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by Elvin Thean
J.P. Morgan Investment Analytics & Consulting
elvin.x.thean@jpmorgan.com
AS OF OCTOBER 2009
European Indices (UK, France, Germany, Switzerland)
All quotes in Euros
Source: J.P. Morgan Investment Analytics & Consulting, J.P. Morgan Equity Research,
Morgan Markets, Bloomberg, Rimes
- For the first time since the March bottom, we witnessed a rotation into quality and defensive sectors. Energy and Staples were the biggest outperformers, while the cyclicals were the worst underperformers, led by Discretionary and IT. At stock level, the top-performers were large caps, had high RoE and positive earnings revisions, as compared to small-cap negative-earnings-revisions stocks that outperformed in Q2 & Q3. European Equities trade at a 12-month forward P/E ratio of 13x, in line with their 10-year average. Despite top line failing to beat expectations, the Q3 earnings reporting season was encouraging with about two thirds of companies giving a positive EPS surprise in Europe, reflecting better cost management and restructuring as the drivers of Net Income growth rather than revenues.
Japan (Nikkei 225)
Source: J.P. Morgan Investment Analytics & Consulting, J.P. Morgan Equity Research,
Morgan Markets, Bloomberg, Rimes
- In the last week of October, Japanese investors continued to net sell foreign equities to the tune of ¥51.0bn while foreign investors continued to net purchase Japanese equities, albeit at a slower pace, buying ¥35.1bn, for the third consecutive week. Meanwhile overall portfolio flows recorded net outflows of ¥336.1bn, reversing the previous week’s net inflows of ¥344.1bn, mainly driven by the shift in Japanese investment in foreign bonds, which sharply turned to net purchase of ¥304.9bn from net sales of ¥377.7bn.
Korean (KOSPI)
Source: J.P. Morgan Investment Analytics & Consulting, J.P. Morgan Equity Research,
Morgan Markets, Bloomberg, Rimes
- The 12-month high/low range for Kospi Index is 1718 (22 Sep 09) / 938 (21 Oct 08). Key domestic issues were fund outflow from equity funds and real estate market performance. Year to date Korean equity funds invested in domestic market AUM is down KRW8.7 trillion to KRW77.1 trillion. Some cash were thought to be reinvested into real estate market, along with fund outflow from money market fund.
Australia, Hong Kong, Singapore
Source: J.P. Morgan Investment Analytics & Consulting, J.P. Morgan Equity Research,
Morgan Markets, Bloomberg, Rimes
- The Hong Kong equity market stayed robust in the last week of October, driven by the strong performance in property stocks. Hang Seng Index rose 3%w/w with a further pickup in average daily turnover to HK$70bn. MSCI China continued to outperform the region and MSCI Hong Kong by 3.1%w/w and 0.7%w/w, respectively. Property sector performed strongly, benefiting from the robust residential property market.
- China led both equity and the economic recovery in the EM and the world in early this year. November 2008’s aggressive monetary and fiscal stimuli worked, driving notable domestic demand recovery. After having risen more than 90% from the trough of Q4 2008, MSCI China has largely been range-bound and underperformed both the developed and EM markets by a significant margin, in the past two months.
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