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Director’s Cut
Yield trading proven winner
When markets are volatile the decision-making flaws of investors seem to be
amplified as we all grapple with the question of when and what to buy or sell. In
times like this it helps to look at what more objective, quantitative strategies tell
us about what investment decisions we should make.
One approach developed by our global quant team is the Macro Distance Model,
which compares a range of macro variables to the past looking for similar points
in history. The assumption is that strategies and styles that performed well in a
similar macro environment are more likely to perform well now also.
Using this approach in Asia, Burke Lau says the peak periods of similarity now
are August 2010 and June 2008. In August 2010 QE2 was introduced and the
markets rallied through to the end of the year, while in June 2008 the markets
were heading into the GFC. Generally, our quant team would expect a similar
pattern around the world, and running the model in Australia, for example, now is
most similar to August 2010, with June 2008 a close second.
Given markets and risk appetite could potentially break up or down, Burke says
a focus on dividend yields is the superior approach. This has the advantage of
being defensive in a down market, while also retaining some value exposure in
case the market bounces strongly, and investors chase oversold stocks. With
many countries also in ex-dividend season, the outperformance of stocks into
their ex-dividend date should add to the returns of a yield focused strategy.
Stocks highlighted in this issue that also have attractive dividend yields include
Telstra (TLS AU) Austrian Post (POST AV) HSBC (HSBA LN), Verizon (VZ
US), SingTel (ST SP) and Southern Company (SO US), which offer forward
yields of around 5%, or higher, with Telstra leading the pack at 9.4%.
Current macro environment similar to August 2010 and June 2008
Highlights
Andrew Dale says cuts to China social housing targets have a minimal
impact on physical demand, those cuts will negatively impact sentiment.
Angie Storozynski is attracted to the defensive nature of Southern (SO US)
and Dominion (D US) and has upgraded both to Outperform.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Director’s Cut
Yield trading proven winner
When markets are volatile the decision-making flaws of investors seem to be
amplified as we all grapple with the question of when and what to buy or sell. In
times like this it helps to look at what more objective, quantitative strategies tell
us about what investment decisions we should make.
One approach developed by our global quant team is the Macro Distance Model,
which compares a range of macro variables to the past looking for similar points
in history. The assumption is that strategies and styles that performed well in a
similar macro environment are more likely to perform well now also.
Using this approach in Asia, Burke Lau says the peak periods of similarity now
are August 2010 and June 2008. In August 2010 QE2 was introduced and the
markets rallied through to the end of the year, while in June 2008 the markets
were heading into the GFC. Generally, our quant team would expect a similar
pattern around the world, and running the model in Australia, for example, now is
most similar to August 2010, with June 2008 a close second.
Given markets and risk appetite could potentially break up or down, Burke says
a focus on dividend yields is the superior approach. This has the advantage of
being defensive in a down market, while also retaining some value exposure in
case the market bounces strongly, and investors chase oversold stocks. With
many countries also in ex-dividend season, the outperformance of stocks into
their ex-dividend date should add to the returns of a yield focused strategy.
Stocks highlighted in this issue that also have attractive dividend yields include
Telstra (TLS AU) Austrian Post (POST AV) HSBC (HSBA LN), Verizon (VZ
US), SingTel (ST SP) and Southern Company (SO US), which offer forward
yields of around 5%, or higher, with Telstra leading the pack at 9.4%.
Current macro environment similar to August 2010 and June 2008
Highlights
Andrew Dale says cuts to China social housing targets have a minimal
impact on physical demand, those cuts will negatively impact sentiment.
Angie Storozynski is attracted to the defensive nature of Southern (SO US)
and Dominion (D US) and has upgraded both to Outperform.
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