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Daeil Cha

Recent Posts

Do Lofty Markets Imply Impending Pain?

Despite valuations in several sectors appearing stretched, stock markets continue to fly and defy any negative news that one would expect to rattle investor sentiment. As a follow-up to our previous blog on stretched valuations in international equity markets, we look into the valuations of European banks and the potential downside risk if the market corrects. While record high valuations could imply poor future performance, the earnings yield of European banks might justify further upside. For RIAs and other international equity investors, our goal is to better understand this risk-reward set-up and the potential implications for future returns.

Posted by Daeil Cha on Dec 19, 2017 11:43:26 AM

Topics: From the Desk of Daeil Cha

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Biosimilars: The Opportunity and Growth Potential

A couple months ago, our international equity team published a blog about generic drug prices and the downward pressure. In this blog, we will continue the generic drug theme by exploring the prospects of biosimilars—generic versions of biologic drugs, also known as biologics.

Biologics are molecules made by living organisms such as humans, animals, and microorganisms, which means they typically have a more complex molecular structure compared to conventional drugs. These drugs can treat a wide variety of diseases and potentially see greater efficacy versus other therapies.

Posted by Daeil Cha on Nov 1, 2017 10:24:40 PM

Topics: From the Desk of Daeil Cha

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International Equity Investors Look at the Era of Machine Learning

As a follow-up to the R Squared blog on the impact of automation on bank branches, let's take a look at how the broader financial industry is changing due to a transformative technology: machine learning.

While machine learning (ML) has existed since the 1950s, only in recent years has the hardware progressed enough to make ML applications relevant—and potentially necessary—in business. This year, an index that tracks stocks that are poised to benefit from increased adoption of robotics and machine learning is up over 40%.

Posted by Daeil Cha on Oct 12, 2017 10:53:34 AM

Topics: From the Desk of Daeil Cha

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Generic Drug Pricing in the U.S.: What's the End-Game?

One clear theme in the U.S. drug industry is the downward pressure on generic drug prices. The latest quarterly results at generics manufacturers Impax and Perrigo missed expectations by at least 20%, largely due to lower prices. Overall, the generic drug manufacturers expect prices to fall by as much as 9% this year. Teva thinks generics price deflation will accelerate in 2H17.

Posted by Daeil Cha on Aug 31, 2017 10:34:00 AM

Topics: From the Desk of Daeil Cha

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How Will Technology Impact Bank Branches?

While retail continues to be disrupted by online sales, less attention is focused on technology's potential impact on banking. In an environment of zero-rates and stiffer capital requirements, banks around the world have been challenged to grow profits. One obvious but non-recurring source of profitability is cost-cutting, which banks have resorted to by lowering headcount and closing branches. By the end of 2016, European banks cut their workforce by roughly 10% and their branches by 20% compared to five years prior. 

Posted by Daeil Cha on Jul 27, 2017 1:18:58 PM

Topics: From the Desk of Daeil Cha

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Can Toronto’s Hot Housing Market Be Contained?

In April, Toronto home prices rose 27.7% from a year ago (compared to a 24.1% increase in March) with the average home price in Toronto at C$817,000.

Posted by Daeil Cha on May 23, 2017 6:01:32 PM

Topics: From the Desk of Daeil Cha, Canada, Real Estate

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How the Fed Rate Hike Affects Europe

The recent Federal Reserve rate hike was widely expected—they’ve now raised rates three times since the end of 2015—and its benchmark interest rate has increased by 0.25 percentage points. We should be seeing two more rate hikes in 2017, and three in 2018. There’s plenty of talk about how this impacts life within the United States, but how does it affect our dealings with Europe?

Posted by Daeil Cha on Mar 30, 2017 11:28:28 AM

Topics: From the Desk of Daeil Cha, Europe

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R Squared Talks Turkey

Turkey is one of the best performing markets year to date.  Since the beginning of the January, the Borsa Istanbul Index is up over 14% (see chart below). Does this performance tailwind represent a broader secular opportunity for international equity investors?

Posted by Daeil Cha on Mar 1, 2017 2:31:38 PM

Topics: From the Desk of Daeil Cha, Turkey

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Will Rising Interest Rates Lift Profits For All Banks?

In a low/zero interest rate environment as we have been in for some time, banks are hard-pressed to grow profits given their core business is predicated on a rate-spread between their assets and liabilities. Now, with rising yields and the recent rate hike by the US Federal Reserve (with further hikes expected in 2017), should we automatically assume that the net interest income will benefit bank stocks across the board? At R Squared Capital Management (former team at Julius Baer / Artio Global) we believe there’s more than meets the eye on this. See the table below for rises in Treasury yields during Q4 2016.

Posted by Daeil Cha on Jan 18, 2017 7:00:53 PM

Topics: From the Desk of Daeil Cha

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Engines That Can Move Economies? Market Insights on Greek Bank Stocks

We recently posted about a tailwind in Japanese megabanks as well as shared a case study on Banco Monte dei Paschi. This week we focus on another banking-oriented tailwind the team at R Squared Capital Management (former team at Julius Baer / Artio Global) has identified: Greek bank stocks. As international equity investors, R Squared utilizes fundamental and macro analysis to identify structural tailwinds and headwinds at the geographic, sector and company levels, and we believe Greek bank stocks will benefit both from macro factors as well as improving fundamentals.

Posted by Daeil Cha on Dec 12, 2016 3:33:00 PM

Topics: From the Desk of Daeil Cha, Greek Bank Stocks

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