Global Value: Germany And Korea Best Of Them All, Says Citi

Global Value: Germany And Korea Best Of Them All, Says Citi

Citigroup Inc (NYSE:C)’s Quantitative Research team, currently led by Chris Montagu, introduced a market ranking model in 2004 to rank 22 global markets for which exchange traded funds were available. The model considers fundamental, macroeconomic, and price momentum as inputs. The model was last updated in July 2013.

Global Value

Factors and weights vary according to markets covered. Cluster analysis is used to classify 17 factors into 11 groups, and 5 factors are chosen for each market. Weights are assigned to factors by determining the size and strength of the relationship between the market’s rank on a given factor and the subsequent performance of the market. Correlations are measured since the beginning of 1990.

Despite 60% Loss On Shorts, Yarra Square Up 20% In 2020

Yarra Square Investing Greenhaven Road CapitalYarra Square Partners returned 19.5% net in 2020, outperforming its benchmark, the S&P 500, which returned 18.4% throughout the year. According to a copy of the firm's fourth-quarter and full-year letter to investors, which ValueWalk has been able to review, 2020 was a year of two halves for the investment manager. Q1 2021 hedge fund Read More

Also see: While S&P 500 Is Fairly Valued, Small Caps Are Rich: JPMorgan

Data is sourced from Thomson IBES, Worldscope, MSCI, Bank of International Settlements, and DataStream. Fundamental factors include dividend yield, return on equity, price to sales, and forward price to earnings ratios. Among macroeconomic factors considered are interest rates trends and changes in real effective foreign exchange rates. Momentum factors taken into account are changes in number of analyst estimates and price momentum measured over different periods.

Global Value: Germany and Korea attractively priced

The 5 factors that ranked highest with respect to the relationship between factors to next period returns are change in number of analyst estimates, dividend yield, forward earning yield less interest rate for current fiscal year, P/E for current fiscal year, and change in real effective FX rate. The factor that had the highest weight was forward earning yield less interest rate for current fiscal year and Germany’s score was 6.9%, which suggests that German stocks present value relative to bonds. The second highest weight was placed on P/E for current fiscal year, and value was 11.6, which is the second lowest value behind Korea’s respective measure at 11.1. The factor suggests that German stocks may appreciate as they are attractively valued. Germany ranked first out of 22 countries studied.

Also see: Are Municipal Bonds Cheap Relative To Taxable Counterparts?

For Korea, the top 5 factors are change in number of analyst estimates, price to sales, price to book, price to cash flow, and earning revision ratio. The factor that had the highest weight was price to sales, which came in at 0.5, suggesting that companies’ revenue streams may be underappreciated by investors. Related factors such as price to cash flow and price to book are also at low levels relative to other countries in the universe, suggesting that Korean stocks are attractively priced. Korea ranked second out of 22 countries.

Global Value

Global Value: Mexico and Malaysia overvalued

Valuation factors also played an important role in ranking Malaysia and Mexico, the 2 lowest ranking countries ranked at 21 and 22, respectively. A low dividend yield even relative to developed markets did not help Mexico’s standing, and its forward P/E for FY1 is the highest among 22 markets. This suggests Mexican stocks may be expensive. In Malaysia’s case all factors used for ranking were valuation based, and they suggest that local equities may be expensive relative to bonds as suggested by negative contributions by forward earning yield less interest rate factors.

Global Value

No posts to display