Conviction-Correlation Model: Long commodities, China, Brazil, Qatar vs Ibex/DAX, KRW, Turkey, Nikke

Our Conviction-Correlation ('Con-Cor') Model forecasts weekly returns on almost 70 assets based on our qualitative macro convictions as well as historical cross-asset correlations.

Some themes:

  • Commodities to outperform: Oil (+1.5%), Gold (+0.6%), Silver (+0.4%), Copper (+0.3%)

  • China (Shcomp +1%, Hang Seng +0.6%) to lead EM equities on 'Party Congress Put', followed by Brazil Bovespa (+0.8%) and Qatar (0.7%). Argentina Merval may end higher (+0.5%), but we advise being nimble on profit-taking/mid-term election risks.

  • European equities are predicted to end in the red due to domestic politics: Spain Ibex (-1.0%), DAX (-0.8%)

  • Geopolitics to lead to losses in KRW (-0.7%) and Kospi (-0.4%) and to a certain extent Turkey (TRY -0.6%, Borsa Istanbul -0.6%)

  • Strong-JPY bias this week may push Nikkei 225 lower (-0.5%)

  • Egypt momentum to soften (-0.3%) with Malaysia KLCI (-0.2%)

  • Poland to see mixed performance with Zloty gain (+0.3%) and WIG20 retreat (-0.3%)

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