors... Chart I-2B...To Predict Periods Of Equity Sector Outperformance Our approach also accounts for the existence of any leading or lagging relationships between the macro and market variables we have used as predictors and sector relative performance. In most cases the predictors lead relative sector performance, but in some cases it is the opposite. In the case of the latter, we have limited the lead of any variable in our models to three months in order to reduce the need to forecast. Finally, our approach also limits the extent to which we consider a leading relationship between our predictors and relative sector performance, in order to avoid picking up overlapping economic cycles. This issue, and the evidence supporting the existence of a 3½-year credit cycle in China, is detailed in Box I-1 of our October 30 Special Report (please see footnote 1). Key Drivers Of Sector Performance: Domestic Versus Investable Pages 11-22 present the results of each sector’s outperformance probability model, along with a list of factors that were found to be useful predictors and a summary of the results. The importance of the factors included in the models is shown in each of the tables at the top right of pages 11-22 by a score of 1-3 stars, (loosely representing key levels of statistical significance) as well as each factor’s optimal lead or lag. A minus sign shows that the predictor leads sector relative performance, whereas a plus sign shows that it lags. Following a review of our domestic equity sector outperformance models, differences in the results from those presented in our previous report can be organized into three distinct elements: 1) the breadth of macro & equity market factors in predicting sector performance, 2) the relative importance of our LKI leading indicator, and 3) the difference between domestic/investable cyclical versus defensive performance. The Breath Of Predictive Factors Chart I-3In The Domestic Market, The Breadth Of Predictive Factors Is Narrower Compared with the models for investible sector performance that we detailed in our previous report, our work modeling domestic equity sector performance highlights that the breadth of predictive factors is narrower, particularly among cyclical sectors (Chart I-3). Our model for domestic materials (shown on page 12) is one exception to this rule, but we found that our models for energy, industrial, and consumer discretionary relative performance were all focused on fewer predictors than is the case for the investable market. In addition, our domestic utilities model has considerably worse predictive power than our model for investable utilities. The case of industrials is particularly notable: our model for investable industrials highlighted the importance of tight monetary policy, rising core inflation, rising broad market stock prices & earnings, and overbought and oversold technical conditions in explaining past periods of industrial sector outperformance. By contrast, our domestic industrials model is quite simple: the sector has been more likely to outperform, with a lag, when our BCA China Activity Index and LKI leading indicator have been rising, and underperform following periods of extreme overvaluation. One of the core conclusions of our previous report was that investors should view the relative performance of investable industrials versus consumer staples as a reflationary barometer, given the strong sensitivity of both sectors to tight monetary policy. We explained this sensitivity by pointing to the substantial difference in corporate health between the two sectors: industrial firms are heavily debt-laden and thus experience deteriorating operating performance and an environment of rising interest rates. In comparison, food and beverage firms appear to have the strongest balance sheets among the sub-sectors that we have examined, suggesting that they would benefit less from easier monetary conditions than firms in other industries. Our leading indicator for Chinese economic activity has been considerably more important in predicting domestic equity sector outperformance than in the investable market. However, these dynamics appear to be completely absent in influencing performance in China’s domestic equity market. Not only has domestic industrial sector relative performance not been negatively linked to periods of tight monetary policy, but our model for consumer staples (shown on page 15) highlights that periods of staples performance have been driven by two simple factors: the relative trend in staples EPS  (positive sign), and the trend in broad market EPS (negative sign). The Relative Importance Of Monetary Conditions, Money, And Credit Growth Chart I-4 summarizes the significance of the factors in predicting sector performance in general, by summing up each predictor’s number of stars across all of the models. The chart shows that our LKI leading indicator is the most important signal of sector performance that emerged from our analysis, followed by rising core inflation, rising broad market stock prices, rising economic activity, and oversold technical conditions. The ranking of results shown in Chart I-4 is fairly similar to those that we listed for the investable market, with two exceptions. First, for the domestic market, periods of tight monetary policy were considerably less important than in the investable market as an important predictor of relative sector performance. Instead, our LKI leading indicator was by far the most important predictor, which underscores a point that we have made in previous reports: domestic stocks appear to be much more sensitive to the trend in monetary conditions, money, and credit growth than for the investable market. This increased sensitivity has helped explain the difference in performance this year between the investable and domestic market, underscoring that the former has more catch-up potential than the latter in a trade truce scenario. Chart I-4Monetary Conditions, Money, & Credit Growth Drive A-Share Performance Second, in the investable market, episodes of significant overvaluation had essentially no power to predict future episodes of equity market underperformance. But this factor was an important or very important contributor to our domestic industrials, health care, and tech models. This finding is consistent with our May 23 Special Report, which noted that value stocks have outperformed in China’s domestic equity market over the past five years and underperformed in the investable market (Chart I-5). Chart I-5Value Has Been A More Successful ##br##Factor In The Domestic Market   Major Differences In The Performance Of Cyclicals Versus Defensives The results of our models for domestic equity sector performance did not change the cyclical & defensive labels that we applied in our previous report. The signs of the predictors shown in the tables on pages 11-22 clearly highlight that the domestic energy, materials, industrials consumer discretionary, and information technology sectors are cyclical sectors, and that consumer staples, health care, financials, telecom services, utilities, and real estate are defensive. What is striking, however, is that there is a major difference in the relative performance of equally-weighted domestic cyclicals versus defensives compared with what has occurred in the investable market over the past decade. Chart I-6A and Chart I-6B illustrate the different relative performance trends, along with their corresponding trends in relative P/E and relative EPS. Whereas the relative performance of investable cyclicals versus defensives has had somewhat of a stable mean over the past decade, domestic cyclicals have badly underperformed since early-2011. The charts also make it clear that this underperformance has been driven by a downtrend in relative EPS, not due to trend differences in relative valuation. Chart I-6ACyclicals/Defensives Somewhat Mean-Reverting In The Investable Market... Chart I-6B...But Not So In The Domestic##br## Market Digging further, it appears that this discrepancy can be largely explained by the significant difference in performance between investable and domestic tech over the past decade (Chart I-7). Whereas the former has outperformed the overall investable index by roughly 4-5 times since 2010, the relative performance of the latter has only very modestly risen. In effect, Charts I-6 and I-7 highlight that Chinese cyclical sectors have been structurally impaired over the past decade and have only been “saved” in the investable market by massive outsized outperformance of the tech sector. The fact that investable tech sector performance itself has been largely driven by 2 extremely successful firms underscores how narrowly based the investible cyclical versus defensives performance trend has been. Chart I-7A Huge Gap In Tech Explains Domestic Cyclical Underperformance Investment Conclusions There are three conclusions that investors can draw from our analysis. First, our research shows that episodes of domestic equity sector outperformance over the past decade appear to be more idiosyncratic (or sector specific) that has been the case for the investable market. This does not mean that domestic sector performance is not significantly impacted by macro and top down equity market factors, but it suggests that periods of “abnormal” relative sector performance may occur more frequently than in the investable universe. As such, investors should be prepared to include episode-specific investigation of abnormal performance as a regular part of their domestic equity sector allocation decisions. Investors should favor domestic cyclicals over the coming year, with exposure focused on consumer discretionary and tech. Second, the fact that our LKI leading indicator is in an uptrend suggests that investors should favor domestic cyclicals over defensives over the coming year, with a caveat. We have noted in several previous reports that our indicator is in a shallow uptrend, and the slower pace of money and credit growth than during previous economic upswings suggests that the bar may be higher for some cyclical sectors to outperform. We would advise investors to watch closely over the coming 3-6 months for signs of a technical breakout in all cyclical sectors. But sector performance in Q1 of this year, when the overall A-share market rose sharply versus global stocks, suggests that domestic consumer discretionary and tech should be favored within a cyclical equity portfolio over energy, materials, and industrials barring a surge in oil prices or a capitulation by Chinese policymakers in favor of “flood irrigation-style” stimulus (Chart I-8). Within resources, we prefer the investable energy sector to its domestic peer, due to a sizeable valuation advantage. Chart I-8Favor Select Domestic Cyclical Sectors Over The Coming Year As a third and final point, abstracting from our bullish outlook for select cyclical sectors over the coming year, Charts 6 and 7 clearly argue for investors to maintain a structural bias towards defensive stocks in the domestic market until cyclicals demonstrate meaningfully better earnings performance. In the May 23 Special Report that we referred to above, we noted that an A-share portfolio formed of industry groups with above-median return on equity and below-median ex-post beta has significantly outperformed over the past decade. Table I-1 presents the current industry group weights of this portfolio, and shows that overweight exposure is concentrated in the health care, consumer staples, and real estate sectors (all of which are defensive), and a heavy underweight towards industrials. Table I-1Current High ROE / Low Beta Factor Industry Group Portfolio Weights* For clients who are interested in strategically allocating to the A-share market, we maintain a long position in this portfolio relative to the MSCI China A Onshore index in our trade book, and plan to continue to update the performance of the trade on a weekly basis. Energy Chart II-1 Table II-1 Similar to the investable energy sector, periods of domestic energy sector outperformance are strongly positively related to rising oil prices and rising headline inflation in China. We noted in our previous report that this is a behavioral relationship, rather than a fundamental one. Domestic energy stocks are negatively associated with rising broad market stock prices, unlike their investable peers. This largely reflects the fact that the relative performance of domestic energy stocks has been in a structural downtrend over the past decade. From 2010 to mid-2016, this decline was caused by a persistent underperformance in earnings. Since mid-2016, domestic energy sector EPS have been rising in relative terms, meaning that more recent underperformance has been due to multiple contractions. While not as relatively cheap as their investable peers, domestic energy stocks are heavily discounted versus the broad domestic market based on both the price/earnings ratio and the dividend yield. Consequently, it is possible that domestic energy stocks may at some point begin to outperform in a rising broad equity market environment. For now, our model argues for an underweight stance towards domestic energy due to the lack of a clear uptrend in oil prices. As a pure value play, investable energy stocks maintain a dividend yield of nearly 6.5%, and are thus more attractive than their domestic peers. Materials Chart II-2 Table II-2 Our model for the domestic materials highlights that the sector’s performance has been related to strengthening economic activity and strongly related to a rising Li Keqiang leading indicator. Among the equity market variables that we tested, materials outperformance has been positively associated with rising relative EPS, rising broad market EPS, and prior oversold technical conditions. Similarly, the investable materials sector, these results show that domestic materials are a strong play on accelerating Chinese economic activity. The factors included in our domestic materials sector model are similar to those included in our investable material, except that relative material earnings have also been a significant predictor of sector relative performance. In addition, the macro & equity market predictors included in our domestic materials model have done a better job of leading material sector performance. The odds of domestic materials outperformance rose twice above the 50% mark this year according to our model, without any corresponding improvement in relative stock prices. The spikes in the model occurred largely because domestic materials became significantly oversold; technical conditions for the sector have only twice been weaker over the past decade. This underscores that investors should be watching domestic materials closely in Q1 of next year for signs of a relative rebound. Industrials Chart II-3 Table II-3 The results of our model for domestic industrial sector outperformance are interesting, as they imply that the drivers of performance are different between the domestic and investable markets. In the investable index, we found that industrials were heavily sensitive to monetary policy, rising core inflation, relative sector earnings, and periods of rising broad market stock prices. Our domestic model is considerably simpler: industrials outperform, with a lag, when our activity index and Li Keqiang leading indicator are rising. Periods of strong overvaluation have also been significant in predicting future episodes of domestic industrial sector underperformance. It is not clear to us why the drivers of relative performance for domestic industrials have been different than in the investable equity index, But the good news is that the relative simplicity of the model makes the investment decision making process for domestic industrials considerably easier. Today, domestic industrials are significantly undervalued, and our Li Keqiang leading indicator is in a shallow uptrend. This suggests that domestic industrials are likely to begin outperforming at some point in early-2020 following a bottoming in Chinese economic activity, unless policymakers are quick to tighten once activity begins to improve (which would be contrary to our expectations). Consumer Discretionary Chart II-4 Table II-4 Our domestic consumer discretionary model highlights that the sector’s relative performance is positively associated with a rising Li Keqiang leading indicator, rising core inflation, and rising broad market stock prices. Similar to its investable peers, domestic consumer discretionary stocks are cyclical, and positive relationship with core inflation may reflect improved pricing power for the sector. Unlike investable consumer discretionary, the domestic consumer discretionary has not been meaningfully impacted by the December 2018 changes to the global industry classification standard. Hence, our model does not exclude the internet & direct marketing retail sector as we did in our previous report on investable sectors. For now, our model suggests that the domestic consumer discretionary sector is likely to continue to underperform, given decelerating core inflation and the lack of a clear uptrend in the broad domestic equity index. However, as a cyclical sector, we will be watching closely for an upside breakout in domestic consumer discretionary performance in the first quarter as a signal to increase exposure to the sector. Consumer Staples Chart II-5 Table II-5 Our domestic consumer staples model is significantly different than that shown in our previous report for investable staples. This reflects sizeable differences in investable/domestic staples relative performance over the past decade, particularly from mid-2015 to late-2017 (where domestic staples outperformed significantly and investable staples languished). Of the two predictors found to be significant in explaining historical periods of domestic staples performance, a negative relationship with the trend in broad market EPS has been the most important. This underscores that staples are defensive sector. The trend in staples relative earnings has closely followed in importance, showing that the tremendous outperformance in domestic consumer staples over the past several years has, at least in part, been driven by fundamentals. Still, domestic consumer staples are currently priced at 34x earnings per share, compared with 15x for the overall domestic market. While our model currently argues for continued staples outperformance, the risk of a valuation mean reversion next year, against the backdrop of an improving economy, is above average. Over the coming 6-12 months, investors should be closely monitoring domestic staples for signs of waning earnings momentum and/or a major technical breakdown as potential signals to reduce domestic staples exposure. Health Care Chart II-6 Table II-6 Over the past decade, periods of domestic health care outperformance have been negatively associated with rising economic activity, rising core inflation, and rising broad market stock prices. Oversold technical conditions and periods of overvaluation have also helped predict future episodes of health care relative performance. These factors clearly point to the defensive nature of domestic health care, similar to health care stocks in the investable index. However, one clear difference between investable and domestic health care is that the former appears to have leading properties and the latter does not. We noted in our previous report that periods of investable health care underperformance appeared to lead, on average, our BCA Activity Index, periods of rising core inflation, and uptrends in the broad investable index. By contrast, domestic health care lags the Activity Index and core inflation by just over a year, and also lags the trend in broad market EPS. Our model points to further health care outperformance, but we would expect domestic health care stocks to underperform at some point next year following an improvement in economic activity and a resumed uptrend in broad domestic EPS. Financials Chart II-7 Table II-7 Our outperformance probability model for domestic financials highlights that the sector is countercyclical: periods of outperformance have been negatively related to our LKI leading indicator, rising core inflation, and rising broad market stock prices. Similar to the case of the investable index and unlike the case globally, financials are clearly defensive. Investable financials have exhibited atypical performance this year according to the model presented in our previous report. By contrast, domestic financials have performed in line with what our model has suggested: our LKI leading indicator is in a shallow uptrend, and the relative performance of domestic financials has trended flat-to-down since late-2018. Barring a major shift by the PBoC towards a hawkish stance in the coming year (which we do not expect), our base case view for the Chinese economy implies that domestic financials are likely to continue to underperform. Banks Chart II-8 Table II-8 Our model for domestic banks is similar to that of financials, with some important differences. In addition to being sensitive to our LKI leading indicator, domestic bank performance is negatively related to our Activity Index. Oversold technical conditions have also been quite important in predicting future episodes of domestic bank outperformance. The model is currently forecasting domestic bank underperformance, although it was late in predicting the selloff in bank stocks that began late last year. Similar to the case for domestic financials, our baseline view for the Chinese economy implies that domestic bank are likely to continue to underperform over the coming year. Information Technology Chart II-9 Table II-9 Our model for the domestic technology sector is different than that of investable tech, which reflects the vast difference in performance between the two sectors. While the relative performance of domestic tech has trended sideways over the past decade, investable tech stock prices have risen fourfold relative to the broad investable index. This difference is largely accounted for by the absence of the BAT stocks (Baidu, Alibaba, Tencent) from the domestic market. Similar to investable tech, domestic technology stocks are negatively related to tight monetary policy, and positively linked with a pro-cyclical economic variable (a rising LKI leading indicator). However, strangely, domestic tech has been strongly and negatively related to rising headline inflation, a finding with no clear fundamental basis. The model has been less successful in predicting domestic tech performance over the past year than in the past, which appears to be linked to the inclusion of headline inflation in the model. Rising headline inflation has been clearly associated with three major episodes of domestic tech underperformance since 2010, but over the past year domestic tech has outperformed as headline inflation accelerated. For now we would advise investors to focus on the other factors in the model: the lack of overvaluation, and our view that policy will remain easy on a measured basis, supports an overweight stance towards domestic tech over the coming year. Telecom Services Chart II-10 Table II-10 Our domestic telecom services relative performance model highlights that the sector is defensive like its investable peer, but the factors driving performance are somewhat different. The only similarity between the two models is that periods of outperformance are negatively related to rising broad market stocks prices for both investable and domestic telecom services, with domestic telecom stocks responding with a lag. Among the macro factors included in the model, periods of domestic telecom services outperformance are negatively and coincidently related to our LKI leading indicator, and positively related to tight monetary policy (with a slight lead). Oversold technical conditions have also proven to help predict future episodes of outperformance. The model failed to predict a brief period of outperformance in mid-2018, but has generally accurately predicted underperformance of domestic telecom stocks since early-2017. Barring a collapse in the US/China trade talks or considerably weaker near-term economic conditions than we expect, domestic telecom services will likely continue to underperform until the specter of tighter monetary policy emerges. This is unlikely to occur until the middle of 2020, at the earliest. Utilities Chart II-11 Table II-11 Overall, our domestic utilities model has considerably worse predictive power than our model for investable utilities. The model shows that the performance of domestic utilities is negatively related to rising core inflation (with a lag) and rising broad market EPS, but these relationships are not particularly strong. We noted in our June 19 Special Report that domestic utilities ranked highly on the impact that relative EPS had on predicting relative stock prices , yet relative sector earnings did not register as a significant predictor in our model. This apparent discrepancy is resolved by differences in the time horizon between these two approaches. The analysis that we presented in our June 19 Special Report examined the relationship between earnings and stock prices over the entire sample period (2011-2018), meaning that it examined the predictive power of earnings over the long-term. The models built in this report have focused strongly on explaining periods of outperformance over a 6-12 month time horizon, there have been enough deviations in the trend between the relative performance of utilities and relative utilities earnings that the relationship between the two was not sufficiently strong to show up in the model. In other words, the long-term link between utilities relative earnings and stock prices is strong, but the short-term link is fairly weak. Real Estate Chart II-12 Table II-12 Similar to investable real estate, our model shows that domestic real estate is a counter-cyclical sector in that it is negatively related to periods of rising economic activity, a rising LKI leading indicator, tight monetary policy, and rising core inflation. Overbought technical conditions have also aided in predicting future episodes of domestic real estate underperformance. Our model for domestic real estate stocks has performed quite well on average, but its predictive success since late-2017 has been mixed. This period of atypical underperformance has coincided with a considerably weaker rebound in residential floor space sold than has occurred in previous recoveries in the real estate market. This suggests that domestic real estate stocks are more susceptible to trends in housing sales than their investable peers (which appear to be mostly sensitive to rising house prices). We noted in our November 6 Weekly Report that floor space sold is picking up , but it still remains weak when compared with history. This, in combination with our view that the Chinese economy will improve over the coming year, suggests that investors should avoid domestic real estate exposure relative to the overall domestic equity market. Footnotes 1  Please see China Investment Strategy Special Report "A Guide To Chinese Investable Equity Sector Performance," dated October 30, 2019, available at cis.bcaresearch.com 2  Please see China Investment Strategy "Six Questions About Chinese Stocks," dated January 16, 2019, available at cis.bcaresearch.com 3  Please see China Investment Strategy Special Report "Chinese Equity Sector Earnings: Predictability, Cyclicality, And Relevance," dated June 19, 2019, available at cis.bcaresearch.com 4  Please see China Investment Strategy Weekly Report "China Macro And Market Review," dated November 6, 2019, available at uses.bcaresearch.com Cyclical Investment Stance Equity Sector Recommendations

In lieu of the next weekly report I will be presenting the quarterly webcast ‘The Japanification Of Europe: Should We Fear It, Or Celebrate It?’ on Monday 4 November at 10.00AM EST, 3.00PM GMT, 4.00PM CET, 11.00PM HKT. As usual, the webcast will take a TED talk format lasting 18 minutes, after which I will take live questions. Be sure to tune in. Regards, Dhaval Joshi Highlights Global and European growth is experiencing a welcome rebound. Favour a cyclical investment stance, albeit tactical – as there is no visibility in the growth rebound beyond early 2020. Close the overweight to healthcare versus industrials at a small profit. Upgrade Sweden and Spain to overweight, and Norway to neutral. Downgrade Denmark to underweight, and Ireland to neutral. Expect heightened volatility in sterling in the build up to a highly ‘non-linear’ UK election. Fractal trades: 1. long oil and gas versus telecom; 2. long tin. Feature Global and European growth is experiencing a welcome rebound. This we can see from the best real-time indicators of activity, such as the ZEW sentiment, IFO expectations and of course the equity and bond markets (Chart of the Week). Nevertheless, investors make three very common mistakes in interpreting, predicting, and implementing such rebounds. This week’s report describes these three mistakes and the underlying realities. Chart of the WeekGrowth Is Experiencing A Welcome Rebound Mistake #1: Real-Time Indicators Do Not Lead The Market Reality #1: In the short term, markets move in lockstep with indicators such as the ZEW sentiment, IFO expectations, and PMIs (Chart I-2). Chart I-2Economic Indicators Do Not Lead The Markets... Having said that, the evolution of economic indicators can still provide a useful long-term investment signal. If an indicator – like IFO expectations – tends to revert to its mean, and is now near its historical lower bound, the scope for an eventual move up is greater than the scope for a further move down.1 Based on such a reversion to the mean, we are maintaining a structural overweight to the DAX versus the German long bund (Chart I-3). Chart I-3...But Depressed Performances Have Scope For Long-Term Upside But to reiterate, in the short term, the market moves in lockstep with the real-time economic indicators. Hence, to get a useful short-term investment signal, we need to predict where these indicators will be in the coming months – in other words, to predict whether growth will continue to accelerate. In the short term, the market moves in lockstep with real-time economic indicators.  Which brings us neatly to the second mistake. Mistake #2: When Financial Conditions Ease, Growth Does Not Necessarily Accelerate Reality #2: It is not the change of financial conditions but rather its impulse – the change of the change – that causes growth to accelerate or decelerate. For example, a 0.5 percent decline in the bond yield decline will trigger new borrowing through, inter alia, an increase in the number of mortgage applications. The new borrowing will add to demand, meaning it will generate growth. But in the following period, a further 0.5 percent decline in the bond yield will generate the same additional new borrowing and thereby the same growth rate. The crucial point being that if the decline in the bond yield is the same in the two periods, growth will not accelerate. Growth will accelerate only if the first 0.5 percent bond yield decline is followed by a bigger, say 0.6 percent, decline – meaning a tailwind impulse. But growth will decelerate if the first 0.5 percent decline is followed by a smaller, say 0.4 percent, decline – meaning a headwind impulse. To repeat, the counterintuitive thing is that for a growth acceleration it is not the change in the bond yield that is important but rather its impulse. There are four impulses that matter for short-term growth: The bond yield 6-month impulse. The credit 6-month impulse. The oil price 6-month impulse (for oil importing economies like Germany). The geopolitical risk impulse. To be clear the geopolitical risk impulse is not an impulse in the technical sense, but it is a similar concept: is the number of potential geopolitical tail-events going up or down? In the fourth quarter, our subjective answer is down. The Brexit deadline has been pushed back to January 31 2020; the new coalition government in Italy has removed Italian politics as an imminent tail-event; and the US/China trade war and Middle East tensions are most likely to be in stasis. Turning to the other impulses, the credit 6-month impulse should briefly rebound in the fourth quarter following the rebound in the global bond yield 6-month impulse (Chart I-4). All of this favours a cyclical investment stance – albeit tactical, because there is no visibility in this growth rebound beyond early 2020. Chart I-4The Credit 6-Month Impulse Should Briefly Rebound Meanwhile, the recent evolution of the oil price 6-month impulse should provide an additional short-term tailwind for oil importing economies (Chart I-5). Justifying a near-term overweight stance to the cyclical heavy German stock market within a European or global equity portfolio. Chart I-5The Oil Price 6-Month Impulse Should Help Oil Importing Economies Which brings us to the third mistake. Mistake #3: Major Stock Markets Are Not Plays On Their Economies Of Domicile Reality #3: Major stock markets are dominated by multinational corporations, and such companies are plays on their global sectors, rather than the country in which they have a stock market listing. Hence, a stock market’s relative performance is predominantly a play on its distinguishing overweight and underweight ‘sector fingerprint’. What confuses matters is that sometimes the sector fingerprint happens to align with the tilt of the domicile economy. Germany has an exporter heavy stock market and an exporter heavy economy while Norway has an oil heavy stock market and an oil heavy economy, so in these cases there is a connection between the stock market and the economy. But in most instances, there is no alignment: the connection between the UK stock market and the UK economy is minimal, and the same is true in Spain, Denmark, Ireland, and most other countries. When bond yields were declining most sharply, and growth was decelerating, it weighed on cyclical sectors such as industrials and banks versus the more defensive sectors such as healthcare. Banks suffered doubly because the flattening (or inverting) yield curve also ate into their margins. But if the sharpest decline in bond yields has already happened, it suggests that cyclicals could experience a burst of outperformance, at least for a few months (Chart I-6). Hence, today we are closing our four month overweight to healthcare versus industrials at a small profit. Chart I-6If The Sharpest Decline In Bond Yields Is Over, Cyclicals Could Outperform Based on sector fingerprints, this also necessitates the following changes to our country allocation: Overweight banks versus healthcare means overweight Sweden versus Denmark (Chart I-7). Chart I-7Long Sweden Versus Denmark = Long Financials And Industrials Versus Biotech Overweight banks means overweight Spain (Chart I-8). Chart I-8Long Spain = Long Banks Meanwhile, removing our underweight to the cyclical oil sector means removing the successful underweight to Norway (Chart I-9). And indirectly, it means removing the equally successful overweight to Ireland, given its high weighting to Airlines (Chart I-10).  Chart I-9Long Norway = Long Oil And Gas Chart I-10Long Ireland = Long Airlines   Bonus Mistake: You Can Not Hit A Point Target In A Non-Linear System Boris Johnson said that he “would rather be dead in a ditch” than miss the October 31 deadline for delivering Brexit. Well Johnson had to ditch his ditch. Why? Because the UK’s parliamentary arithmetic has made Brexit an inherently non-linear system, and you cannot hit a point target in a non-linear system. Boris Johnson had to ditch his ditch. In a non-linear system a tiny change in an input might have no impact on the output, or it might have a huge impact on the output. The Brexit process is inherently non-linear because a tiny shift in parliamentary votes one way or another, or a tiny shift in the tabled amendments to laws one way or another has had a huge impact on the outcome. That’s why it proved impossible for Johnson to hit his point target of delivering Brexit by October 31. Attention now shifts to another non-linear system – the upcoming UK general election. The UK’s first past the post electoral system is designed for a head-to-head between two dominant parties. But right now, there are five parties in play – Labour, Liberal Democrat, Conservative, Brexit, plus the SNP in Scotland. Mathematically, this creates the possibility of ten types of swings, compared with the usual single swing between Labour and Conservative. Making the outcome of the election highly sensitive to a tiny shift in votes either way in ten different directions. The UK general election is a non-linear system. In The Pound Is A Long Term Buy (And So Are Homebuilders) we initiated a structural long position in the undervalued pound.2 Given that our overweight to the international focused FTSE100 versus the domestic focussed FTSE250 is effectively an inverse play on the pound, it is inconsistent with our long-term view on the currency (Chart I-11). Nevertheless, over the course of the election campaign we expect heightened volatility in sterling as the non-linearity of the election outcome becomes clear. Hence, we await an upcoming better opportunity to remove our overweight FTSE100 versus FTSE250 position. Chart I-11Long FTSE250 Versus FTSE100 = Long Pound Fractal Trading System* There are two recommended trades this week. The underperformance of US oil and gas versus telecom is ripe for a technical rebound based on its broken 130-day fractal structure. Go long US oil and gas versus telecom, setting a profit target and symmetrical stop-loss at 8 percent. The recent sell-off in tin is undergoing a similar technical bottoming process. Go long tin, setting a profit target and symmetrical stop-loss at 5 percent. For any investment, excessive trend following and groupthink can reach a natural point of instability, at which point the established trend is highly likely to break down with or without an external catalyst. An early warning sign is the investment’s fractal dimension approaching its natural lower bound. Encouragingly, this trigger has consistently identified countertrend moves of various magnitudes across all asset classes. Chart I-12US: Oil & Gas Vs. Telecom Chart I-13Tin The post-June 9, 2016 fractal trading model rules are: When the fractal dimension approaches the lower limit after an investment has been in an established trend it is a potential trigger for a liquidity-triggered trend reversal. Therefore, open a countertrend position. The profit target is a one-third reversal of the preceding 13-week move. Apply a symmetrical stop-loss. Close the position at the profit target or stop-loss. Otherwise close the position after 13 weeks. Use the position size multiple to control risk. The position size will be smaller for more risky positions. * For more details please see the European Investment Strategy Special Report “Fractals, Liquidity & A Trading Model,” dated December 11, 2014, available at eis.bcaresearch.com.   Dhaval Joshi Chief European  Investment Strategist dhaval@bcaresearch.com Footnotes 1 In technical terms, if the time-series is ‘stationary’, it must eventually rebound from its lower bound. 2 Please see the European Investment Strategy Weekly Report, "The Pound Is A Long-Term Buy (And So Are Homebuilders)," dated October 17, 2019 available at eis.bcaresearch.com Fractal Trading System Cyclical Recommendations Structural Recommendations Fractal Trades Trades Closed Trades Asset Performance Currency & Bond Equity Sector Country Equity Indicators Bond Yields Chart II-1Indicators To Watch - Bond Yields Chart II-2Indicators To Watch - Bond Yields Chart II-3Indicators To Watch - Bond Yields Chart II-4Indicators To Watch - Bond Yields   Interest Rate Chart II-5Indicators To Watch - Interest Rate Expectations Chart II-6Indicators To Watch - Interest Rate Expectations Chart II-7Indicators To Watch - Interest Rate Expectations Chart II_8Indicators To Watch - Interest Rate Expectations  

Aspectos destacados Estrategia de cartera La débil demanda de vivienda, el mínimo en las tasas de interés, la deflación de los precios de viviendas nuevas y las pobres perspectivas de empleo en la industria sugieren que ahora procede una posición infraponderada en el índice S&P homebuilding.      El fortalecimiento de la dinámica demanda/oferta, las regulaciones IMO Sulfur 2020, y las expectativas de beneficios relativos hundidas indican que hay más ganancias por delante para las acciones puras de refino. Cambios recientes Bajar la calificación del índice S&P de construcción de viviendas a infraponderado, hoy. Tabla 1 ¿Esto es todo? ¿Esto es todo? Artículo Las acciones intentaron alcanzar nuevos máximos históricos la semana pasada, continuando con el entusiasmo por el acuerdo comercial "fase uno" y respirando con alivio por resultados bancarios mejores de lo esperado. Dudamos que se materialice un acuerdo real que incluya la Propiedad Intelectual y el sector tecnológico. En el mejor de los casos, lo único que obtuvimos fue una tregua comercial. Vale la pena repetir la reciente analogía futbolística de Larry Kudlow: “Es como estar en la línea de siete yardas en un partido de fútbol... Y como fanático sufridor de los New York Giants, podrían estar en la línea de siete y nunca logran llevar el balón a la zona de anotación... Cuando llegas al último 10 por ciento, a la línea de siete yardas, es difícil”. Como recordatorio, las altas tarifas permanecen vigentes y hay muchas probabilidades de que el daño ya infligido al comercio global sea lo suficientemente severo como para que pasen meses antes de que surjan brotes verdes. Mientras tanto, dando seguimiento a nuestro “candidato a gráfico del año” que publicamos hace dos semanas, profundizamos y descubrimos dos índices económicos sensibles adicionales que consistentemente alcanzaron su pico antes que el SPX en los tres ciclos anteriores (Gráfico 1). Ahora conforman el Indicador Líder de Acciones de la Estrategia de Renta Variable de EE. UU.: un compósito con ponderación igual del índice S&P Banks, el índice Russell 2000 y el índice Value Line Geometric, que señala que el dinero fácil ya se ha hecho este ciclo en el SPX (Gráfico 2). Gráfico 1 Tres señales infalibles... Tres señales infalibles... Tres señales infalibles... Gráfico 2 ...Combinadas en un único indicador líder de acciones ...Combinados en un único indicador líder de renta variable ...Combinados en un único indicador líder de renta variable Es importante subrayar que, en ausencia de crecimiento de beneficios, sigue siendo extremadamente difícil que las acciones emprendan un nuevo tramo alcista sostenible confiando únicamente en la expansión de múltiplos. Gráfico 3 muestra nuestro actualizado Indicador de Poder de Fijación de Precios Corporativos (CPPI) y continúa desinflándose. De hecho, la fuerte caída de nuestro CPPI compensa más que la caída en el crecimiento salarial, advirtiendo que la contracción de márgenes en el S&P 500 tiene poder de persistencia1 (panel inferior, Gráfico 3). Analizando en profundidad, nuestro CPPI está agitando una bandera roja. Como recordatorio, calculamos el poder de fijación de precios por grupo industrial a partir de las tasas de crecimiento relevantes del CPI, PPI, PCE y las materias primas para cada uno de los 60 grupos industriales que seguimos. Tabla 2 también destaca las tendencias de poder de fijación de precios a más corto plazo y la diferencia de cada industria con respecto a la inflación general. Sólo el 42% de las industrias que cubrimos están elevando los precios de venta en más del 1%, y el 33% están claramente deflacionando. Preocupantemente, solo el 26% de los sectores están subiendo precios a un ritmo superior al de la inflación general. En cuanto a las tendencias de poder de fijación de precios, dos tercios de las industrias que cubrimos están o bien planas o en tendencia descendente (Tabla 2). Gráfico 3 Poder de fijación de precios corporativo nulo Nulo poder corporativo de fijación de precios Nulo poder corporativo de fijación de precios Tabla 2 Poder de fijación de precios por grupo industrial ¿Es esto todo? ¿Es esto todo? El oro ha saltado a la cima de nuestra tabla galopando a una tasa del 26% anual (recuerde que estaba en deflación en nuestra actualización de principios de julio), y solo tres industrias adicionales relacionadas con materias primas llegaron al top veinte (Tabla 2). La desaparición del complejo de materias primas de los primeros puestos es consistente con los problemas del PPI global y la fortaleza del dólar estadounidense. Esta semana actualizamos dos grupos, uno temprano y otro profundamente cíclico. Curiosamente, los sectores defensivos tienen una presencia saludable en los diez primeros puestos con cinco entradas. Por el contrario, las materias primas en general y las industrias relacionadas con la energía en particular ocupan la parte baja de la clasificación, ya que el crudo WTI está deflacionando fuertemente desde el pico de octubre de 2018. Sumando todo, la inflación de precios de venta del sector corporativo se está hundiendo en línea con las expectativas de inflación deprimidas. Como planteamos en nuestro reciente Informe Especial sobre márgenes de beneficio, los márgenes de beneficio ya han alcanzado su pico para el ciclo. Reiteramos nuestra visión cautelosa del mercado accionario en un horizonte cíclico de 9 a 12 meses. Esta semana actualizamos dos grupos, uno temprano y otro profundamente cíclico. Resquebrajando los cimientos de la construcción de viviendas Recomendamos degradar el nicho del índice S&P homebuilding a infraponderado, ya que la mayoría, si no todos, los impulsores positivos de beneficios ya están reflejados en los precios relativos de las acciones. Específicamente, la caída de las tasas de interés ha sido más que compensada por el comportamiento superior en lo que va del año de los constructores de viviendas. Desde la Gran Recesión, los constructores de viviendas han estado en ciclos claramente definidos de subidas y bajadas, y hay muchas probabilidades de que pronto entremos en una oscilación descendente (panel inferior, Gráfico 4). Las tasas de interés tocaron fondo a principios de septiembre y hay poco impulso adicional que puedan ejercer sobre los precios relativos de las acciones (rendimiento del Treasury a 10 años mostrado invertido, panel superior, Gráfico 4). Gráfico 4 Las ganancias relativas están agotadas Las ganancias relativas están agotadas. Las ganancias relativas están agotadas. Preocupantemente, las expectativas de los consumidores de comprar una vivienda nueva se desplomaron el mes pasado según la encuesta de The Conference Board, y esa debilidad en la demanda afectará a los inicios de vivienda y, en última instancia, a los ingresos de la construcción de viviendas (Gráfico 5). Gráfico 5 Aparecen grietas Formación de grietas Formación de grietas Para colmo, los precios de venta de casas nuevas están perdiendo terreno frente a los precios de las viviendas existentes, pero dicho descuento ya no está impulsando los volúmenes dado que las ganancias de cuota de mercado de ventas de viviendas nuevas se han estancado recientemente. Ya, las ventas del S&P homebuilding están contrayéndose y existe el riesgo de que la deflación se arraigue en esta industria de la construcción (Gráfico 6). Aunque el índice de solicitudes de hipoteca para compra (MAPI) ha estado subiendo por el desplome de las tasas de interés, el aumento de 30 puntos básicos en el rendimiento del Treasury a 10 años desde el 1 de septiembre indica que el MAPI ha alcanzado tentativamente su pico (segundo panel, Gráfico 7). Gráfico 6 Ventas en contracción Ventas por contrato Ventas por contrato Gráfico 7 Problemas de margen Problemas de margen Problemas de margen Simultáneamente, los precios de la madera están cobrando fuerza y, junto con la contracción de los precios de viviendas nuevas, señalan que las ganancias de los constructores sufrirán un retroceso (paneles medio y cuarto, Gráfico 7). Esto contrasta notablemente con la comunidad sell-side que ha estado aumentando las estimaciones de beneficios para el índice S&P homebuilding (panel inferior, Gráfico 7). Resumiendo, la débil demanda de vivienda, el mínimo en las tasas de interés, la deflación de los precios de viviendas nuevas y las deterioradas perspectivas de empleo en la industria sugieren que ahora procede una posición infraponderada en el índice S&P homebuilding. En el frente operativo, el mercado laboral también emite una señal de alarma. Las ofertas de empleo en la industria de la construcción están cayendo como una piedra y el crecimiento del empleo en la construcción residencial coquetea con la zona de contracción. Históricamente, los flujos y reflujos en los empleos de la construcción han ido a la par con el rendimiento relativo de los precios de las acciones y el mensaje actual es esperar una caída en estos últimos (Gráfico 8). La mayoría de los indicadores que seguimos subrayan un entorno desafiante para la construcción de viviendas en los próximos meses. Sin embargo, existe un riesgo clave para nuestra visión: las tasas de interés. Si la tasa hipotecaria fija a 30 años cayera más desde los niveles actuales, atraerá a los compradores de primera vivienda y amortiguaría el golpe a la demanda de construcción de viviendas (tasas hipotecarias mostradas invertidas, panel superior, Gráfico 9). De forma similar, los banqueros están dispuestos a extender crédito hipotecario y están reportando una demanda creciente de préstamos inmobiliarios residenciales como consecuencia rezagada de la caída de las tasas. Pero, nuestra sensación es que las ganancias fáciles están agotadas y está a la vista una reversión en la mayoría de estas medidas (Gráfico 9). Gráfico 8 Preste atención al mensaje del mercado laboral Preste atención al mensaje del mercado laboral Preste atención al mensaje del mercado laboral Gráfico 9 La posible caída de las tasas es un riesgo clave Las Tarifas Potencialmente Más Bajas Son Un Riesgo Clave Las Tarifas Potencialmente Más Bajas Son Un Riesgo Clave Resumiendo, la débil demanda de vivienda, el mínimo en las tasas de interés, la deflación de los precios de viviendas nuevas y las deterioradas perspectivas de empleo en la industria sugieren que ahora procede una posición infraponderada en el índice S&P homebuilding. Conclusión: Bajar la calificación del índice S&P homebuilding a infraponderado, hoy. Los símbolos bursátiles de las acciones de este índice son: BLBG – S5HOME – DHI, LEN, PHM, NVR. Mantenerse con las refinerías Aunque nuestra visión alcista sobre las refinerías tuvo un comienzo resbaladizo, ha recuperado todas las pérdidas y esta posición ahora está en positivo. Los factores están alineándose para ganancias adicionales en los próximos meses y recomendamos que los inversores mantengan esta recomendación de sobreponderar en acciones puras del downstream. De manera alentadora, las acciones de refino han estado superando al índice energético general últimamente y han reanudado su tendencia relativa alcista de varios años (panel superior, Gráfico 10). En cuanto a la válvula de alivio de las exportaciones, las exportaciones netas de productos refinados de EE. UU. están en una tendencia secular al alza y sorprendentemente no se ven afectadas por los movimientos del dólar (panel inferior, Gráfico 10). Sume las regulaciones de la Organización Marítima Internacional (IMO) Sulfur 2020 que pronto se adoptarán en el combustible de transporte marítimo, y las refinerías de EE. UU. que producen fuelóleo de menor azufre están bien posicionadas para superar en rentabilidad al SPX. Gráfico 10 Reanudada la tendencia alcista Tendencia alcista reanudada Tendencia alcista reanudada El consumo doméstico de productos refinados se mantiene vigoroso y debería servir como catalizador para desbloquear un excelente valor en este subgrupo energético nicho (panel medio, Gráfico 11). De hecho, el consumo de gasolina está volviendo a expandirse por el aumento de los kilómetros recorridos por vehículo (panel inferior, Gráfico 11). Gráfico 11 Demanda sólida... Demanda sólida... Demanda sólida... La dinámica de oferta de productos de refinería también se está moviendo en la dirección correcta. Los inventarios de gasolina se están reduciendo y deberían impulsar las expectativas de beneficios relativos castigadas de las refinerías (inventarios mostrados invertidos, panel inferior, Gráfico 12). Es importante, este contexto de demanda/oferta más firme ha sido un impulso para los márgenes de refino y debería continuar sustentando el impulso relativo de los precios de las acciones (panel medio, Gráfico 12). En términos de lo que ya está descontado para esta industria, la barra esperada de crecimiento de beneficios es extremadamente baja y está cayendo, y el valor relativo se ha restaurado por completo. Primero, en términos de valoraciones relativas, la ratio precio/ventas relativa histórica se ha corregido un 35% desde el pico de mediados de 2018 (panel medio, Gráfico 11). En términos de PER a futuro, las refinerías son extremadamente atractivas comparadas con el SPX tras una casi reducción a la mitad en el PER futuro relativo en los últimos quince meses (segundo panel, Gráfico 13). Gráfico 12 ...El contexto de oferta está impulsando los 'crack spreads'  ...El entorno de la oferta está impulsando los crack spreads ...El entorno de la oferta está impulsando los crack spreads Gráfico 13 El umbral de beneficios es inusualmente bajo El umbral de ganancias está inusualmente bajo El umbral de ganancias está inusualmente bajo En segundo lugar, el crecimiento EPS relativo ha caído por debajo de la línea cero tanto a doce meses como a cinco años vista. Ese pesimismo está sobredimensionado y nos inclinaríamos a contradecir el pesimismo del sell-side (panel inferior, Gráfico 13). Incluso la ratio de revisiones de ganancias netas de la industria de refino se ha desplomado, lo cual es contrariamente positivo (tercer panel, Gráfico 13). Sumando todo, la firmeza de la dinámica demanda/oferta, las regulaciones IMO Sulfur 2020, y las expectativas de beneficios relativos hundidas indican que hay más ganancias por delante para las acciones puras de refino. Conclusión: Mantener sobreponderado el índice S&P oil & gas refining & marketing. Los símbolos bursátiles de las acciones de este índice son: BLBG – S5OILR – MPC, VLO, PSX, HFC.   Anastasios Avgeriou, Estratega de renta variable de EE. UU. anastasios@bcaresearch.com   Notas al pie 1      Consulte el Informe Especial de BCA U.S. Equity Strategy, “Peak Margins” de fecha 7 de octubre de 2019, disponible en uses.bcaresearch.com. Recomendaciones actuales Operaciones actuales Visión sobre tamaño y estilo Mantener neutral: cíclicos frente a defensivos   (alerta de degradación) Favorecer el valor sobre el crecimiento Favorecer las grandes capitalizaciones sobre las pequeñas (Stop 10%)

Puntos destacados El acuerdo comercial interino de "fase 1" alcanzado la semana pasada representa un avance significativo hacia una distensión en la guerra comercial entre China y EE. UU. Independientemente de lo que ocurra después en las negociaciones del Brexit, se evitará una salida dura. Mantener posición larga en la libra. Es probable que el crecimiento de los beneficios en EE. UU. sea plano en el tercer trimestre, en contraste con las expectativas "bottom-up" de una caída interanual. El crecimiento de los beneficios debería repuntar a medida que el crecimiento global vuelva a acelerarse hacia fin de año. Un crecimiento global más fuerte presionará a la baja al dólar estadounidense. Mantener sobreponderación en acciones globales respecto a los bonos en un horizonte de 12 meses. Las acciones cíclicas deberían comenzar a superar a las defensivas. El sector financiero finalmente tendrá su momento de gloria. Vientos favorables del comercio En nuestra Perspectiva estratégica del cuarto trimestre publicada hace dos semanas, argumentamos que las acciones globales habían entrado en una fase de "demuéstramelo", lo que significa que sería necesaria evidencia tangible de una desescalada en la guerra comercial y una recuperación del crecimiento global para que los índices bursátiles subieran.1  Recibimos algunas noticias positivas en el frente comercial el pasado viernes. A cambio de suspender la subida prevista de aranceles del 15 de octubre del 25% al 30% sobre $250 mil millones de importaciones chinas, China acordó comprar entre $40 y $50 mil millones de dólares de productos agrícolas estadounidenses por año, mejorar el acceso al mercado para las empresas de servicios financieros de EE. UU. y aumentar la transparencia en la gestión del tipo de cambio. Admitimos que aún queda mucho por hacer. El texto del acuerdo aún no se ha finalizado. Ambas partes apuntan a concluir el pacto para la cumbre de la APEC en Santiago, Chile, los días 16 y 17 de noviembre. Teniendo en cuenta que quedan sin resolver una serie de cuestiones clave, incluyendo qué tipo de mecanismos de cumplimiento y resolución se incluirán en el acuerdo, son posibles más retrasos o incluso un colapso en las conversaciones. El acuerdo interino pactado la semana pasada también aplaza la espinosa cuestión de cómo manejar las protecciones de propiedad intelectual a una "fase 2" de las negociaciones programada para comenzar poco después de que se cierre la "fase 1". Según la independiente y bipartidista Comisión sobre el robo de la propiedad intelectual estadounidense, los productores de EE. UU. pierden entre $225 y $600 mil millones anuales por el robo de PI.2 China a menudo ha sido considerada entre los peores infractores. Dada la importancia del tema de la PI, será necesario un progreso significativo para asegurar que no se introduzcan aranceles del 15% sobre aproximadamente $160 mil millones de importaciones chinas el 15 de diciembre. Trump quiere un acuerdo A pesar de los muchos obstáculos que quedan, los acontecimientos de la semana pasada aumentan significativamente las probabilidades de una distensión en la guerra comercial de 18 meses. Como autoproclamado "maestro negociador", el presidente Trump ha puesto en juego su credibilidad al describir las negociaciones como un "festival de amor", llamar al pacto comercial "el mayor y mejor acuerdo jamás hecho para nuestros grandes y patrióticos agricultores" y decir que tiene "poca duda" de que se alcanzará un acuerdo final. Al igual que hizo con el sucesor del TLCAN, el USMCA —un acuerdo que es sustantivamente similar al que reemplazó— es probable que Trump pase a modo de promoción, pregonando el nuevo acuerdo "tremendo" que ha negociado en nombre del pueblo estadounidense. Desde el punto de vista político, esto tiene perfecto sentido. Con razón o sin ella, los votantes valoran más a Trump por su manejo de la economía que por cualquier otra cosa (Gráfico 1). Una guerra comercial prolongada socavaría la economía estadounidense y, por tanto, dañaría las perspectivas de reelección de Trump. Gráfico 1 Trump recibe calificaciones relativamente altas por su manejo de la economía, pero no por mucho más Kumbaya Kumbaya Gráfico 2 Las empresas chinas no están soportando la mayor parte de los aranceles Kumbaya Kumbaya A pesar de sus afirmaciones en sentido contrario, la evidencia sugiere firmemente que son los consumidores estadounidenses, más que las empresas chinas, quienes están pagando la mayor parte de los aranceles. Gráfico 2 muestra que los precios de importación de EE. UU. desde China apenas han disminuido, aun cuando las tasas arancelarias sobre las importaciones chinas han aumentado. En la medida en que las últimas rondas de aranceles se centran en bienes chinos para los que hay poca competencia en EE. UU. o en terceros países, la capacidad de los productores chinos para repercutir el coste de los aranceles solo aumentará. Si se implementaran todas las subidas de aranceles anunciadas, la tasa arancelaria efectiva sobre las importaciones chinas subiría desde alrededor del 15% a finales de agosto hasta un máximo del 25% en diciembre (Gráfico 3). Tal tasa arancelaria reduciría los ingresos disponibles de los hogares estadounidenses en más de $100 mil millones de dólares, borrando la mayor parte de las ganancias de los recortes fiscales de 2017. Trump no puede permitir que la guerra comercial llegue a ese punto. Gráfico 3 Las sucesivas rondas de aranceles han empezado a acumularse Las sucesivas rondas de aranceles han empezado a acumularse. Las sucesivas rondas de aranceles han empezado a acumularse. ¿China adoptará una postura dura? Un riesgo para una resolución favorable de la guerra comercial es que China vea cada vez más a Trump como desesperado por cerrar un acuerdo. Esto podría llevar a los chinos a adoptar una postura dura en las negociaciones. Aunque no se puede descartar este riesgo, lo atenuamos por tres razones: Primero, aunque los exportadores chinos han podido mantener cierto poder de fijación de precios durante la guerra comercial, los volúmenes comerciales han sufrido, con las exportaciones a EE. UU. cayendo casi un 22% interanual en septiembre. Segundo, como han demostrado las sanciones paralizantes contra ZTE, China sigue siendo muy dependiente de las tecnologías estadounidenses. Esto le da a Trump mucha palanca en las negociaciones comerciales. Gráfico 4 ¿Quién ganará la nominación demócrata de 2020? Kumbaya Kumbaya Tercero, como al propio Trump le gusta decir, a China le resultará más fácil negociar con él durante su primer mandato que en un segundo. Esperar que Trump perdiera su intento de reelección podría haber tenido sentido para China hace unos meses cuando Joe Biden iba por delante en las encuestas; pero ahora que Elizabeth Warren ha emergido como la favorita para asegurar la nominación demócrata, esa esperanza se ha desvanecido (Gráfico 4). Como señalamos hace varias semanas, es probable que China encuentre a Warren no menos problemática en asuntos comerciales que a Trump.3  Todo esto sugiere que China, al igual que Trump, buscará formas de enfriar las tensiones comerciales en las próximas semanas. ¿Avance en el Brexit? Cuando se cierra esta edición, las perspectivas de un acuerdo del Brexit han mejorado. Aunque los detalles aún no se han publicado, el acuerdo propuesto pondría efectivamente a Irlanda del Norte en una verdadera superposición cuántica donde está tanto en el mercado común europeo como en el Reino Unido al mismo tiempo. Esta hazaña se conseguiría manteniendo a Irlanda del Norte dentro de la jurisdicción política del Reino Unido pero aún alineada con las normas regulatorias de la UE. Las negociaciones aún podrían torcerse. A pesar de la garantía del primer ministro Boris Johnson de que logró "un gran nuevo acuerdo", el socio de coalición de los conservadores, el Partido Unionista Democrático de Irlanda del Norte, todavía está reteniendo su apoyo al pacto. El líder laborista Jeremy Corbyn también ha rechazado el acuerdo, diciendo que es aún peor que el pacto originalmente propuesto por Theresa May. Independientemente de lo que ocurra en los próximos días, seguimos pensando que se evitará un Brexit duro. A lo largo de todo el calvario del Brexit, hemos sostenido que no existía suficiente apoyo político dentro de la clase dirigente británica para un Brexit sin acuerdo. Esa convicción solo se ha reforzado a medida que los datos de opinión han revelado que una mayor proporción de votantes elegiría permanecer en la UE si se celebrara otro referéndum (Gráfico 5). Hemos mantenido una posición larga en la libra frente al euro desde el 3 de agosto de 2017. La operación ha ganado un 6.6% en este periodo. Los inversores deberían mantener esta posición. Basándonos en los diferenciales de tasas de interés reales, GBP/EUR debería cotizar cerca de 1.30 en lugar del nivel actual de 1.16 (Gráfico 6). Esperamos que el cruce se mueva hacia su valor justo a medida que disminuyan aún más los riesgos de un Brexit duro. Gráfico 5 Angustia por el Brexit: un caso de arrepentimiento por Brexit Angustia por el Brexit: Un caso de Bremorse Angustia por el Brexit: Un caso de Bremorse Gráfico 6 Importante potencial alcista en la libra Potencial Alcista Sustancial en la Libra Potencial Alcista Sustancial en la Libra   Mejoran las perspectivas de crecimiento global Gráfico 7 La desaceleración del crecimiento ha sido más pronunciada en los datos blandos La desaceleración del crecimiento ha sido más pronunciada en los datos suaves La desaceleración del crecimiento ha sido más pronunciada en los datos suaves Gráfico 8 La producción manufacturera se recupera en medio del desplome del ISM La producción manufacturera se recupera en medio de la caída del ISM La producción manufacturera se recupera en medio de la caída del ISM Una distensión en la guerra comercial y una resolución de la saga del Brexit deberían ayudar a sostener el crecimiento global. La debilidad en los datos económicos ha sido mucho más pronunciada en las medidas denominadas "blandas", como las encuestas empresariales, que en las medidas "duras" como la producción industrial (Gráfico 7). Notablemente, la producción manufacturera estadounidense se ha estabilizado en los últimos tres meses, aun cuando el índice manufacturero ISM se ha desplomado (Gráfico 8). A medida que el sentimiento se recupere, los datos blandos deberían mejorar. Las condiciones financieras globales se han relajado significativamente en los últimos cinco meses, en gran parte gracias al giro acomodaticio de la mayoría de los bancos centrales (Gráfico 9). El número neto de bancos centrales que recortan tasas suele adelantar al PMI manufacturero global entre 6 y 9 meses (Gráfico 10). Además, la decisión de la Fed de volver a comprar bonos del Tesoro aumentará la liquidez en dólares, contribuyendo así a unas condiciones financieras más laxas. Gráfico 9 Condiciones financieras más fáciles impulsarán el crecimiento global Condiciones financieras más favorables impulsarán el crecimiento mundial Condiciones financieras más favorables impulsarán el crecimiento mundial   Gráfico 10 Los efectos de la relajación de la política monetaria deberían filtrarse pronto a la economía Los efectos de la flexibilización de la política monetaria deberían llegar pronto a la economía. Los efectos de la flexibilización de la política monetaria deberían llegar pronto a la economía. Un estímulo chino reforzado también debería ayudar a activar el crecimiento global. El crecimiento del dinero y del crédito en China superó las expectativas en septiembre. El PBoC ha estado recortando los requisitos de reservas, lo que ha contribuido a reducir las tasas interbancarias. Es probable que se realicen nuevos recortes a la facilidad de financiación a medio plazo durante el resto de este año. Los cambios en el crecimiento del crédito chino adelantan al crecimiento global en aproximadamente nueve meses (Gráfico 11). Gráfico 11 El crédito chino debería apoyar la recuperación del crecimiento global El crédito chino debería respaldar la recuperación del crecimiento mundial El crédito chino debería respaldar la recuperación del crecimiento mundial Mantener sobreponderación en acciones globales Aunque el camino para finalizar un acuerdo de "fase 1" a tiempo para la cumbre de la APEC probablemente será accidentado, reiteramos nuestra recomendación de que los inversores sobreponderen acciones globales frente a bonos en un horizonte de 12 meses. Esperamos mejorar la valoración de las acciones de mercados emergentes (EM) y europeas en las próximas semanas una vez que veamos más evidencia de que el crecimiento global está tocando fondo. En última instancia, la trayectoria de las acciones dependerá de lo que ocurra con los beneficios. La temporada de resultados en EE. UU. comenzó esta semana. Hasta la semana pasada, los analistas esperaban que las EPS del S&P 500 disminuyeran un 4.6% en el tercer trimestre respecto al mismo trimestre del año anterior, según datos compilados por FactSet. Tenga en cuenta, sin embargo, que el crecimiento de las EPS ha superado las estimaciones en alrededor de cuatro puntos porcentuales desde 2015 (Gráfico 12). Por tanto, una apuesta razonable es que los beneficios estadounidenses se mantendrán planos este trimestre, superando una baja barrera de expectativas. Gráfico 12 Las EPS reales generalmente han superado las estimaciones Kumbaya Kumbaya Gráfico 13 Los beneficios y el PIB nominal tienden a moverse al unísono Las ganancias y el crecimiento del PIB nominal tienden a moverse al unísono Las ganancias y el crecimiento del PIB nominal tienden a moverse al unísono El hecho de que el 83% de las 63 empresas del S&P 500 que han informado beneficios hasta ahora hayan superado las estimaciones —mejor que la media histórica del 64%— respalda la opinión de que las estimaciones actuales para el tercer trimestre son demasiado pesimistas. Mirando hacia adelante, el crecimiento de los beneficios debería mejorar a medida que se acelere el crecimiento del PIB nominal (Gráfico 13). Las acciones europeas y de mercados emergentes generalmente superan al referente global cuando el crecimiento global mejora (Gráfico 14). Esto se debe a la naturaleza más cíclica de sus mercados bursátiles. Además, como moneda contracíclica, el dólar tiende a debilitarse en un entorno de crecimiento más rápido. Un dólar más débil beneficia de manera desproporcionada a las acciones cíclicas (Gráfico 15).   Gráfico 14 Las acciones de EM y de la zona euro suelen superar cuando mejora el crecimiento global Las acciones de los mercados emergentes y de la zona del euro suelen tener un mejor rendimiento cuando mejora el crecimiento global. Las acciones de los mercados emergentes y de la zona del euro suelen tener un mejor rendimiento cuando mejora el crecimiento global. Gráfico 15 Las acciones cíclicas superarán si el dólar se debilita Las acciones cíclicas tendrán mejor desempeño si el dólar se debilita Las acciones cíclicas tendrán mejor desempeño si el dólar se debilita Incluiríamos a los financieros en nuestra definición de sectores cíclicos. A medida que mejore el crecimiento global, los rendimientos de los bonos a largo plazo aumentarán en el margen. Dado que los bancos centrales no tienen prisa por subir las tasas, las curvas de rendimiento se empinarán. Esto impulsará los beneficios bancarios y los precios de las acciones (Gráfico 16). Las acciones cíclicas están actualmente bastante baratas en comparación con las defensivas (Gráfico 17). Del mismo modo, las acciones no estadounidenses son relativamente baratas en comparación con sus homólogas estadounidenses, incluso si se ajusta por diferencias en la composición sectorial entre regiones. Mientras que las acciones estadounidenses cotizan a 17.5 veces las ganancias a futuro, las acciones internacionales cotizan a un PER a futuro más atractivo de 13.7. La combinación de mayores rentabilidades por beneficios y tipos de interés más bajos en el extranjero implica que la prima de riesgo de la renta variable es aproximadamente dos puntos porcentuales más alta fuera de Estados Unidos (Gráfico 18). Gráfico 16 Curvas de rendimiento más empinadas beneficiarán a los financieros Curvas de rendimiento más pronunciadas beneficiarán al sector financiero Curvas de rendimiento más pronunciadas beneficiarán al sector financiero Gráfico 17 Las acciones cíclicas son más atractivas que las defensivas Las acciones cíclicas son más atractivas que las defensivas Las acciones cíclicas son más atractivas que las defensivas   Gráfico 18 La prima de riesgo de la renta variable es bastante alta, especialmente fuera de EE. UU. La prima de riesgo de las acciones es bastante alta, especialmente fuera de Estados Unidos. La prima de riesgo de las acciones es bastante alta, especialmente fuera de Estados Unidos. Esperamos mejorar la valoración de las acciones de mercados emergentes (EM) y europeas en las próximas semanas una vez que veamos más evidencia de que el crecimiento global está tocando fondo.   Peter Berezin, Jefe de Estrategia Global Estrategia Global de Inversiones peterb@bcaresearch.com Notas al pie 1Consulte Estrategia Global de Inversiones, “Perspectiva estratégica del cuarto trimestre de 2019: un mercado 'muéstrame',” con fecha 4 de octubre de 2019. 2 “Actualización del Informe de la Comisión sobre el Robo de la Propiedad Intelectual: El informe de la Commission on the Theft of American Intellectual Property,” The National Bureau of Asian Research, 2017. 3Consulte Global Investment Strategy Weekly Report, “Elizabeth Warren y los mercados,” con fecha 13 de septiembre de 2019. Estrategia & tendencias del mercado Modelo MacroQuant y puntajes subjetivos actuales Kumbaya Kumbaya Recomendaciones estratégicas Operaciones cerradas

Business confidence peaked in March 2018 and has been in a freefall ever since, with the steepest drop taking place in recent months as the Sino-American trade war has re-escalated (CEO confidence shown inverted, top panel). Moreover, there is mounting evidence that the trade tensions are further infecting the economy beyond manufacturing including services and the consumer. Using data from the Conference Board’s Consumer Confidence survey and from the University of Michigan Sentiment survey the chart shows that consumer intentions to buy large household durable goods (shown inverted, second panel), cars (shown inverted, third panel) and homes (shown inverted, bottom panel), all have taken a massive hit of late. Historically, all three survey measures have been excellent leading indicators of the labor market and the current message is to expect a rise in the unemployment rate in coming months. Bottom Line: While we are on the sidelines on the defensive/cyclical portfolio bent we stand ready to move to a defensive over cyclical preference. Once our S&P software trailing stop gets triggered, which will move this heavyweight tech subgroup to neutral, then the broad tech sector will shift to underweight and our defensive/cyclical bent to overweight. Stay tuned.  

Análisis sobre Chile está disponible a continuación. Aspectos destacados Las grandes rotaciones en el liderazgo de acciones suelen ocurrir en torno a mercados bajistas o correcciones. Por tanto, una venta masiva amplia probablemente será una condición previa para que los mercados emergentes (EM), las materias primas, los cíclicos globales y las acciones de valor comiencen a tener un rendimiento superior. Las probabilidades de que las acciones de mercados emergentes (EM) tengan un rendimiento inferior al S&P 500 o a los precios de las acciones de mercados desarrollados (DM) en una caída de las acciones son del 65-70%. Un dólar más débil es esencial para el mejor desempeño de los EM. Seguimos alcistas en el dólar y estamos infraponderados/cortos en EM. Artículo principal La década actual se ha caracterizado por el rendimiento sustancialmente superior de las acciones de crecimiento frente a las de valor, y del S&P 500 frente a los mercados emergentes y otros mercados internacionales. BCA celebró su conferencia anual en Nueva York la semana pasada. Uno de los temas clave que los inversores querían entender fue el potencial de una rotación de liderazgo en los mercados de renta variable globales. La década actual se ha caracterizado por el rendimiento sustancialmente superior de las acciones de crecimiento frente a las de valor, y del S&P 500 frente a los mercados emergentes y otros mercados internacionales, los precios de las acciones FAANG frente a las materias primas y las acciones de la “vieja economía”. ¿Está a punto de invertirse esta tendencia? Las opiniones entre los ponentes de nuestra conferencia ciertamente diferían. Algunos todavía mostraron una inclinación por las acciones de crecimiento y las acciones estadounidenses, mientras que otros recomendaron valor global y acciones de EM. Nuestros temas para la década Nuestros temas clave a largo plazo – presentados en nuestro informe especial del 8 de junio de 2010 Special Report titulado How To Play Emerging Market Growth In The Coming Decade1 – que han dado forma a nuestra estrategia de inversión durante la última década han sido: Los sectores de renta variable de materias primas, materiales y energía, así como las acciones de maquinaria, estarán en un mercado bajista porque la inversión de capital de China ha alcanzado su punto máximo. Por tanto, los inversores deberían evitar los mercados emergentes que son muy sensibles a los precios de los recursos. Favorecer apuestas de consumo en EM/China, es decir, tecnología así como acciones de salud en general y de equipos sanitarios en particular, es la forma de aprovechar el crecimiento de China/EM en esta década. Dado que la tecnología y la salud representan un menor peso en los índices bursátiles de EM que en los de mercados desarrollados (DM), hemos estado recomendando que los inversores infraponderen EM frente a las acciones de DM. No hace falta decir que estos temas han resultado extremadamente bien, con los sectores de renta variable de EM, recursos, relacionados con materias primas y maquinaria subper- formando masivamente (Gráfico I-1), y las acciones de tecnología, consumo y salud superando (Gráfico I-2). Estos temas han guiado nuestra estrategia durante los últimos nueve años, llevándonos a estar infraponderados en acciones de EM en favor del S&P 500, que está fuertemente dominado por empresas de tecnología, consumo y salud. Gráfico I-1 Las apuestas de gasto de capital en China han tenido un rendimiento inferior esta década Las inversiones en Capex en China han quedado rezagadas esta década Las inversiones en Capex en China han quedado rezagadas esta década Gráfico I-2 Nuestros favoritos de esta década han tenido un rendimiento superior Nuestros favoritos de esta década han tenido un rendimiento superior Nuestros favoritos de esta década han tenido un rendimiento superior Cualquier tendencia de inversión tiene un principio y un final. Es esencial no permanecer en exceso en estrategias ganadoras. Críticamente, Gráfico I-3 muestra que la magnitud del aumento en las acciones FAANG durante los últimos 10 años es comparable a las burbujas de décadas anteriores. Este gráfico compara precios de activos en términos reales (ajustados por inflación) en dólares estadounidenses. Gráfico I-3 FAANG y burbujas previas en perspectiva FAANG y las burbujas anteriores en perspectiva FAANG y las burbujas anteriores en perspectiva Solo la historia dirá si las FAANG están actualmente en una burbuja o no. Por el momento, no tenemos una opinión de alta convicción sobre este asunto. Sin embargo, incluso si no están en una burbuja, están extremadamente sobrecompradas y caras. Su incapacidad para superar sus máximos de 2018 es una señal técnica negativa. En conjunto, esto justifica una postura cautelosa sobre el rendimiento absoluto de las FAANG. Conclusión: Independientemente de la dirección de las acciones FAANG, lo más probable es que los precios de las acciones de EM retrocedan en términos absolutos antes de que surja un suelo sostenible. Para una discusión detallada sobre esto, consulte las páginas 6-9. En tal escenario, es difícil imaginar un repunte de las acciones FAANG. Pueden seguir superando en términos relativos, pero aun así se desinflarán en términos absolutos. Las rotaciones de renta variable se producen en torno a mercados bajistas El rendimiento relativo de las acciones de crecimiento frente a las de valor a nivel global a menudo experimenta reversiones de tendencia durante o después de las ventas masivas. Con respecto a la rotación del liderazgo en renta variable, es crucial señalar que las rotaciones de liderazgo en renta variable normalmente ocurren durante o después de mercados bajistas y/o correcciones en los precios globales de las acciones. Gráfico I-4 ilustra los precios relativos de las acciones de EM frente a DM junto con el índice de renta variable global. En los últimos 25 años, ha habido varios cambios importantes de liderazgo entre EM y DM, y todos ellos coincidieron con, o fueron precedidos por, un mercado bajista o una corrección en los precios globales de las acciones. De manera similar, el rendimiento relativo de las acciones de crecimiento frente a las de valor a nivel global a menudo experimenta reversiones de tendencia durante o después de ventas masivas (Gráfico I-5). Gráfico I-4 EM versus DM: Rotaciones de renta variable EM Frente a DM: Rotaciones de Renta Variable EM Frente a DM: Rotaciones de Renta Variable Gráfico I-5 Crecimiento global versus valor: rotaciones de liderazgo Crecimiento global frente al valor: rotaciones de liderazgo Crecimiento global frente al valor: rotaciones de liderazgo Finalmente, los cambios estructurales en la tendencia del rendimiento relativo del sector tecnológico global, las acciones de energía y los materiales también han ocurrido durante o después de caídas en los precios globales de las acciones (Gráfico I-6). Gráfico I-6 Tecnología, energía y materiales globales: rotaciones de liderazgo Tecnología, Energía y Materiales Globales: Rotaciones de Liderazgo Tecnología, Energía y Materiales Globales: Rotaciones de Liderazgo Conclusión: Las grandes rotaciones de liderazgo en renta variable normalmente ocurren en torno a mercados bajistas o correcciones. Por tanto, probablemente habrá una venta masiva importante antes de que los EM, las materias primas, los cíclicos globales y las acciones de valor empiecen a obtener un rendimiento superior. Consideraremos cambiar nuestra estrategia relativa de renta variable si se produce una venta masiva generalizada. En una caída de las acciones de este tipo, existe una probabilidad del 30-35% de que los EM puedan superar al S&P 500, como ocurrió durante el colapso de las acciones globales en el cuarto trimestre del año pasado. En resumen, la probabilidad de que los precios de las acciones de EM tengan un rendimiento inferior al S&P 500 y a los mercados desarrollados (DM) es del 65-70%. Un dólar más débil es esencial para que los EM obtengan un mejor desempeño. El servicio Emerging Markets Strategy de BCA sigue siendo alcista respecto al dólar y está infraponderado/corto en EM. ¿Un colapso en EM y los cíclicos globales? Con el PMI manufacturero de China nuevamente en alza, es crucial cuestionar nuestra visión sobre el ciclo empresarial chino, así como la fabricación y el comercio globales. En nuestra opinión, el último aumento en el PMI manufacturero del continente es una aberración más que una nueva tendencia: Los precios de las acciones chinas a lo largo de los años han sido coincidentes o líderes respecto al PMI manufacturero del continente. Actualmente, las acciones apuntan a una recaída en este último (Gráfico I-7). El mensaje de los precios de las acciones chinas es que la última mejora en el PMI manufacturero del país debe desestimarse. Gráfico I-7 Precios de las acciones chinas y PMI manufacturero Precios de las Acciones Chinas y PMI Manufacturero Precios de las Acciones Chinas y PMI Manufacturero La recesión manufacturera global sigue extendiéndose. La recesión manufacturera global sigue extendiéndose. Esto aún no se ha descontado en los sectores de renta variable cíclica global. Estos últimos se han movido lateralmente durante el último año y medio, a pesar de la contracción en la actividad manufacturera global (Gráfico I-8). La paciencia de los inversores en acciones puede estar agotándose, ya que la recuperación manufacturera global esperada hasta ahora no se ha materializado. Gráfico I-8 Acciones cíclicas globales y PMI manufacturero bca.ems_wr_2019_10_03_s1_c8 bca.ems_wr_2019_10_03_s1_c8 Gráfico I-9 EPS de EM y exportaciones coreanas: moviéndose al unísono EM EPS y las exportaciones coreanas: avanzando al unísono EM EPS y las exportaciones coreanas: avanzando al unísono Las exportaciones coreanas en septiembre se contrajeron a una tasa cercana al 10% interanual (Gráfico I-9, panel superior). Curiosamente, el nivel de ganancias por acción (EPS) corporativas de EM en términos de dólares estadounidenses muestra un patrón similar al de las exportaciones coreanas (Gráfico I-9, panel inferior). Ambos están en el mismo nivel que en 2010. Por tanto, durante esta década las EPS de EM y las exportaciones coreanas en términos de dólares no se han expandido en absoluto. Las acciones estadounidenses de alta beta en conjunto, así como los precios de las acciones de industriales y tecnológicas de alta beta, están cerca de romper por debajo de sus líneas de soporte técnico (Gráfico I-10). Podrían ser canarios en la mina para el S&P 500. Gráfico I-10 Las acciones estadounidenses de alta beta se están deteriorando Las acciones de alta beta de EE. UU. se están desplomando Las acciones de alta beta de EE. UU. se están desplomando Gráfico I-11 Una señal bajista para EM y materias primas bca.ems_wr_2019_10_03_s1_c11 bca.ems_wr_2019_10_03_s1_c11 A pesar de un PMI manufacturero estadounidense muy débil, el dólar sigue estando bien demandado. Esto indica que la recesión manufacturera global emana del resto del mundo, no de EE. UU. De hecho, el sector manufacturero de EE. UU. ha sido el último dominó en caer. La fortaleza persistente del dólar es un síntoma del debilitamiento del crecimiento global. Nuestra ratio Risk-On / Safe-Haven Currency2 – que es agnóstica respecto a las tendencias del dólar – se está desplomando, corroborando la perspectiva negativa para el crecimiento global en general y los precios de las materias primas en particular (Gráfico I-11). Por último, los diferenciales de crédito corporativo de alto rendimiento en EM y Asia en conjunto se están ampliando frente a los de grado de inversión. Esto es una señal de aumento de la aversión al riesgo.  Los mercados de crédito de EM y los bonos en moneda local han sido hasta ahora razonablemente resistentes, a pesar de la venta masiva en los precios de las acciones y las monedas de EM (Gráfico I-12). La base de tal desacoplamiento ha sido la búsqueda indiscriminada de rendimiento más que una mejora en la dinámica de crecimiento de los EM. Gráfico I-12 Los mercados de crédito de EM volverán a acoplarse a la baja con acciones y monedas Los mercados de crédito de EM volverán a correlacionarse a la baja con las acciones y las divisas Los mercados de crédito de EM volverán a correlacionarse a la baja con las acciones y las divisas El deterioro del crecimiento eventualmente provocará una ampliación de los diferenciales de crédito de EM. Además, la depreciación persistente de las monedas de EM probablemente conducirá a salidas de los mercados de bonos locales de alto rendimiento de EM. Conclusión: Las acciones de EM, los mercados de crédito y los bonos en moneda local de alto rendimiento corren el riesgo de sufrir una venta masiva importante. Nuestra lista de asignaciones por país en las distintas clases de activos de EM, así como nuestras operaciones, siempre se puede encontrar al final de nuestros informes, consulte las páginas 14-15. Seguimos recomendando vender en corto la siguiente cesta de monedas emergentes frente al dólar: ZAR, CLP, COP, IDR, MYR, PHP y KRW.   Arthur Budaghyan Estratega jefe de mercados emergentes arthurb@bcaresearch.com   Chile: Seguir favoreciendo bonos sobre acciones; apostar por una inflación más baja Hemos estado apostando por un crecimiento lento, tasas de interés más bajas y una moneda debilitada en Chile. Estas posiciones han resultado bien ya que la economía se ha desacelerado considerablemente, los rendimientos de los bonos locales han caído y la moneda se ha depreciado significativamente (Gráfico II-1, panel superior y medio). Sin embargo, nuestra posición en sobreponderación en acciones chilenas dentro de una cartera dedicada de acciones de EM ha tenido un desempeño pobre (Gráfico II-1, panel inferior). ¿Es hora de reconsiderar nuestra posición? Gráfico II-1 Nuestra estrategia para Chile Nuestra estrategia para Chile Nuestra estrategia para Chile Tras reexaminar la dinámica cíclica de esta economía y situarla en el contexto del panorama global, reiteramos nuestras recomendaciones de inversión. También vemos una nueva oportunidad de inversión en los mercados de renta fija chilenos: los inversores deberían considerar apostar por expectativas de inflación más bajas, es decir, posicionarse largos en bonos domésticos y vender en corto bonos ligados a la inflación. Creemos que las expectativas de inflación a medio y largo plazo que refleja el mercado de bonos están sobrevaloradas y caerán en los próximos meses. Es probable que la economía chilena se debilite aún más y la inflación se reduzca considerablemente más allá del corto plazo. Aunque el banco central ya ha recortado las tasas en 100 puntos básicos, se necesitarán más flexibilizaciones y tiempo antes de que el impulso crediticio se vuelva positivo y eleve la demanda interna. El impulso crediticio para las empresas apunta a una recaída en la inversión de capital (Gráfico II-2). El estímulo fiscal adoptado ha sido insignificante, 0,21% del PIB para 2019 y 2020. Aunque el crecimiento del gasto público está tocando fondo, el gasto fiscal total representa el 20% del PIB. En resumen, son demasiado pequeños para marcar una diferencia importante en la economía. Gráfico II-2 Chile: Impulso del crédito en caída = Capex débil Chile: Caída del impulso crediticio = Capex débil Chile: Caída del impulso crediticio = Capex débil Con las exportaciones no mineras contrayéndose y los precios de las materias primas desplomándose, los sectores exportadores continuarán lastrando el crecimiento. Los beneficios corporativos se están reduciendo y esto afectará la inversión de capital y la contratación. De manera crítica, el aumento de los costes laborales por unidad está deprimendo los márgenes de beneficios corporativos (Gráfico II-3). Estos han subido porque la desaceleración de la producción aún no se ha visto acompañada por despidos o por un menor crecimiento salarial. A su vez, los próximos despidos en medio de la ya creciente tasa de desempleo llevarán sin duda a una considerable desinflación salarial (Gráfico II-4). Chile ha visto entradas masivas de inmigrantes desde Venezuela en los últimos años, lo que demostrará ser una fuerza desinflacionaria importante para esta economía a medio plazo. Por último, la inflación de los precios de los bienes – que ha surgido de la depreciación de la moneda – podría impedir que la inflación de los consumidores caiga en el corto plazo. Sin embargo, este fenómeno no será sostenible más allá del corto plazo. Gráfico II-3 La reducción de beneficios llevará a las empresas a bajar los costes laborales por unidad La reducción de las ganancias llevará a las empresas a disminuir los costos laborales unitarios. La reducción de las ganancias llevará a las empresas a disminuir los costos laborales unitarios. Gráfico II-4 El crecimiento salarial es insosteniblemente alto El crecimiento de los salarios es insosteniblemente alto El crecimiento de los salarios es insosteniblemente alto En conjunto, el mercado de renta fija pasará por alto la inflación de los precios de bienes inducida por la depreciación de la moneda y empezará a descontar expectativas de inflación mucho más bajas. Recomendamos apostar a que las expectativas de inflación a 3 años caerán del 2,5% al 1,5% en los próximos 12 meses (Gráfico II-5). Hemos estado recibiendo tasas swap a 3 años desde el 31st de mayo de 2018 y esta posición sigue intacta. El peso seguirá depreciándose a medida que los precios del cobre caigan más. Cabe destacar que la tasa de cambio efectiva real basada en los costes laborales por unidad – calculada por la OCDE – sugiere que el peso sigue estando caro (Gráfico II-6). El último punto de datos corresponde a septiembre de 2019. Esto probablemente se deba a la depreciación de otras monedas de América Latina. Gráfico II-5 Chile: expectativas de inflación en caída Chile: Expectativas de inflación se desplomarán Chile: Expectativas de inflación se desplomarán Gráfico II-6 El CLP no es barato El CLP no es barato El CLP no es barato Por último, nos mostramos reacios a rebajar la bolsa chilena dentro de una cartera de renta variable de EM. La relajación de la política y la gran subrendimiento, así como las perspectivas estructurales positivas, deberían producir un periodo de mejor desempeño de este mercado de acciones en medio de la venta masiva en el universo general de acciones de EM. Los asignadores de activos locales deberían seguir favoreciendo los bonos frente a las acciones. Conclusión: Como nueva operación para inversores de renta fija: recomendamos posicionarse largos en bonos domésticos a 3 años y vender en corto bonos ligados a la inflación a 3 años.   Juan Egaña, Asociado de investigación juane@bcaresearch.com Arthur Budaghyan Estratega jefe de mercados emergentes arthurb@bcaresearch.com   Notas al pie 1      Consulte el Emerging Markets Strategy Special Report, “How To Play Emerging Market Growth In The Coming Decade”, fechado el 8 de junio de 2010, disponible en ems.bcaresearch.com 2      Promedio de los índices de rentabilidad total de CAD, AUD, NZD, BRL, CLP y ZAR en relación con el promedio de las rentabilidades totales de JPY y CHF (incluido el carry). Recomendaciones de acciones Recomendaciones de divisas, crédito y renta fija

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