sentix ASR Essentials 39-2014


Emerging Market sentiment plays catch-up with Commodities

The latest sentix survey indicates that the notable divergence in opinion on the Emerging Markets (EMs) and Commodities has begun to close. In recent months, a rising tide of optimism towards EMs as an asset class has provided an unusual counterpoint to deep pessimism on Commodities. An odd development given sentiment towards both asset classes has historically had a reasonably close relationship. However, this month’s questions’ on asset class preferences indicate that investors have begun to temper their optimism on EMs. While there remains a notable sentiment gap, Emerging Market sentiment has begun to play catch-up with Commodities.

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Chemicals shares lose their status as darlings


In October, the sentix Sector Sentiment which was polled via the latest sentix Global Investor Survey sends a clear message: investors increasingly like shares of defensive sectors and turn their backs at cyclical stocks. Among these, chemicals shares experience a particularly strong setback in sentiment this month. They now have finally lost their status as "darlings" among investors, but their disenchantment is set to continue.


sentix ASR Essentials 38-2014


Signs that sentiment gap between EMs and Commodities is narrowing

A notable feature of the sentix survey through the summer has been the resilience of sentiment towards Emerging Markets (EMs), at a time when pessimism has been the dominant theme in the case of Commodities. On this front, medium-term sentiment readings for Gold and Crude remain at deep pessimism levels, while nearterm pessimism on Crude is running at historic extremes. However, there are signs that sentiment on the equity front may be changing, with survey readings based on the strategic medium-term outlook for China 'bluechips' beginning to retreat from recent highs (Chart 2, page 2). It may be that the unusually large sentiment gap between EMs and Commodities is beginning to close.

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Euro zone shrinking, the world feeble


In October, the composite index for the euro zone falls for the third time in a row. As both the assessment of the current situation and the 6-month expectations are now clearly in negative territory, the sentix indices signal shrinking output for the euro area. And there are no positive news coming from the indicators for the other coun-tries or regions either: all composite indices recede this month! Even for the US and Asia ex Japan – both stood out until recently with rather solid indices – the economic shine fades. It is mainly investors' 6-month expecta-tions that worsen. All in all, the data points to a nearing downturn of the world economy.


sentix ASR Essentials 37-2014


Bunds sentiment supported by macro views

The latest sentix survey underlines the rising tide of optimism towards eurozone bonds, both in the near-term and on a medium-term strategic viewpoint. Such optimism may reflect expectations that the ECB could move into the market to purchase government bonds. However, it is also consistent with investors' views (as expressed when answering monthly questions on investment themes) that the inflation and economic backdrop continues to become more bond-bullish on a six month view (see Charts 2/3, page 2). That said, while the tide of optimism is rising, the survey also suggests that medium-term 'neutrality' levels on bunds are also becoming elevated. A degree of uncertainty on bunds remains beneath the sentiment surface.

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