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Feature Since the end of the first quarter, the decline in Treasury yields has been the most important trend in global financial markets. It has contributed to the return of the outperformance of growth stocks relative to value stocks, the underperformance of Eurozone equities relative to the S&P 500, and the tepid results of cyclicals relative to defensive equities. This decline in yields is a temporary phenomenon, because the global economy continues to re-open and inventory levels remain so low that further restocking is in the cards. The cyclical picture is not without blemish; COVID-19 variants remain a concern. However, if these risks were to materialize into another delayed re-opening, then further reflationary efforts by both monetary and fiscal authorities would buoy financial markets. The greatest near-term worry for the global economy and markets comes from China. The Chinese credit impulse is slowing markedly and fiscal support has yet to come to the rescue. This phenomenon is the main reason why this publication maintains a cautious tactical stance on Eurozone cyclical stocks, even if we believe these sectors have ample scope to outperform over the remainder of the business cycle. As a corollary, we believe that yields will likely remain within range this summer and Eurozone benchmarks will lag behind the US. This week, we review key charts, organized by theme, highlighting some of these key concepts. As an aside, none covers inflation. Even if the balance of evidence suggests that any sharp increase in Eurozone inflation will be temporary, the proof will only become more visible by early 2022. The Opening Is On Track… The pace of vaccination across the major Eurozone economies has picked up meaningfully since the spring. Consequently, the number of doses distributed per capita is rapidly approaching that of the US, even as it still lags behind that of the UK (Chart 1). As a result of this improvement, the stringency of lockdown measures is declining, which is allowing European mobility to recover (Chart 2). While this phenomenon is evident around the world, EM still lag in terms of vaccination rates. However, the Global Health Innovation Center at Duke University expects 10 billion vaccine doses to be produced by the year’s end, which will be enough to inoculate most (if not all) the vulnerable people in the world by early 2022. Consequently, the re-opening of the economy will remain a potent tailwind behind global growth for three or four more quarters. Chart 1Vaccination Progress... Chart 2...Leads To Greater Activity   … But Near-Term Headwinds Remain The re-opening of the global economy will allow growth to stay well above trend for the upcoming 12 months, at least. Global industrial activity could nonetheless decelerate this summer. Input costs have risen. The two most important ones, oil and interest rates, are already consistent with a peak in the US ISM manufacturing and the global PMI (Chart 3). In this context, the decelerating Chinese credit impulse is concerning (Chart 4) because it portends a hit to global trade and industrial activity. The effect of this slowdown should be most evident in the third and fourth quarters of 2021. However, it will be temporary because Beijing only wants credit to grow in line with GDP, rather than an outright deleveraging. Thus, the credit impulse will stabilize before the year’s end, which will allow the positive effect of the global re-opening to be fully experienced once again. Chart 3Rising Input Costs... Chart 4...And China's Credit Slowdown Matter   Domestic Tailwind In Europe Despite the extreme sensitivity of the European economy to the global business cycle, Europe should continue to produce positive surprises. The supports to the domestic economy are strong. The NGEU funds means that Europe will suffer one of the smallest fiscal drag among G-10 nations next year. Moreover, the re-opening will support household income and allow the positive effect of the increase in the money supply to buoy consumption (Chart 5). Finally, rising consumer confidence, and the ebbing propensity to save will reinforce the tailwinds behind consumption (Chart 6). Chart 5Europe's Domestic Activity Chart 6...Will Improve Further   Higher Bond Yields Are Coming… The environment continues to support higher yields. Our BCA Pipeline Inflation Indicator is surging, which historically translates into higher global borrowing costs (Chart 7). Most importantly, our Nominal Cyclical Spending Proxy remains very robust, which normally leads to rising yields (Chart 8). While US inflation expectations at the short end of the curve already fully reflect current inflationary pressures, the 5-year/5-year forward inflation breakeven rates will have additional upside. Moreover, the term premium and real rates remain depressed, and policy normalization will cause these variables to climb higher over time. Chart 7Higher Yields Will Come... Chart 8...Later This Year   … But Not This Summer It could take some time before the bearish backdrop for bonds results in higher bond yields. First, bonds have yet to purge fully their oversold status created by the 125 basis-point surge that took place between August 2020 and March 2021 (Chart 9). This vulnerability is even more salient in an environment in which the Chinese credit impulse is decelerating. As Chart 10 illustrates, a slowing total social financing number reliably leads to bond rallies. While the chart looks dire for bond bears, it must be placed in context, in which global fiscal policy remains accommodative considering the decline in the private sector savings rate and in which Advanced Economies’ capex will stay strong. Thus, instead of betting on a large swoon in yields in the coming quarters, we expect US yields to remain stuck between 1.20% and 1.70% for a few more months before they resume their upward path once the Chinese economy stabilizes. Chart 9But Bonds Are Still Oversold... Chart 10...And Fundamentals Cap Yields For Now   A Positive Cyclical Backdrop For The Euro The near-term forces suggest that the euro will remain range bound over the summer, between 1.16 and 1.23. EUR/USD is a pro-cyclical pair, and so the near-term lack of upside to global growth will act as a temporary ceiling on this currency. Nonetheless, the 18-month outlook continues to favor the common currency. Investors have shed Eurozone exposure for more than 10 years and are structurally underweight this region (Chart 11). Hence, EUR/USD should benefit from any positive reassessment of the growth path in the Euro Area compared to that of the US. Additionally, the euro benefits from a structural current account surplus compared to the USD, which translates into a positive basic balance of payments (Chart 12). In an environment in which US real interest rates are low in relation to foreign ones and in which the Fed wants to maintain accommodative monetary conditions to achieve maximum employment, the capital account balance is unlikely to come to the rescue of the dollar. In this context, EUR/USD still possesses significant cyclical upside and is likely to move back above 1.30 by the year’s end of 2022. Chart 11Investors Underweight Eurozone Assets... Chart 12...And The BoP Favors The Euro   The Bull Market In Global Stocks Is Not Over The cyclical outlook for equities remains supportive. To begin with, in most years, equities eke out positive returns, as long as a recession is not around the corner; we do not expect a recession anytime soon. Moreover, while the balance of valuation risk and monetary accommodation is not as supportive of stocks as it was last year, it is not pointing to an imminent deep pullback either (Chart 13). The equity risk premium echoes this message. Our ERP measure adjusts for the expected growth rate of earnings as well as the lack of stationarity of the ERP. According to this indicator, equities are not an urgent buy, but they are not at risk of a bear market either (Chart 14). This combination does not prevent corrections, but it suggests that pullbacks of 10% are to be bought. Chart 13Equities Are Not A Screaming Buy... Chart 14...Nor A Screaming Sell   Europe’s Structural Underperformance Is Intact… Eurozone stocks have been underperforming their US counterparts since the GFC. As Chart 15 highlights, this subpar performance reflects the decline in European EPS relative to US ones. There is very little case to be made for this underperformance to end on a structural basis. Europe remains saddled with an excessive capital stock and ageing assets. This combination is weighing on European profit margins and RoE (Chart 16). To put an end to this structural underperformance, either European firms will have to consolidate within each industry (allowing cuts to the excess capital stock, to increase concentration, and to boost profit margins) or the regulatory burden must rise in the US to curtail rates of returns in relation to European levels. Chart 15Europe's Underperformance... Chart 16...Reflects Profitability Problems   …But The Window For A Cyclical Outperformance Remains Open Despite a challenging structural backdrop, European equities have a window to outperform US stocks, similar to the outperformance of Japan from 1999 to 2006, which only marked a pause within a prolonged relative bear market. European stocks beat their US counterparts when global yields rise (Chart 17). This is because European benchmarks underweight growth stocks relative to US markets. The effect of higher yields on the relative performance of the Euro Area is not limited to the impact of higher discount rates. Yields rise when global economic activity is above trend. As Chart 18 highlights, robust readings of our Global Growth Indicator correlate with an outperformance of the EPS of value stocks compared to growth equities. Thus, when rates rise, Europe should enjoy both a period of re-rating relative to the US and stronger profits. Chart 17Yields Drive European Stocks... Chart 18...And So Does Global Growth   Positives For Euro Area Financials Like the broad European market, the financials’ fluctuations are linked to interest rates. Moreover, Euro Area banks also move in line with EUR/USD (Chart 19). As a result, our positive view on both yields and the euro for the next 18 months or so should translate into an outperformance of financials in Europe. Additionally, European banks are inexpensive, embedding not just depressed long-term growth expectations, but also a wide risk premium. Europe’s structural problems mean that investors are correct to expect poor earnings growth from the region’s banks. However, the risk premium is overdone. Eurozone banks are much safer than they were 10 years ago. Banks now sport significantly higher Tier 1 capital adequacy ratios and NPLs have shrunk considerably (Chart 20). Moreover, governmental supports and credit guarantees implemented during the pandemic should limit the upside to NPL in the coming quarters. Finally, the so-called doom-loop that used to bind government and bank solvency together is not as problematic as it once was, because the ECB is a willing buyer of government paper and the NGEU programs create the embryo of fiscal risk sharing that limit these dynamics. As a result, investors should overweight this sector for the next 18 months. Chart 19Financials Have A Window To Shine... Chart 20...And Are Less Risky   A Tactical Hedge Our worries about the impact on the global economy of the Chinese credit slowdown are likely to prompt some downside in European cyclical equities relative to defensive ones. Moreover, cyclicals are still significantly overbought relative to defensives, while our relative Combined Mechanical Valuation Indicator confirms the near-term threat (Chart 21). A high-octane vehicle to play this tactical underperformance of cyclicals relative to defensives is to buy Euro Area telecom stocks relative to consumer discretionary equities. Not only are the discretionary stocks massively overbought and expensive relative to telecoms (Chart 22), they also offer a lower RoE. This backdrop makes the short discretionary / long telecoms bet a great hedge for portfolios with a pro-cyclical bias over one- to two-year horizons.  Chart 21Cyclicals Are Tactically Vulnerable... Chart 22...But This Risk Can Be Hedged Away   Currency Performance Currency Performance Fixed Income Performance Government Bonds Corporate Bonds Equity Performance Major Stock Indices Geographic Performance Sector Performance  

特別レポート

Highlights Home prices have risen at a rapid rate over the last year, stirring some fears that a new bust could be in store: The housing market is strong, but price appreciation has not been that significant relative to history and popular concerns appear to be misplaced. Banks and households are on much sounder financial footing than they were before the housing bust: Banks’ exposure to residential mortgages has shrunk and stiffer regulatory requirements have made them more resilient to shocks. Households have been de-levering since the crisis and have accumulated massive excess savings since the pandemic began. The housing market is not oversupplied in the aggregate and does not appear as if it will become oversupplied soon: High prices are a reliable cure for high prices, but the housing supply response has been muted and looks as if it will remain so for the immediate future. The Global Financial Crisis had its roots in debauched underwriting standards that bear no resemblance to today’s mortgage lending environment: Before it spread around the world, the GFC was known as the subprime crisis, but subprime borrowers are almost entirely shut out of today’s residential mortgage market. Feature The state of the housing market was a central concern for investors in the wake of the global financial crisis. That incident was initially known as the subprime crisis, as a new class of loans – subprime mortgages – set a self-reinforcing debt-deflation dynamic into motion. When the music stopped, dedicated mortgage originators and securitizers were out of business, a sizable share of borrowers faced foreclosure and a lot of homes, from freshly built subdivisions to tattered urban blocks, stood empty. Many of the people who were a part of the pipeline – making loans, appraising properties, wholesaling loans, packaging loans into securities, trading securities, and building and selling houses – were thrown out of work. As if the consequences in the real economy weren’t bad enough, the convulsions in the financial markets imperiled the banking system. Record mortgage default rates and plunging collateral values left commercial banks gasping, and highly leveraged investment banks holding unsold securities, as-yet-unpackaged whole loans or other property investments found their capital levels whittled nearly to zero. A high-profile insurer was undone by guaranteeing against the securities’ defaults, but several life insurers were squeezed by the losses they sustained on highly rated securities that turned out to harbor a lot of poorly underwritten loans. The net result of the financial distress was a paucity of investment capital to help the real economy get back on its feet. Elected officials, central bankers, regulators and investors are all understandably wary of a repeat of the crisis and its wide-ranging effects. In his press conference after the FOMC’s April meeting, Chair Powell acknowledged the risks before going on to say that they don’t appear particularly strong right now. “So many of the financial crack-ups … that have happened in the last 30 years have been around housing. We … really don’t see that [financial stability concerns] here. We don’t see bad loans and unsustainable prices and that kind of thing.” This Special Report examines why we concur with the Fed’s view. Investors May Be Jittery, But The Banks Are Steady Chart 1Once Bitten, Twice Shy This evening in the States we will get on the phone with an Asia-Pacific client who wants to discuss the following topic: “One of the issues that we are currently exploring is the US housing market. It is exceptionally strong and may create an important medium-term risk for the US and global markets.” Internet users closer to home have also taken note of the housing market’s strength and have their own concerns about it. Google searches for “housing crash” by US users are making new highs, dwarfing the interest the phrase drew ahead of the GFC (Chart 1). While potential homebuyers are understandably wary of getting in at the top, and households who already have mortgages are averse to price declines that would erode the value of their equity, it is the overall financial system’s exposure to US home prices that draws global investors’ attention. Such an overwhelming majority of households borrow to buy their home that single-family homes have traditionally comprised the largest component of banking system collateral (Chart 2). Although US banks have less exposure to residential mortgages than their peers in other major developed economies (Table 1), the housing market poses an outsize risk to financial stability by virtue of the amount of debt financing it. Chart 2Moving Beyond Mortgages Table 1Don't Look At Us Since the GFC, however, the largest banks have sharply reduced their exposure to lending (Chart 3, top panel). They have a disproportionate influence on the state of the overall banking system and their offloading of qualifying loans to Fannie Mae and Freddie Mac have helped the system pare residential real estate loans’ share of total assets to 10%, or half of their pre-GFC weight (Chart 3, bottom panel). The wave of post-GFC regulation has forced systemically important banks to hold more capital against their assets, making them more resilient to shocks and the ordinary vagaries of asset markets and the business cycle. Loans account for less than half of all bank assets, with nearly all the rest going to Treasury and agency securities, cash, property and goodwill and fully collateralized short-term loans (Chart 4). Chart 3Big Banks Have Become Much More Judicious Lenders Chart 4Risk Off Bottom Line: The banking system is better capitalized than it was in 2007 and has considerably less exposure to residential real estate loans. The financial system is much less vulnerable to a rupture in the housing market than it was 15 years ago. Better Borrowers, Better Loans Household balance sheets are not a source of vulnerability, either, as they are in far better shape than they were before the GFC. Employment gains, increased savings, lender write-offs and lower debt-service costs helped shore up household finances after the crisis, and the pandemic yielded explosive wealth gains via whopping fiscal transfers, reduced spending options and surging stock and home prices. No previous four-quarter stretch has been better for household net worth gains, nominal (Chart 5, top panel) or real (Chart 5, bottom panel), than the one ended March 31st, and even the five-quarter stretch including last year’s disastrous first quarter was quite strong relative to history, especially in real terms. Households have paid down their outstanding credit card balances, and with interest rates at rock-bottom levels, servicing the debt they have has never been easier (Chart 6). Chart 5The Pandemic Has Been Great For Household Net Worth Chart 6A Light Yoke Chart 7Only Qualified Borrowers Need Apply The improvement in aggregate household financial positions would be of little import if lenders repeated their pre-GFC practices of lending to the weakest candidates in the pool of potential borrowers. Fortunately for financial stability and the health of the housing market, the highest-quality borrowers have been capturing an increasing share of new mortgage loans. In a reversal of the underwriting follies of a decade-and-a-half ago, lenders are shunning subprime and near-prime borrowers in favor of the best credits (Chart 7). The current housing boom has been built on a solid credit foundation. Supplies Are Tight As measured by the Case-Shiller 20-City Index, home prices are appreciating at a double-digit clip on a year-over-year basis. The rapid appreciation has helped fuel fears of a housing bubble, but it pales beside the 46-month stretch of double-digit percentage gains from August 2002 through May 2006 (Chart 8). Our Bank Credit Analyst and Global Fixed Income Strategy colleagues have made the case that the current burst of home price appreciation across the developed world has largely derived from generous fiscal transfers and extremely accommodative monetary policy.1 That implies that home prices will not be able to maintain their current pace once the policy support fades, but it does not necessarily foreshadow a looming crash. In our view, policy has contributed to a sugar rush that has briefly quickened price gains, a much less destabilizing condition than the multi-year course of steroid injections provided by the willful abandonment of prudent lending standards that triggered the GFC. Chart 8Nothing Like The Last Boom Yet Despite the run-up in prices, homes remain much more affordable today than they were at the peak of the pre-GFC boom (Chart 9, top panel), thanks to mortgage rates that are about half their 2004-7 level (Chart 9, middle panel). Homebuilders have maintained their discipline this time around, holding new home construction at or below the rate of household formation (Chart 10, top panel) and there is none of the overtrading associated with bubbles, like the flipping at the top of the last cycle. As a share of the total housing stock, inventories of new and existing homes for sale are more than two standard deviations below their four-decade mean (Chart 10, middle panel) and the share of vacant homes, at 0.9%, is sitting at its 65-year series low (Chart 10, bottom panel). Unusually high prices will eventually inspire new sources of supply and push price gains down to levels consistent with their long-run mean; in the meantime, low mortgage rates will likely summon enough demand to prevent the disruption that Google searchers and cranky Austrians fear. Chart 9Affordability Is Still Quite High ... Chart 10... Even Though Supply Is Tight Haven’t We Left Something Out? Now wait a minute; you’re trying to have it both ways. You’ve been citing rising wealth for a while, suggesting that it will help foster a virtuous growth cycle that will last through next year, six or seven quarters after the final stimulus checks were cut. Home prices have been a part of that wealth surge but you’re ignoring what will happen once they stop defying gravity. We have been tracking aggregate household income, spending and savings for over a year and the growing pile of savings has been a key pillar of our argument that the economy will grow way above trend. Our running estimate of excess pandemic savings is now up to $2.4 trillion through May. That’s quite a lot even in a $21 trillion economy, and if it were all spent over a two-year period, GDP would grow by 10% more than it otherwise would. There is no close precedent for the income windfall that up to three-fourths of households have received since the pandemic began, so we cannot turn to regression models for an estimate of the savings’ near-term impact. However, it's important to recognize the money was directed at households below the top rungs of the income scale with a higher marginal propensity to consume, especially the federal unemployment insurance benefit supplements, which wound up going largely to the lowest-paid workers who bore the brunt of pandemic layoffs. Our working assumption is that around half of the savings will be spent across 2021 and 2022, which would push output over the period higher by more than 5%. We don’t care about GDP growth per se, but it does impact the outlook for corporate earnings, household income and credit performance. We have viewed the savings developments as making an important contribution to the positive macro backdrop for investments in equities and credit and expect they will continue to do so well into next year. Although we expect the returns on risk assets to slow, we anticipate that they will continue to exceed returns from Treasuries and cash and therefore maintain our overweight recommendations on equities and spread product. The household net worth gains from financial asset and home price appreciation haven’t factored much into our view. Though their advances have far outpaced the increase in savings, mainstream economic models consider their effects on consumption to be modest. Most of the gains are captured by wealthier households, who are more apt to save wealth increases than spend them, and our rule of thumb is that five cents and three cents of every dollar of stock and home price gains are spent, respectively. By that measure, the $7.4 and $3.2 trillion advances in the value of directly held stocks and home equity are less impactful than the savings gains and do not figure meaningfully into our view. We disagree with the widespread assumption that the increase in home prices is particularly notable. Per the Fed’s quarterly report on US financial accounts, the first quarter’s year-over-year increase in the value of real estate owned by households was 10.3%, a little more than half a standard deviation above the 275-quarter mean (Chart 11). It’s a nice gain, especially against a backdrop of low inflation, but it’s hardly a game changer. We agree that what goes up must come down, but in this case, reverting to the mean would only involve a three-percentage-point decline. Chart 11Housing Wealth Is Rising, But Not At An Outsized Rate It should also be noted that outright national declines in nominal home values are rare – the only incidence in the postwar era occurred amidst the subprime crisis/GFC. It appears that the trauma of that event has global investors and Google-searching US citizens overestimating the probability that it might occur again. We have exhumed the term “subprime crisis” because that housing bust was caused by a near-total abandonment of established lending standards by virtually everyone involved in mortgage origination and securitization, including the agencies that rated the securities, the middlemen who warehoused them, the end-investors who bought them and the insurer who blithely wrote credit protection on them. Nothing even remotely similar from a credit perspective is going on today. Chart 12 shows the aggregate loan-to-value (LTV) on residential mortgages since 1971, when the first baby boomers began to turn 25, derived from the Fed’s financial accounts data. Aggregate household LTV is back to the 33% level it hugged throughout the seventies and eighties. It exploded higher from 2006 to 2009 as new mortgage debt galloped ahead of stagnating home values during the lending crescendo of 2006 and 2007 and then continued on in 2008 and 2009 as mortgage balances fell more slowly than home values (Chart 13). Chart 12High LTVs Amplify Shocks, Low LTVs Absorb Them Chart 13Six Years That Crippled The Housing Market Appalling underwriting provided the kindling for the crisis and the unprecedented plunge in US home prices that was a feature of it. A similar plunge will not recur this cycle when there are almost no borrowers with little to no skin in the game who would walk away from their nonrecourse loans at the first sign of trouble. Psychology also matters; given our deep-seated aversion to recognizing losses, homeowners who do not have to sell often hold on until prices climb back above their basis. Home values will surely encounter some headwinds once mortgage rates rise from rock-bottom levels, but an outright decline remains unlikely when increases in longer-dated Treasury yields will almost certainly be accompanied by an increase in inflation and/or real growth expectations, both of which would be associated with higher home prices. We hold our conclusion with high conviction: the US housing market does not look vulnerable and it is not likely to be a source of distress for the financial system here or abroad.   Doug Peta, CFA Chief US Investment Strategist dougp@bcaresearch.com Footnotes 1 Please see the May 28, 2021 Global Fixed Income Strategy/Bank Credit Analyst Special Report, “Global House Prices: A New Threat For Policymakers.”

Weekly Performance Update For the week ending Thu Jul 08, 2021 The Market Monitor displays the trailing 1-quarter performance of strategies based around the BCA Score. For each region, we construct an equal-weighted, monthly rebalanced portfolio consisting of the top 3 stocks per sector and compare it with the regional benchmark. For each portfolio, we show the weekly performance of individual holdings in the Top Contributors/Detractors table. In addition, the Top Prospects table shows the holdings that currently have the highest BCA Score within the portfolio. For more details, click the region headers below to be redirected to the full historical backtest for the strategy. BCA US Portfolio Total Weekly Return BCA US Portfolio S&P500 TRI -1.33% 0.06% Top Contributors   TX:US IT:US PSA:US TGT:US GOOG.L:US Weekly Return 15 bps 7 bps 7 bps 6 bps 6 bps Top Detractors   SIG:US WES:US MTZ:US SEM:US LPX:US Weekly Return -22 bps -16 bps -15 bps -14 bps -13 bps Top Prospects   ESGR:US MPLX:US ANAT:US TX:US BRK.A:US BCA Score 98.48% 97.38% 96.24% 94.71% 94.62% BCA Canada Portfolio Total Weekly Return BCA Canada Portfolio S&P/TSX TRI -0.62% -0.43% Top Contributors   WIR.UN:CA EMP.A:CA SMU.UN:CA NWC:CA H:CA Weekly Return 8 bps 8 bps 8 bps 7 bps 5 bps Top Detractors   WEED:CA CRON:CA IMO:CA LNR:CA BB:CA Weekly Return -26 bps -17 bps -17 bps -13 bps -13 bps Top Prospects   LNF:CA CS:CA IFP:CA RUS:CA NWC:CA BCA Score 99.30% 99.18% 98.93% 98.46% 96.93% BCA UK Portfolio Total Weekly Return BCA UK Portfolio FTSE 100 TRI -0.37% -1.25% Top Contributors   PZC:GB OXIG:GB SRE:GB BYG:GB FDM:GB Weekly Return 22 bps 16 bps 16 bps 14 bps 9 bps Top Detractors   SPI:GB HFD:GB DEC:GB NFC:GB NVTK:GB Weekly Return -28 bps -26 bps -11 bps -10 bps -9 bps Top Prospects   SVST:GB NLMK:GB GROW:GB GLTR:GB MNOD:GB BCA Score 99.78% 99.55% 98.11% 98.07% 95.26% BCA Eurozone Portfolio Total Weekly Return BCA EMU Portfolio MSCI EMU TRI -0.37% -1.66% Top Contributors   ALTA:FR MONT:BE ATS:AT PHA:FR LOUP:FR Weekly Return 27 bps 20 bps 12 bps 5 bps 4 bps Top Detractors   OMV:AT BB:FR US:IT TESB:BE CNV:FR Weekly Return -17 bps -16 bps -15 bps -12 bps -10 bps Top Prospects   STR:AT SOLV:BE FDJ:FR TESB:BE ROTH:FR BCA Score 99.79% 98.01% 97.87% 97.25% 96.82% BCA Japan Portfolio Total Weekly Return BCA Japan Portfolio TOPIX TRI -0.31% -0.97% Top Contributors   6960:JP 8979:JP 9543:JP 4694:JP 3468:JP Weekly Return 17 bps 10 bps 9 bps 8 bps 7 bps Top Detractors   8595:JP 3291:JP 3539:JP 7593:JP 4966:JP Weekly Return -33 bps -15 bps -9 bps -8 bps -8 bps Top Prospects   4966:JP 8133:JP 3291:JP 6960:JP 8117:JP BCA Score 99.91% 99.20% 98.35% 97.57% 97.49% BCA Hong Kong Portfolio Total Weekly Return BCA Hong Kong Portfolio Hang Seng TRI -2.28% -5.43% Top Contributors   990:HK 856:HK 215:HK 43:HK 2380:HK Weekly Return 33 bps 26 bps 18 bps 7 bps 4 bps Top Detractors   3600:HK 6100:HK 329:HK 857:HK 468:HK Weekly Return -29 bps -27 bps -24 bps -22 bps -22 bps Top Prospects   1277:HK 1839:HK 98:HK 2232:HK 857:HK BCA Score 99.98% 99.35% 99.32% 99.19% 98.85% BCA Australia Portfolio Total Weekly Return BCA Australia Portfolio S&P/ASX All Ord. TRI 0.12% 0.98% Top Contributors   GRR:AU ZIM:AU YAL:AU NHC:AU PSQ:AU Weekly Return 72 bps 23 bps 22 bps 11 bps 10 bps Top Detractors   FLN:AU NEC:AU BLX:AU RIC:AU TLX:AU Weekly Return -38 bps -27 bps -23 bps -17 bps -15 bps Top Prospects   BFG:AU AGI:AU BSE:AU ZIM:AU JLG:AU BCA Score 99.07% 99.04% 98.90% 97.03% 97.01%