Insights: Asia/Australia

Cdn/Aust’n Banks: Why the Big Housing Short is So Difficult (and the Risk of a “Direct Hit” Remains Low)

In Q4 2018, we expanded our ETF offering to include two ETFs with monthly distributions and exposure to two world-class – and very similar – financial sectors with excellent performance histories. In October, we launched the Hamilton Capital Canadian Bank Variable-Weight ETF (HCB), a rules-based strategy that seeks to capitalize on the historical mean reversion tendencies of the Canadian banking sector[1]. In December, we launched the…

Indian Banks Overview: Large Diverse Sector, Operating in a High Growth Market

In this insight, we provide a review of the Indian economy and banking system, highlighting the most important issues facing the sector. India is a large emerging market with a fast-growing banking sector comprised of over 35 publicly traded banks divided into two main categories: state-owned (over 20) and private banks (over 15). For many years, India has been – and is forecast to remain –…

Notes from India: Financials Poised to Benefit from World’s Fastest Growing Economy

We met the management teams of over a dozen Indian banks, insurers and asset managers in the financial capital of Mumbai, India in December. With real GDP growth of over 7% over the past decade, India is one of the largest emerging markets and forecast to be the fastest growing major economy in 2019. Not surprisingly, the management teams we met were very upbeat. Exposure to…

Australian Financials: Regulatory Clarity Arrives

The Hamilton Capital Australian Financials Yield ETF (HFA) was launched in December 2018, with a targeted yield of 6.5% or higher paid monthly (aided by covered calls). The Australian financials have a history of long-term outperformance versus the Canadian financials with lower volatility. In fact, the Australian banks outperformed the Canadian banks during the global financial crisis. One main reason Australian financials have consistently outperformed their…

Pref ETFs Falter (Again): Why HFA/HCB are Logical Switch Candidates for Monthly Income

Following our October launch of the Hamilton Capital Canadian Bank Variable-Weight ETF (HCB), today we launched the Hamilton Capital Australian Financials Yield ETF (HFA). Both of these ETFs pay monthly dividends. HFA seeks to generate a yield of 6.5% or higher from a portfolio of higher dividend-paying Australian financials operating in arguably the world’s strongest and safest financial sector (aided by covered calls). Of note, the…

Australian Banks Outperformed the Canadian Banks During the Global Financial Crisis

It is well known that the Canadian banks performed very well during the financial crisis relative to their global peers, and the U.S. banks in particular. However, what is less well known is that the Australian banks did even better than the Canadian banks, generating higher returns from 2007 through 2009, the years encompassing the financial crisis (see chart below). As we explain in “Dividend-Heavy Australian…

Dividend-Heavy Australian Financials: History of Outperformance vs. Canadian Peers

All Canadian bank investors know that the sector has experienced very good performance over the past ten to fifteen years. However, most are less familiar with Australia, which actually has a history of long-term outperformance relative to the Canadian financials, with virtually identical volatility. Interestingly, as a testament to the strength of the Australian financial sector, its banks even outperformed the Canadian banks during the global…

Australian Banks: Rate Cut Highlights Benefits of Flexible Monetary Policy

The Hamilton Capital Global Bank ETF (HBG; TSX) emphasizes the benefits of investing in countries with flexibility in monetary policy – i.e., those with a central bank rate materially above zero. As of month-end, the weighted average central bank rate was over 1.0%, materially higher than that of Canada (50 bps) or the U.S. (~38 bps – i.e., between 25 and 50 bps). One of those…

March 2016 Update | Australian Banks: Profitable Banking Sector in a Wealthy Country

In this note, we provide a review of the Australian economy and banking system, highlighting the most important issues facing the sector. Australia is a wealthy country with an oligopoly banking sector, with banks known for their profitability, strong credit metrics, and high dividend yields. Current headwinds facing the economy, which will impact the banking system, include elevated real estate prices and a downturn in the…

Chinese Banks Part #3: Are Chinese Banks Solvent? Q&A on the Sector

In this series on Chinese banks, we have been evaluating the risk that distress in the system triggers a global sell-off. In the first two parts, we assumed that the Chinese government’s reported statistics are unreliable and hence obscuring the true financial distress of the sector. Then, to help investors understand these systemic risk issues, we presented the arguments supporting the bear case (Part #1), as…

Chinese Banks Part #2: For BULLS, Four Reasons Why Macro Risk from Chinese Banks is Overstated

In this three part series, we discuss macro risk posed to the markets by the enormous Chinese banking sector. In Part #2, we take the perspective of the ‘bulls’, providing reasons why the macro risk posed by the Chinese banking sector is overstated. In Part #1, we provided the perspective of the ‘bears’, discussing why the sector could be the epicentre of a further global sell-off…

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