Robeco's March Newsletter
Europe's stock markets have been defying economic gravity and don't look as appealing as Japan or the US, our monthly outlook says. This month we assess the state of play in thematic investing, discuss how climate transition financing works, and outline how machine learning can be used to predict significant price crashes in certain stocks.
Europe: beautiful stagnation, challenging recovery?
European stocks will struggle to outperform in the near term, though they remain cheap compared to other markets, says strategist Peter van der Welle.
Thematic investing: State of the Union
In 2023, while general markets experienced upswings, some segments saw declines. Depending on their focus, Robeco’s thematic investment strategies sat in both camps. Despite highs, lows, and plateaus our vision and focus on themes that address enduring problems remains intact. Here we offer some observations on 2023, armed with the wisdom of hindsight, as well as some foresight on the factors likely to impact thematic developments in 2024.
Unraveling the Korea discount
Policies to unlock value in the stock market are likely to be popular and help mitigate a future pension system crunch in the thriving, but rapidly-aging, north Asian economy.
The Korean stock market discount phenomenon is characterized by Korean-listed companies trading at a consistent discount to international counterparts. The disparity exists even when the earnings per share (EPS) and book value per share (BPS) of these companies are comparable.
All you need to know about 'transition finance'
A new aspect of the evolution in sustainable investing is the emphasis on what is termed 'transition finance'. It is a broad concept – some argue it’s too broad – but there are strong views that the complex shift that we need to get our economies to net zero will depend on this form of capital. How are investors going about the process of transition investing; what are their priorities, and what have been the lessons learned so far?
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Real-life experience: Using ML and distance-to-default to predict distress risk
Tail risk is extremely relevant for investors. While small wins and losses are inherent to stock market investing, significant price crashes can be highly detrimental. Identifying stocks that are likely to experience severe price crashes is crucial.
Traditional risk indicators like stock beta and return volatility are useful but limited as they rely on historical data. To better estimate tail risk, Robeco has incorporated advanced measures such as distance-to-default (DtD) since 2011, and more recently in 2021, a machine learning (ML) risk signal that identifies complex market patterns.
SI Dilemma: A tale of two court cases
Why the acquisition of forward-looking analytics is essential for assessing the low-carbon transition readiness of companies.
This opening sentence of Charles Dickens’ ‘A tale of two cities’, full of paradoxes, well describes my mood of late. The discussion on sustainability seems to become more polarized by the day. Two recent litigation cases against financial companies illustrate this phenomenon. You could say it has become ‘A tale of two court cases’ in how to navigate this situation.
Defining fair value in global credit markets
Despite interest rate volatility, credit markets performed well in 2023, and credit spreads have continued to tighten in recent months.
In our webinar, our Head of Credit, Joop Kohler, and Head of Multi-Asset Strategies, Colin Graham, discuss the value of global credit markets. The webinar explores whether valuations in credit markets are still attractive or if the cheapness has disappeared.?They compare the attractiveness of credits to other asset classes. Additionally, the speakers discuss how to define fair value in global credit markets using valuations, macro outlook and technicals.