ab3 January 2024Global Research and Evidence LabEM Equity StrategyAsia 4Q23: positioning cheat-sheets ahead of earnings seasonWhere do UBS analysts expect the biggest positive and negative surprises? We polled our analysts across Asia to identify stocks where they expect a positive or negative surprise vs consensus in the Dec-23 results. We have identified 14/11 stocks where the earnings could see beats/misses with respect to consensus, respectively. Our analysts expect positive surprises, among others, in Japan (Tech and staples), China (Consumer Discretionary) and India (Healthcare), while expecting negative surprises in Australia (Mining), Taiwan (Semis) and Japan (Pharma). UBS analysts' earnings expectations intersecting with crowding score provided by the UBS Quant Research team has been shown to generate superior alpha (see note for background, and below for a brief discussion). Stocks where long positions have built recently (i.e crowding has increased), but where our analysts see potential for negative surprise from results, include BHP (BHP AU), Samsung SDI (006400 KS), Astellas Pharma (4503 JP), LG Innotek (011070 KS), and UMC (2303 TT). Stocks where investors have reduced long positions (or increased shorts) sharply, but where UBS analysts expect positive surprise include Corporate Travel Management (4689 JP) and Omron (6762 JP) (details in Figure 1Positive screner: stocks where UBS analysts are expecting a BEAT on consensus for 4Q23 (sorted on crowding factor) and Figure 2Negative screner: stocks where UBS analysts are expecting a MIS on consensus for 4Q23 (sorted on crowding factor) ).Buy-side positioning: Which parts of Asia are crowded? In this note, we leverage the UBS Quant team's proprietary crowding score to identify the most crowded markets/sectors in Asia. The larger Asian markets - Korea and India - have seen increasing crowding over past six months, while China has seen a small drop in crowding (Figure 5 Over last six months Korea and India have sen a rise in investor crowding, while China/Taiwan have sen a smal drop/stable crowding ). Crowding in Taiwan has remained flat over last six months. The sectors with the most crowded short positioning in Asia (ex Japan) are Materials and Industrials, while IT, Consumer Discretionary, and communication services are the sectors with most crowded longs. Figure 7Curent Top 5 crowded longs in each market and Figure 8Curent Top 5 crowded shorts in each market show the most crowded longs and shorts in each market.Sell-side ratings: Where is the street turning bullish and bearish quickly?Compared to EPS upgrades and downgrades, sell-side ratings changes on stocks are less frequent and potentially indicative of material change in the analyst's thought process on a stock, and bigger than incremental EPS changes. They also encapsulate not only fundamental earnings information, but also...
