Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Report on Business readers have not shown much interest in China-related news in the past few years but the country remains the primary source of global GDP growth and a direct determinant of most commodity prices. Citi economist Pierre Lau has published his predictions for China in 2022.
“Economics: We think economic stability will be reaffirmed as a top priority for the govt ahead of the 20th Party Congress. We expect GDP to grow 4.7% in 2022 and believe the govt will step up its easing measures and refine the implementation of reforms. Equity: Hang Seng Index was the worst-performing major stock index globally, -15% in 2021. But, into 2022, we expect a reversal and highlight three key investment themes: (1) common prosperity; (2) recovery from the COVID-19 epidemic; and (3) margin rebound from lower Producer Price Index. HSI looks attractive at 10.7x 2022E PER and 1.1x PB, and we forecast it to rise to 26,000 by end 1H22 and 28,000 by end-2022. Overweight transportation, technology, auto, healthcare & industrial sectors. Our top H-share picks are Mengniu, Sands China, CSPC Pharma, Shenzhou, AIA, JD, COSCO Shipping and Towngas Smart Energy.”
“Citi is bullish on China in 2022″ – (research excerpt) Twitter
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Bespoke Investment Group sees underlying technical strength in U.S. financials and industrials sectors.
“On Tuesday we noted the “Breadth Boom” that has been happening in the back half of December. Even though sectors like Industrials and Financials aren’t overbought or at new 52-week highs, their cumulative advance/decline lines have recently made news highs. That’s a positive sign for these two sectors as well as the broader market. As shown, along with Financials and Industrials, most other sectors (along with the S&P 500) are seeing a breakout in their cumulative A/D (accumulation/distribution indicator) line readings. The only two sectors that aren’t close to seeing new highs in this reading are Communication Services and Energy. With the way investors have been rotating out of and into certain areas of the market throughout the post-COVID bull market, will these two sectors be the next to see buying in early 2022?”
“Bespoke sees underlying technical strength in U.S. financials and industrials” – (research excerpt) Twitter
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Wells Fargo global equity strategist Chris Haverland provided some interesting insights while recapping the year in global markets.
“While returns in 2020 were driven by price to earnings multiple expansion, returns in 2021 were driven by earnings growth… equities outperformed bonds in 2021 – risk assets often take the lead early in bull market cycles… Within the U.S., large cap equities led performance for the year as investors began to return to higher quality companies as the cycle matured… after a promising start for value stocks, growth stocks reasserted themselves and outperformed for the second year in a row… while we do not expect 2022 performance to be as strong as 2021, we do expect the equity markets to continue trending higher.
“Wells Fargo, “while we do not expect 2022 performance to be as strong as 2021, we do expect the equity markets to continue trending higher” – (research excerpt) Twitter
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Diversion: “BlackBerry to End Support for Legacy Devices on January 4, 2022″ – Gizmodo
Tweet of the Day: " The U.S., Canada and much of Western Europe are leading the surge, with both regions seeing record-breaking levels of new coronavirus cases.
New cases in at least 11 European countries passed their previous all-time peaks on Tuesday or Wednesday” – Twitter
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Scott Barlow