A clear sight of the liquidity flows
Key Takeaways :
▪️ We have identified 4 trends of liquidity flows across asset classes recently which are characterized by : 1) lower stocks trading value but higher bond transactions; 2) the dominance of government bond portfolio inflows; 3) accommodating corporate needs of liquidity; 4) delivering value to shareholders particularly by paying sizeable dividend and stock repurchase.
▪️ Due to the rising interest rates and a flattening yield curve, bond markets have been more active than the stock markets. With the bond markets having higher turnover than stock markets in 4M23, foreign funds have continued to flow more towards government bonds, influenced by changes in interest rates, deposit rates, and liquidity in the banking systems.
▪️ Equity financing activities remained solid in 4M23 reflected by a rapid increase in fund raised through IPO, yet large-scale IPOs have decreased in value with an aggregate return of -13.7% since the IPO. In addition, some of the companies planned to bolster their valuations by allocating their excess liquidity towards dividend payments and stock buybacks.
▪️ As for our strategy report, we plan to rebalance our stock picks while maintaining neutral stance for domestic market stock. In our previous report, our portfolio provided an excess return of +224 to +506 bps from JCI. In the short term period, we estimate JCI to move in the range of 6,667-7,097 or the equivalent of 7.75-8.25% earnings yield, assuming a spread of 10-1 year yield <100 bps.
MNCS Research
Disclaimer On
