sentix ASR Essentials 43-2014

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Cyclicals sentiment upswing

The latest sentix survey suggests that investors’ views on sectors have begun to shift in the past month. On one hand, survey respondents have become less cautious on the six month outlook for Cyclical sectors such as Industrial Goods & Services, Autos and Chemicals. Sentiment towards Basic Resources has also modestly improved, in contrast to Energy, where pessimism still dominates. On the other hand, they have become less optimistic on the prospects for Telecoms and Healthcare versus the market (see Charts 2 to 4, page 2). Deep pessimism on Cyclical sectors versus Defensives may be beginning to ease.

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sentix ASR Essentials 42-2014

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A less bond-bullish view of macro themes

The latest sentix survey indicates that investors remain optimistic on the mediumterm, more strategic outlook for eurozone bonds, albeit readings are down on their early-October highs. In the near-term, however, sentiment is more neutral, while the survey also reveals a high degree of 'neutrality' on the near-term outlook. Such uncertainty is consistent with investors' views on the macro backdrop, with investment themes such as inflation and economics being seen as having become a little less bond-bullish on a six month view (see Chart 3, page 2). The tide of medium-term optimism on bonds is still rising. However, beneath the sentiment surface, it is also apparent that a degree of uncertainty on the near-term has emerged.

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sentix ASR Essentials 41-2014

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BOJ moves – seen as good for Nikkei; bad for Yen

The latest sentix survey underlines the extent to which the BOJ's surprise stimulus measures have impacted sentiment towards Japanese markets. In terms of the near-term outlook for the Nikkei 225, sentiment readings have spiked sharply higher, albeit they are shy of historic highs. While the initial impact on survey participants' views on the medium-term outlook has been less dramatic, investors are becoming gradually more upbeat from a more strategic perspective, after a latesummer setback in sentiment. On the other side of the sentiment divide, pessimism on the Yen versus the USD has also increased markedly, with near-term sentiment readings reaching historic highs on USD/JPY (while USD optimism is also high-end in EUR/USD). Investors seem to view BOJ moves as good for Nikkei, but bad for Yen.

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sentix ASR Essentials 40-2014

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Pessimism a little less marked on Equities

The latest sentix survey indicates that pessimism towards equities has begun to ease, both in terms of participants' views on the near-term and their medium-term, more strategic opinion on markets. A less pessimistic attitude can also be seen in investor positioning, with the level of over-investment in equities among survey respondents having moved back to longer-term average levels (Chart 3, page 2). While bonds have been the near-term sentiment losers from this change of investor tack, survey participants' over-investment in European bonds is still above long-term average levels (Chart 10a, page 4). It is still early days with regards to the swing in sentiment back from bonds towards equities.

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sentix ASR Essentials 39-2014

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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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