Saxo Equity World Cup: Mexico pulls ahead despite EM jitters

If we look across the competing countries, Mexico (represented by America Movil) has taken the lead after the first two days which is interesting given the rising uncertainty and underperformance in emerging markets.

With no important news on America Movil, it looks like a technical rebound in the share price following recent sharp declines. If we turn to our global equity factor model we see that America Mobil scores -0.17, making the stock less appealing in the longer term.

As we wrote earlier this week, our global equity factor model favours Danish pharma firm Novo Nordisk, which has the highest model score.

Predictions for Monday and Tuesday

On Monday and Tuesday we have seven more matches; below we go through the matches and how the stocks have performed.

France versus Australia

With little more than one trading session left, it looks like France (LVMH) will take the win over Australia (BHP Billiton) as investors are favouring luxury stocks over miners in the current environment. The Federal Open market Committee's trajectory for US interest rates is having a negative impact on companies with significant debt use on the balance sheet, which has hit BHP Billiton. This theme is likely to continue and could be a drag on miners such as BHP Billiton.

Argentina versus Iceland

The situation in Argentina is getting worse with the Argentinian peso losing 6.6% to the USD yesterday, dragging down the performance of Telecom Argentina. With Marel HF representing Iceland (up over the past two days) it will require a miracle for Argentina (Argentina Telecom) to win this match. While Argentina is a great football nation, the country is weak on macroeconomics and stock market performance.

Peru versus Denmark

This match is going to be close with Peru (Banco de Credito del Peru) up yesterday while Denmark (Novo Nordisk) is down over the past two days measured in USD. With the EUR weakening, it could potentially boost Novo Nordisk’s share price; given its highest rating in our global equity factor model, Novo Nordisk might stage a comeback.

Croatia versus Nigeria

Again, a close match with Croatia (INA Industrija) down only 1.4% versus Nigeria (Dangote Cement) down 0.3% over the past two days. As we communicated on our morning call, we are turning structurally negative on emerging markets because of Chinese weakening but also because the Fed’s rate policy trajectory is clearly negative for EM and investors are already beginning to reflect that through outflows from the space.

Costa Rica versus Serbia

The equity game’s two smallest companies with market caps below €1.5bn. Costa Rica is represented by Florida Ice & Farm – by far the coolest company name in our equity game – and it's share price was down 0.6% yesterday, but Serbia (NIS AD) is down 1.1% so it looks like a close match. 

Germany versus Mexico

The two best-performing stocks are already fighting it out in the first match. While Germany is one of the favourites in the real World Cup, anything can happen in our Saxo Equity World Cup. Germany (Adidas) is up 2.2% over the past two days, trailing Mexico (America Movil) which is up 2.8%, so Adidas needs to tighten its shoes and run for it in order to win. With the weakness in emerging markets, there could be more pressure on America Movil over the next couple of trading sessions.

Brazil versus Switzerland

Can samba beat precision clocks as Brazil (Petrobras) meets Switzerland (Nestle)? Both stocks are down the past couple of days despite good tailwinds for Petrobras from high oil prices. On the other hand, Brazil is fighting social unrest and a weakening currency. In our latest morning calls we have asked whether Brazil could be the next domino in EM. Our view is that Brazil could ride out the storm in the short term, and in fact we highlighted a couple of days ago in our monthly equity webinar that Brazilian equities might be a good opportunity short-term.