Investment Rating - The report has downgraded Emerging Market (EM) equities to Underweight in a global context due to growing macro headwinds and increased risks associated with the potential re-election of Trump [4][6]. Core Insights - The MSCI EM index is currently about 10% off its highs, with a projected upside of approximately 8% to a target of 1130 by mid-2025, based on an expected 8% EPS growth and flat valuations [4][7]. - The report emphasizes a tilt towards quality in EM country strategy, favoring India and Taiwan while being Underweight on Brazil and downgrading Korea to Neutral [4][10]. - The political landscape in the US, particularly the potential for a Trump 2.0 scenario, poses significant risks for EM equities, especially for countries like China and Brazil, which are more exposed to US trade policies [9][20]. Summary by Sections EM Equity Strategy - The report summarizes top-down views and insights from various strategists, indicating that recent market corrections have led to a more realistic pricing of EPS outcomes in EM [4][5]. - The report suggests that while the worst may be behind, volatility is expected to persist as market positioning has not fully unwound [4][5]. Key Theme: Trump 2.0 - The US political backdrop is fluid, with prediction markets assigning a roughly 50% chance of a Trump win, which could lead to heightened trade policy uncertainty and negatively impact EM equities [9][22]. - The report highlights that approximately 13% of MSCI EM revenues come from the US, with significant exposure in Asia Tech, making markets like India and Mexico appear less vulnerable to Trump-related risks [9][37]. EM Allocation Model - The allocation model reflects a preference for quality and defensiveness, with Overweight positions in the US and specific EM countries, while downgrading others based on macroeconomic conditions and election-related risks [6][10]. - The report indicates a shift towards sectors and regions with strong EPS momentum, particularly in India and Taiwan, while downgrading Korea and Brazil [10][14]. Quantitative Strategy - The report notes that despite the recent sell-off, the MSCI EM is trading at a forward PE of 12x, near its long-term average, suggesting that EM equities remain relatively cheap compared to developed markets [7][46]. - EPS growth forecasts for 2024 are stronger in EM compared to developed markets, with a focus on sectors like technology and basic materials [43][51]. EM Countries: Insights from Local Strategists - Country preferences are adjusted based on EPS momentum and exposure to US economic conditions, with upgrades for Poland and downgrades for China and Brazil [10][14]. - The report emphasizes that while Korea shows EPS recovery, its cyclical characteristics and exposure to Trump risks warrant a Neutral rating [14][69].

CitiFX Wire Market Commentary - FXLM - Intended for Institutional clients only Europe Open - Gentle breeze By Naveen Nair A quieter day for markets in Asia with Japan observing a local holiday. Interbank FX volumes are ~60% lower than 30d averages according to our etraders. DXY trades flat, with JPY down 0.4% on the day though we flag no news behind this. The rest of the G10 FX complex trade in tight ranges. Elsewhere, US stock futures are flat, while cash US treasuries are closed on account of the Japan ho ...

Cheatsheet CitiFX Wire Market Commentary - FXLM - Intended for Institutional clients only Cheatsheet - G10 & EM Week Ahead: Half and half By CitiFX Wire US core CPI should, in part, comfort Fed officials but, in other, keep them squarely focused on labor and economic trends. US retail sales and consumer earnings will be key, as will initial and continuing jobless claims this week. Fedspeak, sprinkled throughout the week, should also be monitored Elsewhere in G10, the RBNZ (Wed) could skew dovish, as might N ...

V i e w p o i n t | Prepared for Philip Hu China Economics CITI'S TAKE 11 Aug 2024 21:33:53 ET │ 13 pages Top Questions on Monetary Policy – Takeaways from PBoC's MPR 24Q2 Xiangrong Yu AC +852-2501-2754 xiangrong.yu@citi.com Xinyu Ji AC +852-2501-2792 xinyu.ji@citi.com The PBoC released its Monetary Policy Report (MPR) for 24Q2 last Friday (PBoC, Aug 9). The pro-growth tone was reconfirmed with focus shifting towards countercyclical monetary policies. Yet in our view, the central bank is still walking a tig ...

V i e w p o i n t | Prepared for Philip Hu PH Q2 GDP & BSP Cut in August; CN Deflationary Concerns 11 Aug 2024 23:13:19 ET │ 14 pages CITI'S TAKE EM Asia Economics & Strategy Philippines: Q2 GDP was fairly healthy but not strong enough to delay policy rate cut in August; China: A Seasonal Beat Does Not Ease Deflationary Concerns; Upcoming Events: IN Jul CPI (Citi: 3.8%YY, Mkt: 3.60%, Prior: 5.08%) & IP, GE Current account balance Johanna Chua AC +852-2501-2357 johanna.chua@citi.com Philip Yin Samiran Chakra ...

V i e w p o i n t | Prepared for Philip Hu CNB minutes, Turkish inflation forecast CITI'S TAKE 09 Aug 2024 06:25:02 ET │ 20 pages It has been an incredible week in global macro. After the recent trigger of Sahm's rule and the unexpected BoJ hike, we believe that this higher volatility may not normalise as fast as some expect, suggesting a potential re-calibration higher in EM risk premium. We are entering a mini regime of rising investing uncertainty, whereby the start of Fed easing almost overlaps with US ...

Investment Rating - The report maintains a positive outlook on US equities, lifting the year-end target for the S&P 500 to 5600 and EPS estimate to $250, with a further target of 5800 for 2025 based on $270 of EPS [6][8]. Core Insights - The earnings momentum remains positive, with a beats-to-misses ratio of 4.6:1, indicating strong performance relative to expectations [5][6]. - The Levkovich Index shows a significant week-over-week decline, indicating a shift towards a more balanced sentiment, although it remains in the euphoria zone [5][25]. - The report highlights the influence of the "Magnificent 7" stocks, which have contributed to two-thirds of the S&P 500 gains this year [6]. Market Outlook - Price remains negative due to flat equity markets and a slight increase in 10-year yields, leading to cross-asset valuation imbalances [4]. - Liquidity is positive, with continued inflows into domestic equity funds and ETFs [4]. - Sentiment is negative, but there is potential for a neutral reading in the coming weeks if current conditions persist [5][6]. Sector Recommendations - Real Estate and Financials have been upgraded to Overweight, joining Consumer Discretionary, while Industrials have been lowered to Market Weight [7]. - Health Care and Materials remain Underweight, indicating a cautious stance on these sectors [7]. Earnings Performance - Over 90% of the S&P 500 has reported Q2 earnings, with aggregate EPS surprising to the upside by 2% compared to expectations [5][33]. - The report details sector-specific performance, with notable earnings growth in Consumer Discretionary and Financials [33][34]. Valuation Metrics - The S&P 500 is currently trading at a P/E ratio of 22.4, which is in the 89th percentile historically, indicating high valuations [14]. - Forward 1-year returns based on current valuation metrics suggest a median return of 6.6% for the S&P 500 [14]. Economic Indicators - The report notes that corporate preparedness for an economic slowdown and improvements in supply chains could positively impact market performance [18]. - The potential for downside surprise inflation prints without weaker macro data is highlighted as a positive market influence [18].

Prepared for Philip Hu 09 Aug 2024 13:25:01 ET │ 18 pages Japan Equity Strategy Investment strategy with Japan equities returning to an upward trajectory CITI'S TAKE We expect Japan equities to embark on a real recovery in the second half of September after the current period of instability. The themes we highlight for investment strategy in this scenario are 1) recently devalued high-quality names with strong earnings, 2) the decoupling of Japan-US long rates, and 3) elevated visibility on a recovery in do ...

Roundup | Prepared for Philip Hu The SMID Point Friday, 09 August 2024 Company | Industry Company Nevro Corp (NVRO.N) - Upgrading to Neutral: Enthusiasm at a Trough, Guidance Seems Reasonable but Uncertainty Is High With the 2Q24 print (link), we are upgrading NVRO to Neutral from Sell. While the quarter itself was fairly benign, the full-year revenue guidance cut to $400- $405M from $435-$445M was unexpected, sending shares down 44% post print. With shares now down 73% YTD and trading at <0.5x NTM revenue, ...

Prepared for Philip Hu Citi Research August 9th, 2024 Citi Research Macro Think Tank Citi Global Research citiinvestmentresearch@citi.com +44-20-7500-1400 See AppendixA-1 for AnalystCertification, Important Disclosures and ResearchAnalystAffiliations Citi Research is a division of Citigroup Global Markets Inc. (the "Firm"), which does and seeks to do business with companies covered in its research reports. As a result, investors should be aware thatthe Firm may have a conflict ofinterestthat could affectthe ...