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2015-08-28 16:01:30

Posted by
Scott Dingwell

Contributor
Stocks

Five Things to Consider Now for Your 401(k)

There are few times in life where doing nothing is the right strategy. Now might be one of them. Scott Dingwell explains why.

 

When market swings dominate the news, it’s easy to get anxious. A sure way to heighten your concern is to check your 401(k) balance. Current market conditions can be sobering—but for most of us, this should just be one stop on a long journey.

If you can’t stand to sit tight, focus on these five steps to help channel your worries in a more productive manner:

1. Look before you leap

For many investors, moving out of equities into some other supposedly safe haven may not make sense. You know that selling low and buying high is typically the opposite of how investors strive to invest, right? Selling stocks today implies that you will be able to buy them at a lower price in the future. But do you really think you’ll be able to spot the market’s ultimate low? The market can roar back in a buying frenzy, leaving those in cash sitting on the sidelines.

2. Consider target date funds

Target date funds maintain a methodical (read that: unemotional) approach designed to invest more of your assets in equities earlier in your career, when you have more time to make up for any short-term losses. As you get closer to retirement, target date funds generally move more of your assets into fixed income and cash-like vehicles. The goal is to make your nest egg less vulnerable when you’re getting ready to tap it for retirement income.

3. Seek advice from a reputable source

If you have access to a financial planning advice provider, consider getting a second opinion before making any big changes to your asset allocation. Like target date funds, advice providers should make decisions based on scientific principles, not fear or greed.

4. Consider increasing your contributions

You may look back on this time as a missed opportunity to add to your equity holdings. Increasing your 401(k) contribution rate is almost always a good choice. Now, it may make even more sense as a cost-effective way to buy into the markets over many years.

5. Name your price

If you think you must reduce your equity holdings, make a plan for re-entry. Consider setting two prices: One that’s lower than where you sold, and another that’s higher. If the market doesn’t fall to the “smart move” price, better to buy back at the “oh, well” price than to give up growth potential.

Time is on your side

Most of us have years—perhaps even decades—when we can sell off equities. So why make any big moves now? Instead, take a moment to consider more effective and rational actions that might get better results in the long run.

Or just do nothing. This is one time when not taking action might make the most sense.
 

Scott Dingwell is a Director in BlackRock’s Global Client Group where he serves on the U.S. and Canada Defined Contribution Team. He writes about retirement for The Blog.


This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader.

©2015 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries. All other marks are the property of their respective owners.

iS-16435
 

This article is from BlackRock and is being posted with BlackRock’s permission. The views expressed in this article are solely those of the author and/or BlackRock and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
 

2015-08-28 15:13:30

Posted by
Andrew Wilkinson
Chief Market Analyst
Interactive Brokers
Contributor
Options

Bank of America Options in Focus

An investor took advantage of the recent surge in volatility by selling call options with a shelf life of five months in Bank of America (Ticker: BAC), while getting long of the stock at the same time. The seller received 78-cents for the sale of 15,000 call option contracts at the 17.0 strike expiring in January and paid $16.37 for 645,000 shares. The at-expiration P&L profile is shown below on the left and depicts a maximum profit at the 17.0 strike price. At expiration the combination trade remains profitable with the shares remaining hemmed in a massive range of approximately $14.50 and $18.80. The chart on the right displays both share price movement for Bank of America and its IV reading. The call options are richer on account of the spike in broad market volatility and the fact that fears continue to linger. Broad volatility on BAC is running at around 31% and is two-times its pre-China crisis level. The chart also uses a one standard deviation move to project the expected price movement for BAC through January expiration. As you can see, a single SD move would break the boundaries of the breakeven prices in Friday’s trade.

Chart – BAC option combo profile and a single standard deviation move for shares by January

The analysis in this article is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-08-28 14:04:32

Posted by
Russ Koesterich, CFA
BlackRock
Contributor
Macro

What's Holding Back the U.S. Consumer

Since the recession ended, U.S. real household consumption has remained well below the historical average. Russ Koesterich explains why it's likely to remain that way.

 

Most economists and investors understood that it was going to take some time for U.S. consumers to repair their overextended balance sheets after the 2008 crisis. But seven years after the bursting of the credit bubble, things haven’t changed much. Even as job growth has surged and gasoline prices have plunged, consumers are proving slow to respond.

Since the recession ended in 2009, U.S. real household consumption has remained well below the historical average. In the 60 years between 1947 and 2007, real household consumption grew annually by an average of 3.6 percent. Since 2008, it has been closer to 1.5 percent. Even if you exclude the recession, the average is still only around 2.3 percent.

The decline is partly a function of a measurement problem. In a service-driven, “sharing” economy, measuring consumption has become more difficult. That said, it’s hard to argue with the fact that something has changed.

In fact, as I write in my new Market Perspectives paper, “The Hangover: The Rise and Fall of the U.S. Consumer,” the slowdown in consumption predates the crisis. Indeed, the challenges facing U.S. households are tied to several secular trends that won’t be going away anytime soon.

One such trend: stagnating wages. Prior to the recession, there was a very consistent and statistically significant relationship between job creation and wage growth. However, since the financial crisis, that relationship seems to have broken down.

Though there likely isn’t much slack left in the U.S. labor market, we haven’t seen an accompanying broad pickup in wages. This may be because many of the new jobs in the current recovery are low paying or part time. In other words while economic logic suggests that wages should accelerate along with jobs, structural forces changing the makeup of the labor market—including advances in technology and an aging population—may inhibit wage growth from reverting back to the post-WWII norm.

Of course, spending can and does deviate from income. After all, stagnant income growth has been a persistent headwind for several decades, raising the question of how households managed to fund a fairly consistent period of rising consumption before the 2008 crisis.

There were a number of factors behind this phenomenon: the rise of the two-income family, a declining savings rate, a significant rise in government transfer payments and a multi-decade expansion in household credit. But these factors no longer appear to be tailwinds to consumption.

For instance, the rise of women in the workforce enabled many households to deflect the impact of stagnant real wage growth. Unfortunately, this rise seems to have run its course. Between 2000 and 2014, female labor market participation declined to 56 percent from 59 percent, and there are few signs of its imminent recovery.

Meanwhile, though the savings rate has rebounded from last decade’s lows, it remains well below the historical average and likely has further to rise given an aging population that needs to fund a longer retirement.

At the same time, given the increasing burden that an aging population will place on the federal government, the trend of transfer payments flattering consumption probably isn’t sustainable. Finally, it’s unlikely that the typical U.S. family can return to its pre-crisis borrowing habits, considering that consumer debt-to-disposable income levels are still relatively high from a historical perspective.

Looking forward, this changing landscape means consumption is likely to remain modest, at least as compared to the post-WWII norm. In response, one segment of the market may prove vulnerable: U.S. consumer stocks, which have been outperforming the broader market for a number of years. Their outperformance may be difficult to maintain in an environment in which U.S. consumers struggle to regain their old swagger.

Source: The Hangover: The Rise and Fall of the U.S. Consumer


Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock. He is a regular contributor to The Blog.
 

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader.

©2015 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries. All other marks are the property of their respective owners.

iS-16426

This article is from BlackRock and is being posted with BlackRock’s permission. The views expressed in this article are solely those of the author and/or BlackRock and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
 

 

2015-08-28 13:21:12

Posted by
Steven Levine
Fixed Income Reporter
MNI News
Contributor
Fixed Income

MNI's U.S. Risk-O-Meter

Although sales of new investment-grade bonds fell in line with expectations this past week, the total amount was a paltry $700 million from just one SSA issuer. The Province of Quebec sold 3-year floating-rate notes ahead of the weekend, as high grade corporate debt issuance screeched to a halt. The plunge in new deals will likely be followed by a continued slowdown in the week ahead, as market participants enjoy the seasonal end-of-summer lull before the Labor Day holiday, when activity in the primary market is set to accelerate if market conditions are sufficiently calm. The pipeline has recently swelled with potential new near-term sales, including from The Home Depot, Inc., Solvay SA, Pentair PLC and Automatic Data Processing, Inc.

 

Keep pace with the latest corporate news with MNI's US Risk-O-Meter, a weekly recap of credit risk appetite! For more information and a full version of the US Risk-O-Meter, email Steven Levine at slevine@mni-news.com. Click here for moreabout MNI.

This article is from Market News International (MNI) and is being posted with MNI’s permission. The views expressed in this article are solely those of the author and/or MNI and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-08-28 12:18:49

Posted by
Christine Short
Senior Vice President
Contributor
Stocks

Revisions Galore for Energy and Industrials in the Wake of This Week's Market Turmoil

World markets were in a panic again this week due to another sell-off in China on Monday which prompted energy prices to fall further and overall market sentiment to collapse. In the Estimize coverage universe, the companies that saw the largest revisions to Q3 estimates were not so surprisingly within the energy and industrials sectors. These are the 5 with the sharpest revisions in the past month.

Chevron (CVX)

Chevron is the second largest oil company in the United States and therefore has no doubt felt the pinch from declining oil prices, with Brent Crude Oil down more than 17% in the past month, and WTI falling 15%. In that time, the Estimize consensus for Chevron’s third quarter have fallen in lockstep. On August 11 the company was expected to earn $0.93/share, that has since fallen to $0.67, a decrease of 28%. Revenues on the other hand have increased, from $23.4B on August 11, to $25.2B as of today, still well below Wall Street’s estimate for $28B.

Flowserve Corp. (FLS)

Along with energy, the industrial names have been hit hard, too, as many within that sector rely on strength from the global economy, especially China. FlowServe, which manufactures and distributes industrial flow management equipment worldwide, has recently made substantial investment in emerging market operations, including China, India and Brazil. However, last quarter the company saw sales and bookings in Asia-Pacific fall by double-digit percentages, reflecting slowing growth in some of their major markets. Estimize has seen Q3 EPS estimates for FLS fall 12% in the last month. On July 28 EPS was expected to come in at $1.08, that is now down to $0.95. Revenues have fallen as well, from $13.2B to $12.2B.

Exxon Mobil (XOM)

The big kahuna, Exxon Mobil is the largest US oil company and the fourth largest in the world. Despite oil prices, which began to collapse in the third quarter of 2014, the giant has been able to surpass earnings expectations every quarter, with the exception of the latest quarter, while still putting up an impressive beat on the sales front. Since July 31st expectations for earnings have dropped 11%, on that date they were $1.07, dropping to $1.00 by August 6, $0.96 by Aug 23, and to $0.95 on Monday where they have since stayed. Revenues on the other hand have increased, from $62.9B on July 31, to $65.4B as of today, still well below Wall Street’s estimate for $69.2B. Overall estimates for the entire S&P 500 energy sector have fallen, too, now expecting negative profits of 65% in Q3 vs. a Q2 final of -53%.

FedEx (FDX)

FedEx is another big industrial name that has been feeling the pain of a global slowdown. While the transports should be benefitting from lower fuel prices, decreased fuel surcharges and lower package weight, along with a decrease in international revenue per package due to currency headwinds has been weighing on the company. FedEx is also finding their higher end services waning in popularity, with more demand for ground services. Overall the Estimize community has pulled back 6% on EPS estimates, from a consensus for $2.62 a month ago to $2.47 today. Revenue estimates have bounced around, from a peak of $12.33B at the end of June, down to a low of $12.08B in the beginning of July, and inching upwards to $12.25B today.

Caterpillar (CAT)

Manufacturing giant Caterpillar gets a significant amount of its total revenues from China and is often used as a barometer for the strength of China’s economy. Last quarter the company saw profits fall 29% and revenues decrease almost 14% as a result of severe weakness in mining and lower construction related sales in China and Brazil. In response, Caterpillar cut its outlook for revenues by $1B, and is now expecting $49B in 2015. The company has also been reducing its workforce, eliminating close to 5,000 full-time and part-time positions in the past year. Earnings estimates on the Estimize platform are down 5% in the past month, falling from $1.07 at the end of July to $1.02 today. Revenues too, have decreased, from an expectation for $12.6B last month to $12.1B today.

About Estimize

Estimize is an open financial estimates platform which facilitates the aggregation of fundamental estimates from independent, buy-side, and sell-side analysts, along with those of private investors and students. By sourcing estimates from a diverse community of individuals, Estimize provides both a more accurate and more representative view of expectations compared to sell side only data sets which suffer from several severe biases.


This article is from Estimize and is being posted with Estimize’s permission. The views expressed in this article are solely those of the author and/or Estimize and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.










 

2015-08-28 11:16:46

Posted by
Max Lee
New Constructs, LLC
Contributor
Stocks

The Best and Worst of the Mid Cap Growth Style

Style Analysis 3Q15

The Mid Cap Growth style ranks eighth out of the 12 fund styles as detailed in our 3Q15 Style Ratings for ETFs and Mutual Funds report. It gets our Neutral rating, which is based on an aggregation of ratings of 11 ETFs and 382 mutual funds in the Mid Cap Growth style as of July 15, 2015. See a recap of our 2Q15 Style Ratings here.

Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the style. Not all Mid Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 23 to 626). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Mid Cap Growth style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Figure 1: ETFs with the Best & Worst Ratings – Top 5

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

State Street SPDR S&P 400 Mid Cap Growth ETF (MDYG) is the top-rated Mid Cap Growth ETF and Professionally Managed Portfolios Congress Mid Cap Growth Fund (IMIDX) is the top-rated Mid Cap Growth mutual fund. Both earn an Attractive rating.

QuantShares U.S. Market Neutral Momentum Fund ETF (MOM) is the worst-rated Mid Cap Growth ETF and Starboard Investment Goodwood SMID Cap Discovery Fund (GAMAX) is the worst-rated Mid Cap Growth mutual fund. MOM earns a Neutral Rating and GAMAX earns a Very Dangerous rating.

The Buckle, Inc. (BKE: $45/share) is one of our favorite stocks held by Mid Cap Growth funds and earns our Very Attractive rating. Over the past decade, the company has grown after-tax profit (NOPAT) by 14% compounded annually. The company currently earns a top-quintile return on invested capital (ROIC) of 32%, which is more than double the 15% earned in 2005. Furthermore, Buckle has maintained a steady NOPAT margin of 15% for the past six years. Despite the fundamental strength of the business, its stock remains undervalued. At the current price of $45/share, Buckle has a price to economic book value (PEBV) ratio of 0.9. This ratio implies that the market expects Buckle’s profits to permanently decline by 10%. While the retail sector has its ups and downs, this low expectation ignores the profitability Buckle has maintained over its lifetime. If the company can grow NOPAT by just 6% compounded annually for the next ten years, the stock is worth $74/share – a 64% upside.

ServiceNow (NOW: $77/share) is one of our least favorite stocks held by Mid Cap Growth funds and earns our Dangerous rating. Much like other cloud companies we have covered, ServiceNow has never turned a profit since going public. NOPAT declined from -$30 million in 2012 to -$141 million in 2014. On top of falling profits, the company earns a bottom-quintile ROIC of -56%. Investors are ignoring these fundamental issues in favor of misleading revenue growth, and the stock remains overvalued as a result. To justify the current price of $77/share, ServiceNow must immediately achieve a positive pre-tax (NOPBT) margin of 10% (compared to -21% in 2014) and grow revenue by 31% compounded annually for the next 15 years. We feel the expectations embedded in NOW are too optimistic and investors would be wise to stay away or put their money in stocks that offer better risk/reward like BKE.

Figures 3 and 4 show the rating landscape of all Mid Cap Growth ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst Funds

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds From the Worst Funds

Sources: New Constructs, LLC and company filings

Disclosure: David Trainer owns BKE. David Trainer and Max Lee receive no compensation to write about any specific stock, style, style or theme.

 

About New Constructs

QUESTION: Why shouldn’t ETF research be as good as stock research? Why should ETF investors rely on backward-looking price trends?
ANSWER: They should not.

Don’t judge an ETF by its cover. Take a look inside at its holdings and understand the quality of earnings and valuation of the stocks it holds. We enable you to choose the best ETF based on its stock-picking merits so you do not have to rely solely on backward-looking technical metrics. 

The figure below details the drivers of our forward-looking Rating system for ETFs. The drivers of our predictive rating system are Portfolio Management and Total Annual Costs. The Portfolio Management Rating (details here) is the same as our Stock Rating (details here). The Total Annual Costs Rating (details here) captures the all-in cost of being in an ETF fund over a 3-year holding period, the average period for all fund investors.

Cutting-edge technology enables us to scale our forensics accounting expertise so that we can cover enough stocks to cover the ETFs that hold them as well. Learn more about New Constructs. Get a free trial. See what Barron’s has to say about our research. Cutting-edge technology enables us to scale our forensics accounting expertise so that we can cover enough stocks to cover the ETFs that hold them as well. Learn more about New Constructs. Get a free trial. See what Barron’s has to say about our research.

 

This article is from New Constructs, LLC and is being posted with New Constructs, LLC’s permission. The views expressed in this article are solely those of the author and/or New Constructs, LLC and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-08-28 10:16:59

Posted by
Barron's

Contributor
Stocks

Beijing Saves, but Stocks Score on the Rebound

Asia markets were pummeled as China stocks dived to an 8-month low. Here’s 5 bargains to buy now.

 

Time was when policy stimulus was the aphrodisiac China’s stock market craved more than anything. No more. The People’s Bank of China this week cut rates, reduced the amount banks must keep in reserve and eased caps on time deposits. Yet stocks defiantly fell. Shanghai’s benchmark index is on track to end this week around 8% lower even as the rest of the world rebounds.

Despite rumors to the contrary, China has apparently decided it no longer needs to prop up stock prices. After buying by some estimates at least 1 trillion yuan of shares and keeping Shanghai’s index locked in a spin cycle between 3,500 and 4,000 to bail out investors who borrowed up to their eyeballs to buy shares, the China Securities Finance Corp. has declared victory and transferred its holdings to China’s sovereign wealth fund, Central Huijin Investment, according to Citigroup.

Why? It appears there’s no one left who needs bailing out. Margin levels in China’s stock markets have dropped from a peak of CNY 2.3 trillion in mid-June when the market peaked to just CNY1.2 trillion. A closer examination of these margin positionssuggests that nearly all those opened since Beijing started plugging stocks last October have been closed. The market would have to fall drastically before these remaining investors sank below water.

That means the Beijing put on Chinese stocks has likely gone the way of the dodo: stocks in Shanghai are now free to fall below 3,500 and, as they did this week, below 3,000 where they start to actually look like a decent value. With Shanghai’s retail investors still shell-shocked, this might be a rare opportunity to see China’s stocks trade on prospects for profitability instead of on the likelihood of policy stimulus. Indeed, some brave foreign investors are tip-toeing back into China to sift through the wreckage.

While bets that China will depreciate further are still growing, the yuan seems to have stabilized around 6.4 for now. With stocks “saved” and the PBoC pouring liquidity into China’s markets, global investors have set aside for now their fears that Asia’s economies will get caught between the hammer of higher U.S. interest rates and the anvil of slowing Chinese growth, and are instead taking this column’s advice to start shopping for bargains.

EARLIER THIS WEEK, we said markets in Hong Kong, Malaysia, Saudi Arabia, South Korea, Taiwan and Vietnam looked particularly undervalued. Hong Kong and Taiwan are up 2%, Malaysia 2.4%, and South Korea 4.8% since. Investors have left Taiwan looking particularly trampled, leaving no shortage of potential diamonds lying in the rough:

- Taiwan computer chip company Siliconware Precision Industries (2325.TW) is trading at a steep discount to its historical valuation even after receiving an unsolicited offer from fellow Taiwan native Advanced Semiconductor Engineering (2311.TW) to buy 25% of the company at a 13% premium to its current price of TWD39.70. The company reported better-than-expected earnings last month, but the stock has dropped 21% in the past three months. Before the latest offer, analysts had predicted the stock could rise as much as 66% to TWD63. Not surprisingly, Siliconware’s board has recommended shareholders reject Advanced Semiconductor’s offer and the stock has rallied 19% in the past week.

- Another Taiwan company, Innolux (3481.TW), is the world’s third-largest maker of flat-panel screens. After falling 44% in the past three months, its stock is trading at just 4.6 times projected earnings and pays a 7% dividend. Despite disappointing investors with a 38% drop in net profits in the second quarter, analysts believe Innolux shares could climb 34% to NT$13.90 from NT$10.40.

- Taiwan Fertilizer (1722.TW) has fallen 25% in the past three months, leaving it trading at a discounted 10.3 times projected earnings and paying a 5.7% dividend. Analysts see this stock climbing 41% to TWD56. It has already rebounded 4% this week.

- Shipping company Wan Hai Lines (2615.TW) would seem vulnerable to weakening global trade, which has prompted it to drop its routes between Asia and Europe entirely. But the 30% slide in its shares over the past three months have left it trading at only 8.7 times projected earnings, with a 9.2% dividend yield. And while analysts are ambivalent about the stock, they still say it ought to be trading 20% higher than its latest price of TWD21.80.

- Last but not least is notebook computer maker Compal Electronics (2324.TW), whose stock has dropped 30% in the past three months amid weakening sales and disappointing earnings. But its declining share price has left it trading at just 8 times projected earnings, with a dividend yield of 8.2%. Analysts including those at Nomura and Credit Suisse believe this stock could rise by more than 20% from its current TWD18.20. Compal has already jumped 8.6% this week.

 

Get investing analysis that moves stocks and markets—Subscribe to Barron’s for just $1 a week.


This article is from Barron's and is being posted with Barron’s permission. The views expressed in this article are solely those of the author and/or Barron's and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-08-28 05:58:05

Posted by
Elaine Chen
Sales Trader
International Business Division
Guosen Securities
Contributor
Macro

GUOSEN Closing Bell (August.28)

MARKET

Chinese stocks closed higher today, with the benchmark Shanghai Composite Index ended at 3232.35 points. The A share market continued to rally towards Beijing’s desired level. Military and machinery sectors led the gains; none sectors fell. Combined turnover for both markets was 899.5 bn yuan, up 17.5% dod.

 

CLOSE

%CHG

VOL (bn yuan)

%YTD

SH Composite

3232.35

+4.82

474.6

-0.07

SZ Component

10800.00

+5.32

424.9

-1.95

CSI300

3342.29

+4.26

318.7

-5.42

ChiNext

2082.12

+6.26

97.9

+41.47

 

Sector

Top 1

Led by

Top 2

Led by

Upward-leading

Military

300045

Machinery

600169

Downward-leading

 

 

 

 

 

NEWS

*The central parity rate of the Chinese currency renminbi, or the yuan, strengthened by 99 basis points to 6.3986 against the U.S. dollar on Friday, according to the China Foreign Exchange Trading System. In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2 percent from the central parity rate each trading day. The People's Bank of China reformed the exchange rate formation system on Aug. 11 to better reflect market development in the exchange rate of the Chinese yuan against the U.S. dollar. (Xinhua)

*China's economy shows no much sign yet of slowing down from the 7 percent growth rate in the first part of the year despite the latest market pessimism and growing investor anxiety, a leading China scholar said. "I don't think there's very much evidence that Chinese economy is slowing very much. I think it grows something close to 7 percent in the first half (of the year)," said Nicholas Lardy, senior fellow at the Peterson Institute for International Economics, a Washing D.C.-based think tank. (Xinhua)

FUND FLOW

 

This article is from Guosen Securities Co., Ltd. and is being posted with Guosen Securities Co., Ltd.’s permission. The views expressed in this article are solely those of the author and/or Guosen Securities Co., Ltd. and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 

2015-08-28 05:56:29

Posted by
Darren Chu, CFA
Founder
Tradable Patterns
Contributor
Technical Analysis

GBPAUD Forming Potential Reversal Weekly Gravestone

The GBPAUD entered the 3rd day of its strong selloff following the spike to just shy of 2.25 early in the week.  The GBPAUD is now probing upchannel support (on the daily chart), and forming a potential reversal gravestone on the weekly chart.  Although weekly RSI is still sloping up slightly, weekly Stochastics has already begun turning down, and the weekly MACD appears next with its green line flattening.  I will await a bounce back towards the 2.16-2.17 range before entering a short position.

For more information about Tradable Patterns, click here.

 

GBPAUD Weekly/Daily/4hr/Hourly

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

 

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-08-28 05:55:27

Posted by
Darren Chu, CFA
Founder
Tradable Patterns
Contributor
Technical Analysis

Raw Sugar (SB) Surges on Daily Chart Downchannel Resistance Break

Raw Sugar (SB) made a powerful up move yesterday, shattering downchannel resistance (on the daily chart) and firmly reclaiming descending wedge support (on the weekly chart).  Weekly, daily and 4hr RSI, Stochastics and MACD are rallying or bottomish.  I'm flat after having taken profit on my longs yesterday and am looking to re-enter my long today in the .107-.109 range.

For more information about Tradable Patterns, click here.

 

Raw Sugar (ICE SB Oct15) Weekly/Daily/4hr/Hourly

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

 

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 

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