- Volatile — "Equity markets have appeared almost schizophrenic of late. Mid-year optimism gave way to a new sell-off in August before another rally this month. The six-month trading range is intact; we continue to expect an upside breakout in Q4."
- Multiple contraction — "Emerging markets are largely flat in 2010 (+2%). Earnings have risen strongly – even if momentum is now slowing. The consequent severe multiple contraction this year (trailing P/E from 20x to 14.7x) represents a buying opportunity, assuming the global economy and earnings stay on track."
- Rotation Over? — "The well-documented switch from global cyclicals into domestic growth stocks (which generated outperformance of 10% over the summer) seems to be ending, based on long-term optimism over the global economy, combined with rich valuations in domestics (notably consumer staples)."
- Valuations v. Earnings — "Across sectors on valuations and EPS momentum, the cyclicals look far better placed than most domestic sectors, notably Cons. Staples. Also, Industrials look rich, while Health Care, IT, Telecoms and Utilities are attractively valued. We are Overweight Materials and Underweight Cons. Staples."
- Stock Screens — "We screen for Global Cyclicals with 2011 P/Es of 9x EPS growth; the list includes Vale, S-Oil, Severstal, Mechel, Adaro and BBMG. We screen for Consumer Staples stocks with P/Es >20x and weak EPS growth; the list includes Modelo, Hindustan Unilever, Tsingtao, CP ALL and BIM."
Citigroup_Global_Emerging_Markets_Strategy_20100907
- Multiple contraction — "Emerging markets are largely flat in 2010 (+2%). Earnings have risen strongly – even if momentum is now slowing. The consequent severe multiple contraction this year (trailing P/E from 20x to 14.7x) represents a buying opportunity, assuming the global economy and earnings stay on track."
- Rotation Over? — "The well-documented switch from global cyclicals into domestic growth stocks (which generated outperformance of 10% over the summer) seems to be ending, based on long-term optimism over the global economy, combined with rich valuations in domestics (notably consumer staples)."
- Valuations v. Earnings — "Across sectors on valuations and EPS momentum, the cyclicals look far better placed than most domestic sectors, notably Cons. Staples. Also, Industrials look rich, while Health Care, IT, Telecoms and Utilities are attractively valued. We are Overweight Materials and Underweight Cons. Staples."
- Stock Screens — "We screen for Global Cyclicals with 2011 P/Es of 9x EPS growth; the list includes Vale, S-Oil, Severstal, Mechel, Adaro and BBMG. We screen for Consumer Staples stocks with P/Es >20x and weak EPS growth; the list includes Modelo, Hindustan Unilever, Tsingtao, CP ALL and BIM."
Citigroup_Global_Emerging_Markets_Strategy_20100907
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