29th May '21 by Edmund Shing

8 comments 2466 reads

Value and Momentum potential in Eurozone, UK

Summary:

Podcast: Time for the Chinese Dragon to roar again
End-May: Scores on the doors for stock markets, bonds, gold
My favourite hunting grounds for investment

Podcast: Time for the Chinese dragon to roar again

Why don’t Chinese stock and bond markets currently reflect the country’s very strong economic momentum?
What’s happening with the regulatory crackdown on Chinese mega-cap tech companies?
In the context of a progressive opening up of Chinese financial markets, will this be a driver going forward? Will the bond markets benefit from the inclusion of bond benchmark indices?
What is the future of Hong Kong?
Finally, what is the ESG story in China?

Time for the Chinese Dragon
to roar again

End-May: Scores on the Doors

As we have already seen the last trading day of May for the US and UK markets, I thought it would be a good time review a few telling monthly charts:

1. Eurozone equities still look bullishly positioned, only recently breaking out of a 20-year+ peak. Remember: the longer the period of consolidation, potentially the more powerful the subsequent breakout. I remain a big fan of Continental European stocks.

Euro STOXX index primed to move higher

Source: Bloomberg

2. Eurozone Banks look good for further gains. Again, remember that this sector has been a real dog since 2015, so has a lot of pent-up potential to move higher if bond yield curves steepen and earnings continue to improve.

Euro STOXX banks have a lot of catch-up potential

Source: tradingview.com

3. UK equities remain an interesting value play on domestic reopening. Note that the large-cap FTSE 100 index has gone nowhere since 2000, a very poor return for patient UK investors. In contrast, look at the contrasting performance from FTSE 250 mid-cap stocks since 2003.

FTSE 100 back at the same level as 2000

Source: Bloomberg

Japanese equities have broken out from a 30-year resistance level, but remain far from the 1989 stock market peak. Just as for the cyclically-inclined Euro STOXX index, any strong global investment recovery should be similarly good for Japanese stocks.

Japanese TOPIX index far from 1989 high

Source: Bloomberg

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William K

30th May '21

Thanks Edmund. As you say, the Chinese A50 index is beginning to take off once again with a huge surge this week after a somewhat unexplained (to me at least) dip to the 200 day MA line. The other emerging market indexes seem poised to rise - India 50 and Singapore Blue Chip in particular. If you have any thoughts on India over the next few weeks they would be very useful. With regard to metals, there's a bit of a dip in the mining shares so this is probably a great time to top up on miners. Whilst individual metals can be somewhat unpredictable, collectively they're likely to do well over the next 12 months.

(Weekly chart from IG.COM)

KTF67

Chinese equities fell due to worsening of credit conditions.

JCAS

thanks Edmund, really enjoy these weekly commentaries. I'd be interested in yours/readers thoughts on active funds in the commodities sector that I might consider in my SIPP and ISA. I hold Blackrock World Mining Trust (LON:BRWM) and CQS Natural Resources Growth And Income (LON:CYN) plus Amati Strategic Metals so hopefully well covered in this area.

JohnEustace

JCAS,

I suggest taking a look at Baker Steel Resources Trust (LON:BSRT) which invests mainly in privately held resources stocks. It's trading at a small premium to NAV vs the usual discount but I guess that reflects the current interest in the sector.

Thanks John, that looks an interesting one and I think would compliment what I already have. Funnily enough I was also looking at Miton Global Opportunities (LON:MIGO) and note that's the top holding in the fund.

Harry Hindsight

I'm over-heavy on miners. Over-heavy on US tech which don't know if will pick up. Not bad guys but one or two on the Reddit radar. So need to look at Stocko bubble chart more and balance the portfolio for risky times. Hard though when Sylvania, Tharisa, Jubilee and others are current news (greed is good lol). How regularly should you tweak. I'm into daily now thanks to Wall St - run your winners, drop the losers - selling is the hardest thing about investing for sure.

Great if have a mining only blog - with some rules.

31st May '21

@GarryC

I'm over-heavy on miners. Over-heavy on US tech which don't know if will pick up.

Over-heavy is a relative term if you're comparing your portfolio to a conventional 'balanced' portfolio with an expected 'safe' return of 6-8% per annum. If you're hoping for better than that, you need to take risk and load up with what you see as the growth sectors. I, too, am very much focused on miners and US technology because, simplistically, I foresee an increased demand for metals and technology over the next ten years. Disruptive technology rules the world. The 5 FAANG stocks make up 15% of the S&P 500 . Technology embraces every sphere of industry including medicine, finance, space travel, robotics, EVs, cryptocurrency and cybersecurity. The Nasdaq may be somewhat overpriced today - because of these considerations - but in the long term it will comfortably outperform all other sectors. If we were to take our money out of mining and technology, where would we put it for a better return? The answer isn't obvious. At least not to me.

Pansea

Great post, Edmund.

I would love to read your take on the most promising companies involved in the future of food, particularly cell-grown proteins.

Until then, keep up the good work!

Andreas.

Market Musings 28/05/21: Value and Momentum potential in Eurozone, UK

Value and Momentum potential in Eurozone, UK

Summary:

Podcast: Time for the Chinese dragon to roar again

Time for the Chinese Dragon
to roar again

End-May: Scores on the Doors

Unlock the rest of this article with a 14 day trial

About the Author

Edmund Shing

8 comments

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Unlock the metrics for all these stocks and more...

Market Musings 28/05/21: Value and Momentum potential in Eurozone, UK

Value and Momentum potential in Eurozone, UK

Summary:

Podcast: Time for the Chinese dragon to roar again

Time for the Chinese Dragon to roar again

End-May: Scores on the Doors

Unlock the rest of this article with a 14 day trial

About the Author

Edmund Shing

8 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...

Time for the Chinese Dragon
to roar again