THEMATIC BASKETS FOR A NEW NORMAL - EQUITY & DERIVATIVE STRATEGY - BNP Paribas
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THEMATIC BASKETS FOR A NEW NORMAL
EQUITY & DERIVATIVE STRATEGY
Ankit Gheedia, CFA, Equity and Derivatives Strategist | BNP Paribas London Branch
Edmund Shing, PhD, Global Head of Equity Derivatives Strategy | BNP Paribas London Branch
Greg Boutle, Head of US Equity Derivatives Strategy | BNP Paribas Securities Corp
Jason Lui, CFA, Head of Equity and Derivative Strategy APAC | BNP Paribas Hong Kong Branch
Please refer to important information
Please
and MARrefer to important
disclosures information
at the end of this
at the
report end of this report
1 June 2020Executive summary
Earnings outlook: We continue to see consensus earnings forecasts for Fig. 1: Just at the beginning of the downgrade cycle
2020-22 as overly optimistic as they appear to be pricing in a sharp V- 70 100%
shaped economic recovery. While the 2020 earnings forecast has been Global EPS Upgrades / Downgrades (RHS) ISM 80%
65
lowered significantly, the market continues to price in a marked rebound 60%
in 2021. 60
40%
55
Shock to recovery: In recent weeks, we have seen investor focus shift 20%
from the current shock of the Covid-19 crisis to the recovery process. In 50 0%
contrast to a sharp V-shaped earnings recovery priced in by the markets, 45 -20%
BNP Paribas economists expect the GDP recovery to be gradual and the -40%
40
crisis to lead to some long-lasting behavioural changes. -60%
35 -80%
Sector/factor differentiation is key: The earnings season has shown
clear sectoral winners and losers of the current crisis. Sectors such as 30 -100%
00 02 04 06 08 10 12 14 16 18 20
financials, consumer discretionary, industrial, energy and materials seem
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future
to have been hit the hardest. Other sectors, including technology, performance, which may be better or worse than prior results.
healthcare, consumer staples, communication and services, utilities and
Fig. 2: Equity outflows from active investors versus passive inflows (USDbn)
real estate appear to have been less affected. Sectoral differences are
400
also the key driver of relative regional and factor performances.
300
One for the history books: Our history of flow study suggests that 200
active investors have played only a small role in the equity market 100
rebounds seen both last year and in the past month. Looking ahead, -
-100
though, we believe passive retail investors, buybacks and systemic
-200
strategies might not be able to support equities as they did in 2019, and
-300
active investors could be the key driver of equity returns in the near term. -400
Focus on long-term thematic: The recent crisis has rapidly accelerated -500
Jan-18 May-18 Sep-18 Jan-19 May-19 Sep-19 Jan-20
changes in consumer behaviour. We believe some of these changes are
likely to have a longer term impact on businesses and our society as North America, Active North America, Passive
remote working and reduced travel become a regular feature of global Western Europe, Active Western Europe, Passive
lifestyles. As a result, we need to incorporate these changes in our Sources: Bloomberg, BNP Paribas. Past results are not indicative of future performance,
investment themes. which may be better or worse than prior results.
Ankit Gheedia, CFA, Equity and Derivatives Strategist | BNP Paribas London Branch
2Summary of our high conviction thematic baskets (1/2)
Live Since Theme/ Name Region Description Bloomberg ticker Links
Exposure to companies that can thrive in a transition to a low-carbon
09-Mar-20 Transition Global BNPPGLT1/BNPPGST1 Page 5
economy, against companies that will incur higher costs to do so.
Exposure to companies with strong balance sheets, high profit margins,
15-Mar-20 Recovery Global BNPPGLR1 Page 7
secular growth characteristics and low operating leverage.
26-May-20 Gaming Global A basket that offers exposure to the growing gaming industry. BNPPGAMG Page 9
Artificial A basket of companies that were selected based on their outsized
20-Mar-18 Global BNPPGAI1 Page 11
Intelligence exposure to the artificial intelligence growth trend.
Baskets that are more bond-like/high leverage and low-margin
25-Jun-19 EU late cycle Europe BNPPELCL / BNPPELCS Page 13
companies in the late stage of the economic cycle.
A basket of cash-rich eurozone companies likely to have balance
12-Mar-19 EU QARP Europe BNPPBUY5 Page 15
sheet flexibility to deal with financial crisis, such as the current one.
EU High
19-Jun-18 Europe Short a basket of high leverage names. BNPPEHL1 Page 17
Leverage
EU High
12-Jun-19 Europe A basket of stocks currently delivering high profitability. BNPPEHR1 Page 19
ROCE
27-Sep-18 Family-owned Europe A basket that offers exposure to family-owned companies. BNPPEFO1 Page 21
3Summary of our high conviction thematic baskets (2/2)
Live Since Theme/ Name Region Description Bloomberg ticker Links
Long/short baskets of US stocks that could out/underperform in the BNPUEOCL/
21-Mar-19 US end of cycle US Page 23
face of late-cycle margin compression pressure. BNPUEOCS
A basket of green thematic/clean energy stocks which could benefit
08-Oct-19 Green new deal US from the Green New Deal-related policy shifts after the US BNPUDGND Page 25
presidential election.
US corporate Sustainable vs non sustainable buybacks: Long/short baskets of US BNPUBBKL/BNPUBBKT/
05-Dec-18 US Page 27
buyback stocks that may have high/low capability to sustain buybacks. BNPUBBKS
Rising tech – BNP Paribas China ATM+ basket captures the rising
11-Dec-19 China Tech Asia BNPBTECH Page 29
appetite for Chinese technology stocks.
Japan 'Cash- A basket of Japanese companies with high net cash balance and
23-Mar-20 Asia BNPBJPCR Page 31
Rich' high free cash flow for potential buyback after share price correction.
Japan Long/short basket of Japanese companies with good or poor
18-Jun-19 Asia BNPBJTPG / BNPBJPRG Page 33
governance governance.
4ESG Transition long/short baskets
Long/short Transition baskets offer long exposure to companies that can thrive during the
BNPPGLT1/BNPPGST1 transition to a low carbon economy, while shorting companies that will incur higher costs to do so.
Strategy View Performance (rebased to 100)
The environmental, social and governance (ESG) investing trend is active 340 BNP Transition Long Basket
and looks here to stay despite the ups and downs of the economy. 310 BNP Transition Short Basket
However, the current investment approach remains diverse and backward- MSCI World ACWI
280
looking, with several indices presenting a bias towards certain S&P 500
sectors/factors. 250
Stoxx Europe 600
220
Our long/short Transition basket offers exposure to companies we view are
190
better positioned to shine in a transition towards a low-carbon economy,
while remaining sector neutral. In an environment with regulation and 160
guidance from multinational groups, combined with technological shifts and 130
increased public concern over carbon footprints, we think companies will
100
have to adapt quickly and be prepared for the fourth industrial revolution.
70
Sector focus: The long/short Transition basket is sector neutral and, 2014 2015 2016 2017 2018 2019 2020
therefore, the sector weights are a simple average of the sector profiles of Sources: Bloomberg, BNP Paribas. Past results are not indicative of future
performance, which may be better or worse than prior results. Baskets are for
the S&P 500 and the Stoxx Europe 600. reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions.
Link to note: The ESG basket for a changing world, published on 10 March 2020.
Change, %
Screening criteria Basket (EUR)
20Q2 20Q1 19Q4 19Q3 19Q2
Transition long basket: High exposure to low-carbon technologies, actively BNP Transition Long 13.8% -14.0% 8.6% 4.1% 9.0%
transforming business practices to be more environmental friendly, lower BNP Transition Short 11.9% -31.5% 4.0% 2.6% -0.3%
GHG/revenue carbon intensity than competitors, low controversy exposure. Rel. Perf 1.9% 17.5% 4.6% 1.6% 9.3%
SXXP 8.0% -22.5% 6.2% 2.7% 3.5%
Transition short basket: Exposure to low-carbon technologies, static business SPX 15.3% -17.7% 5.9% 6.0% 3.0%
practices with legacy ties to fossil fuel, higher GHG/Rev carbon intensity than MSCI World ACWI 12.9% -19.4% 5.9% 4.3% 2.5%
competitors, high controversy exposure. Sources: Bloomberg, BNP Paribas.
Edmund Shing, PhD, Global Head of Equity Derivatives Strategy | BNP Paribas London Branch, Ankit Gheedia, CFA, Equity and Derivatives Strategist | BNP Paribas London Branch
5Transition long/short baskets: BNPPGLT1/BNPPGST1
Exponential flows into ESG funds BNPP Transition baskets 12m fwd P/E valuation
The transition basket is sector neutral Factor exposure of the RV trade
Transition Transition MSCI World
Sector Rel. Leverage DivYld
Long Short ACWI
Grow th 2% 1%
Financials 17% 12% 5% 21% 7%
Information Technology 16% 13% 3% 17%
Value Country
8% 31%
Utilities 5% 5% 0% 3%
Communication Services 7% 7% 0% 9% Currency
Health Care 12% 12% 0% 12% 11%
Consumer Staples 10% 10% 0% 9%
Real Estate 3% 4% -1% 0%
Consumer Discretionary 9% 9% -1% 11% Industry
Materials 6% 7% -1% 5% 11%
Energy 5% 7% -2% 5%
Momentum
Industrials 12% 14% -3% 8% 29%
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future performance, which may be better or worse than prior results. Baskets are for reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions
Edmund Shing, PhD, Global Head of Equity Derivatives Strategy | BNP Paribas London Branch, Ankit Gheedia, CFA, Equity and Derivatives Strategist | BNP Paribas London Branch
6Global Recovery basket
Exposure to companies with strong balance sheets, high profit margins, secular growth characteristics
BNPPGLR1 and low operating leverage.
Strategy View Performance (rebased to 100)
The shape of recovery: The form of the eventual recovery is almost as
important as the timing. We believe an L-shaped recovery is the most likely
scenario, in which the current crisis results in some permanent loss of
employment and defaults in the SME sector that prove a longer-lasting drag
on consumption. As a result, we believe companies with a strong balance
sheet and a robust earnings model could offer the best risk reward profile to
position for recovery.
In addition to the global basket, regional baskets are also available:
BNPPGLR1 Index (Global), BNPPUSR1 Index (US) and BNPPEUR1 Index
(Europe).
Link to note, Equities – Keep Calm and Recover, published on 15 April 2020.
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future
Screening criteria performance, which may be better or worse than prior results. Baskets are for
reference purposes only. Baskets can be obtained by an OTC derivative by
Keep calm and recover: Our BNP Paribas global recovery basket (BNPPGLR1 appropriately sophisticated institutions.
Index) avoids travel and leisure stocks, which we view are likely to take longer to
Change, %
recover, and selects companies with strong balance sheets, high profit margins, Basket
secular growth characteristics and low operating leverage. In our view, these 20Q2 20Q1 19Q4 19Q3 19Q2
companies will be the first to benefit from a FOMO market rally. BNPP Global Recovery 18.7% -16.0% 13.0% 0.4% 4.0%
MSCI World 12.1% -21.3% 9.1% 0.1% 3.8%
Rel Perf 6.6% 5.3% 4.0% 0.3% 0.2%
Sources: Bloomberg, BNP Paribas.
Ankit Gheedia, CFA, Equity and Derivatives Strategist | BNP Paribas London Branch
7Recovery basket: BNPPGLR1
Different recovery scenarios BNPP Global Recovery basket vs. MSCI World (ratio, rebased)
BNPP Global Recovery sector breakdown BNPP Global Recovery 12m fwd P/E valuation
BNPP Global
Sector MSCI World Diff
Recovery basket
Materials 13% 5% 8%
Communication Services 12% 9% 3%
Consumer Discretionary 13% 10% 3%
Industrials 9% 8% 2%
Financials 19% 19% 0%
Energy 2% 4% -2%
Health Care 11% 13% -2%
Utilities 1% 4% -3%
Consumer Staples 7% 10% -3%
Information Technology 13% 17% -4%
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future performance, which may be better or worse than prior results. Baskets are for reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions
Ankit Gheedia, CFA, Equity and Derivatives Strategist | BNP Paribas London Branch
8Gaming basket
BNPPGAMG A basket that offers exposure to the growing gaming industry.
Strategy View Performance (rebased to 100)
Our BNP Paribas gaming basket offers exposure to the sharp increase in
demand for home entertainment. The basket has broader and more
balanced exposure than its peers, focusing on online gaming targeting
traditional video game makers, but also hardware component makers (eg,
graphics cards) and media companies involved in staging eSports
tournaments.
The recent crisis has rapidly accelerated the demand for home
entertainment. Unlike many sectors, gaming firms have seen their earnings
rise since early 2020, as lockdowns have forced people to find home-based
ways to spend their time.
We expect this demand to continue to rise as remote working and reduced
travel become a regular feature of global lifestyles.
Link to note, Equities – Gaming the system, published on 26 May 2020.
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future
performance, which may be better or worse than prior results. Baskets are for
reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions.
Screening criteria
Change, %
The BNP Paribas Gaming basket offers global exposure to the growing gaming
Basket
20Q2 20Q1 19Q4 19Q3 19Q2
industry. Exposure is achieved via direct exposure to game developer stocks, BNPPGAMG 25.8% -1.5% 10.1% 7.1% 4.5%
such as Nintendo and EA, and indirect exposure to the gaming market
MSCI World 12.8% -20.9% 8.7% 0.7% 4.2%
(NVIDIA). The basket includes 48 equally weighted stocks, with average daily
volume based weighting for small caps. MSCI World Tech 20.5% -13.1% 14.1% 2.4% 6.0%
Sources: Bloomberg, BNP Paribas.
.
Edmund Shing, PhD, Global Head of Equity Derivatives Strategy | BNP Paribas London Branch, Ankit Gheedia, CFA, Equity and Derivatives Strategist | BNP Paribas London Branch
9Gaming basket: BNPPGAMG
Videogame revenue continues to grow Weight overlap vs gaming ETFs
Country breakdown Sector breakdown
BNPP Gaming MSCI ACWI BNPP Gaming MSCI ACWI
Country Diff Sub-sector Diff
basket Tech basket Tech
CHINA 15% 1% 14% Interactive Home
70% 0% 70%
Entertainment
JAPAN 18% 5% 14% Semiconductors 9% 17% -8%
SOUTH KOREA 17% 3% 13% Application Software 0% 10% -10%
TAIWAN 18% 5% 13% Technology Hardware,
10% 21% -11%
Storage
OTHERS 14% 10% 4%
Systems Software 0% 19% -19%
UNITED STATES 19% 77% -58% Others 11% 33% -22%
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future performance, which may be better or worse than prior results. Baskets are for reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions
Edmund Shing, PhD, Global Head of Equity Derivatives Strategy | BNP Paribas London Branch, Ankit Gheedia, CFA, Equity and Derivatives Strategist | BNP Paribas London Branch
10Artificial Intelligence basket
BNPPGAI1 A basket of companies based on outsized exposure to artificial intelligence growth trend.
Strategy view Performance (rebased to 100)
Heavy technology bias: Clearly, given the technological nature of the
underlying theme, it is practically impossible to avoid a heavy technology bias
in the resulting stock selection for this AI basket.
Semiconductor equipment and chipmakers: Nine of the 26 companies are
based in the global semiconductor industry, a sector that has traditionally
been very cyclical and relatively volatile.
Internet, software & IT services: Another nine companies are drawn from
these technology subsectors, gradually integrating AI software components
into their key internet or software platforms.
Link to original note, Artificial Intelligence: Entering the Knowledge Age,
published on 20 March 2018.
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future
performance, which may be better or worse than prior results. Baskets are for
Screening criteria reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions.
This AI custom basket is a selection of 26 global companies that were picked Change, %
for their outsized exposure to the artificial intelligence growth trend and were Basket
20Q2 20Q1 19Q4 19Q3 19Q2
drawn principally from the following key technology subsectors: hardware
(semiconductor equipment makers, logic and sensor chips, robotics), software BNPPGAI1 16.1% -13.2% 11.3% 5.6% 5.4%
(enterprise software) and other sectors (information data vendors, electronic MSCI World 12.4% -20.9% 8.7% 0.7% 4.2%
payment). MSCI World Tech 19.6% -13.1% 14.1% 2.4% 6.0%
Sources: Bloomberg, BNP Paribas.
Edmund Shing, PhD, Global Head of Equity Derivatives Strategy | BNP Paribas London Branch
11Artificial Intelligence basket: BNPPGAI1
Sector breakdown Country exposure
Note weights are when the baskets went live.
BNPP Artificial Intelligence 12m fwd P/E valuation Year-to-date alpha contribution by sector
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future performance, which may be better or worse than prior results. Baskets are for reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions
Edmund Shing, PhD, Global Head of Equity Derivatives Strategy | BNP Paribas London Branch
12EU late-cycle long/short baskets
Baskets that are more bond-like / high leverage and low-margin companies in late stage of the
BNPPELCL/BNPPELCS economic cycle.
Strategy view Performance (rebased to 100)
During the record equity market correction in March, the BNP Paribas late
cycle long/short basket continued to provide a good hedge for equity beta
exposure.
We expect the downward pressure from Covid-19 on markets and
corporate earnings to keep nervous investors overweight in bond-like
equities, at least in the near term.
We expect to see markets differentiate between relative winners and
losers in coming months, and the BNP Paribas end-of-cycle long/short
basket is one way to position for this differentiation in the current
environment.
Link to note: Late in the game, published on 25 June, 2019.
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future
Screening criteria performance, which may be better or worse than prior results. Baskets are for
reference purposes only. Baskets can be obtained by an OTC derivative by
BNP Paribas European long late-cycle basket: Low number of employees appropriately sophisticated institutions.
relative to net income; low ratio of net debt to net income; high net margin; high Change, %
correlation with the 10y Bund; and average daily volume above EUR10mn. Basket
20Q2 20Q1 19Q4 19Q3 19Q2
BNP Paribas European short late-cycle basket: High number of employees Late Cycle Long 13.4% -12.4% 8.6% 3.4% 2.4%
relative to revenue; high ratio of net debt to net income; low net margin; low Late Cycle Short 13.4% -33.3% 8.7% -0.2% 9.5%
correlation with 10y Bund; and average daily volume below EUR10mn. Rel Perf 0.1% 20.8% -0.1% 3.7% -7.0%
SXXP 8.0% -22.5% 6.2% 2.7% 3.5%
Sources: Bloomberg, BNP Paribas
Ankit Gheedia, CFA, Equity and Derivatives Strategist | BNP Paribas London Branch
13EU late-cycle L/S: BNPPELCL/BNPPELCS
Sector weights Long basket appears to have better profitability
Europe EOC Europe EOC
Sector Rel. SXXP
Long Short
Real Estate 18% 0% 18% 5%
Health Care 24% 10% 14% 9%
ConsStaples 10% 0% 10% 8%
Technology 14% 8% 6% 5%
Utilities 10% 2% 8% 5%
Energy 2% 2% 0% 4%
Telecom 4% 6% -2% 7%
ConsDiscr 10% 24% -14% 11%
Materials 2% 18% -16% 9%
Industrials 6% 30% -24% 20%
Note weights are when the baskets went live.
Year-to-date alpha contribution by sector RV trade negatively correlated with sovereigns during the rally
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future performance, which may be better or worse than prior results. Baskets are for reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions
Ankit Gheedia, CFA, Equity and Derivatives Strategist | BNP Paribas London Branch
14EU quality at a reasonable price (QARP) basket
BNPPBUY5 A basket of cash-rich eurozone companies likely to increase shareholder redemption.
Strategy view Performance (rebased to 100)
We expect the recent liquidity injection by global central banks to
favour BNP Paribas’ QARP strategy.
Alpha generated by the QARP basket is less dependent on the sector
tilts of the basket’s versus benchmarks. The latest version of our QARP
basket has the same sector weighting as the benchmark (Eurostoxx
excluding financials).
We believe QARP companies with high free cash flow and low leverage
could be better positioned in Europe, in light of the current disruption.
Long BNP Paribas QARP basket is one of our preferred market rebound
trades for investors looking to position for the market rebound.
Link to note: Stripping QARP down to the essentials, published on 12 March
2019.
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future
performance, which may be better or worse than prior results. Baskets are for
Screening criteria reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions.
The screening methodology of our QARP basket focuses on cash
Change, %
creation and retention. Basket
20Q1 19Q4 19Q3 19Q2 19Q1
The basket comprises liquid eurozone equities with a net debt-to-equity ratio BNPP Buyback 5 11.2% -22.8% 7.2% 1.2% 0.0%
of less than 75%, a pay-out ratio of less than 50% and a free cash flow yield SX5NFE 7.4% -22.6% 4.7% 3.4% 6.8%
(FCFY) > dividend yield (DY).
MXEUQU 9.5% -15.4% 7.6% 3.0% 5.0%
Sources: Bloomberg, BNP Paribas.
Ankit Gheedia, CFA, Equity and Derivatives Strategist | BNP Paribas London Branch
15EU QARP: BNPPBUY5
Use of cash from BNP Paribas QARP members in 2019 Sector exposure
Note weights are when the baskets went live.
BNP Paribas’ QARP strategy outperformed all mono factors The basket trades at a discount
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future performance, which may be better or worse than prior results. Baskets are for reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions.
Ankit Gheedia, CFA, Equity and Derivatives Strategist | BNP Paribas London Branch
16EU high leverage basket
BNPPEHL1 Short our EU high leverage basket.
Strategy view Performance (rebased to 100)
Balance sheets to be the new factor: The current economic disruption due
to Covid-19 makes high leverage companies vulnerable to credit downgrades
and higher default risk.
With a backdrop of rising credit yields, this squeeze has started. And we
expect investors to differentiate between companies with high cash burn rate
during disrupted economic reality against companies with less impacted by
current crisis.
While highly leveraged companies can suffer from flight to quality, after
the beta correction we believe investors will focus on higher quality
companies to position for equity rebound in the near term. We haven’t seen
this basket underperform in the market correction, which could change in the
near future.
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future
performance, which may be better or worse than prior results. Baskets are for
Screening criteria reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions.
Criteria: We built a thematic basket of 30 high leverage European companies
with a combination of a BBB credit rating or below, high net debt/EBITDA ratio, Change, %
Basket
higher than average bankruptcy risk, and that are rated 'neutral' or 'sell' bottom up 20Q2 20Q1 19Q4 19Q3 19Q2
by analysts. Investors who agree with our view that highly leveraged companies BNPPEHL1 8.8% -28.0% 2.3% 8.3% 2.6%
are likely to underperform may consider shorting this basket.
SX5E 5.3% -25.3% 5.2% 3.1% 6.1%
Sources: Bloomberg, BNP Paribas.
Edmund Shing, PhD, Global Head of Equity Derivatives Strategy | BNP Paribas London Branch
17EU high leverage basket: BNPPEHL1
Sector breakdown Country exposure
Cons.
Discretionary
Energy SWEDEN BELGIUM
3% 4% 4%
3%
NETHERLANDS 4% SPAIN
Tech 3% 21%
Cons. Staples 3% SWITZERLAND 3%
Communication
Materials Serv ices FINLAND
14% 34% 7%
FRANCE
7%
BRITAIN
18%
ITALY
Utilities 14%
20%
Industrials GERMANY
20% 18%
Note weights are when the baskets went live.
Basket trading around benchmark levels Year-to-date alpha contribution by sector
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future performance, which may be better or worse than prior results. Baskets are for reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions
Edmund Shing, PhD, Global Head of Equity Derivatives Strategy | BNP Paribas London Branch
18EU high ROCE basket
BNPPEHR1 A basket of stocks currently delivering high profitability.
Strategy view Performance (rebased to 100)
Quality factor, a long-term winner: We expect corporate profitability to
be a key indicator of the winners and losers in 2020.
In Europe, the quality smart beta factor has posted impressive absolute
and risk-adjusted returns versus the benchmark STOXX Europe, with
lower drawdowns in bear markets and shorter subsequent times to
recovery.
A possible way to isolate the profitability factor in Europe is via investment
in a custom basket of 30 high ROCE European companies. Backtest
suggest that since 2015, such a strategy could have outperformed not only
the European benchmark, but also the MSCI EU Quality factor index.
Link to original note: Profit Cycle Anatomy, published on 12 June 2019.
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future
performance, which may be better or worse than prior results. Baskets are for
Screening criteria reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions.
Universe: Non-financial stocks in STOXX Europe 600 (SXXP Index). Change, %
Basket
Ranked by return on capital employed (of the past year) and rebalanced on 20Q2 20Q1 19Q4 19Q3 19Q2
an annual basis. BNPPEHR1 12.7% -20.3% 13.6% 2.5% -1.3%
SXXP 6.8% -24.7% 5.4% 2.6% 4.9%
Liquidity: Minimum average daily volume of EUR5mn.
MXEUQU 8.8% -15.4% 7.6% 3.0% 5.0%
Sources: Bloomberg, BNP Paribas.
Edmund Shing, PhD, Global Head of Equity Derivatives Strategy | BNP Paribas London Branch
19EU high ROCE basket: BNPPEHR1
Country breakdown Sector breakdown v. MSCI EU quality index
Note weights are when the baskets went live.
Basket trading at a discount versus MSCI EU quality Year-to-date alpha contribution by sector
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future performance, which may be better or worse than prior results. Baskets are for reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions
Edmund Shing, PhD, Global Head of Equity Derivatives Strategy | BNP Paribas London Branch
20European family-owned basket
BNPPEFO1 A basket that offers exposure to family-owned companies.
Strategy view Performance (rebased to 100)
Family-owned businesses are important to the world economy. They are
responsible for 70-90% of global GDP and account for 50-80% of jobs in most
countries worldwide, according to Family Firm Institute (2017).
We believe family-owned businesses will be more flexible as we come out of
the current crisis and would focus on long-term sustainability of their
businesses rather than short-term equity investor gains, making them prone to
outperform during the equity recovery phase.
Link to original note: We are family, published on 27 September 2018.
Screening criteria
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future
BNPP Family-owned basket screening criteria: performance, which may be better or worse than prior results. Baskets are for
reference purposes only. Baskets can be obtained by an OTC derivative by
Universe: SXXP appropriately sophisticated institutions.
Analyst Rating: Names with the strongest ‘buy’ conviction or ‘hold’ from
analyst ratings. Change, %
Basket
Profitability: Stable or growing EPS/ROE 20Q2 20Q1 19Q4 19Q3 19Q2
Leverage: Altman z-score higher than 2.0, ie, low probability of bankruptcy BNPPEFO1 9.7% -18.6% 5.0% -2.9% 3.8%
SX5E 5.3% -25.3% 5.2% 3.1% 6.1%
Sources: Bloomberg, BNP Paribas.
Ankit Gheedia, CFA, Equity and Derivatives Strategist | BNP Paribas London Branch
21European family-owned basket: BNPPEFO1
Sector breakdown Country exposure
Note weights are when the baskets went live.
European family-owned basket 12m fwd P/E ratio European family-owned basket 12m fwd ROE
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future performance, which may be better or worse than prior results. Baskets are for reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions
Ankit Gheedia, CFA, Equity and Derivatives Strategist | BNP Paribas London Branch
22US end-of-cycle long/short baskets
Long/short baskets of US stocks that we think could out/underperform when faced with late-cycle
BNPUEOCL/BNPUEOCS
margin compression pressure.
Strategy View Performance (ratio, rebased)
A consistent theme we have observed during this equity market correction is
the underperformance of, and rotation out of, what we see as the most
vulnerable of equities. Our highest conviction D1 trade at the start of this year –
our end-of-cycle pair trade, remains our preferred way to capture this dynamic.
Companies that have thin margins, stretched balance sheets, highly correlated
to credit and a large number of employees per unit of revenue, look particularly
poorly positioned. This subset of names has persistently underperformed in the
first chapter of this bear market, and could come under further strain as the
slowdown deepens.
Sector focus: The long/short basket trade is underweight some of the more
cyclical sectors, discretionary and industrials. The baskets as a pair trade are
overweight healthcare, tech and consumer staples.
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future
performance, which may be better or worse than prior results. Baskets are for
Screening criteria reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions.
End-of-cycle long basket: High ratio of net income versus number of
employees, low ratio of net debt to net income, high net profit margins, low Change, %
Basket
correlation to credit (HYG as proxy). 20Q2 20Q1 19Q4 19Q3 19Q2
BNPUEOCL 15.6% -13.2% 9.2% -0.3% 1.4%
End-of-cycle short basket: Low ratio of revenue versus number of employees, BNPUEOCS 18.3% -37.7% 10.2% -2.6% 2.3%
high ratio of net debt to revenue, low net profit margin, high correlation to credit S&P 500 15.0% -20.0% 8.5% 1.2% 3.8%
(HYG as proxy).
Sources: Bloomberg, BNP Paribas.
Greg Boutle, Head of US Equity Derivatives Strategy | BNP Paribas Securities Corp
23US end-of-cycle long/short: BNPUEOCL/BNPUEOCS
Net sector exposure in long/short EOC baskets Median attributes based on the screening criteria
Consumer Staples
Health Care
Net income/ Sales/ Net Net
Information Technology Profit Beta to
Baskets & Index Employee, Employee Debt/Net Debt/Sale
Communication Services Margin HYG
000s , 000s Income s
Utilities
BNPUEOCL Median 168 682 -0.1x 0.0x 25% 2.4
Materials
BNPUEOCS Median 8 268 6.7x 0.5x 3% 3.0
Energy
SPX Median 56 491 2.9x 0.4x 11% 2.4
Consumer Discretionary L/S EOC basket
net exposure
Industrials
-20% -15% -10% -5% 0% 5% 10% 15% 20%
Note weights are when the baskets went live.
Inflation lags growth, a pick-up could put pressure on margins Wage inflation has picked up since 2018
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future performance, which may be better or worse than prior results. Baskets are for reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions
Greg Boutle, Head of US Equity Derivatives Strategy | BNP Paribas Securities Corp
24US Green New Deal basket
A basket of green thematic/clean energy stocks which could benefit from Green New Deal-related
BNPUDGND
policy shifts post the US presidential election.
Strategy View Performance (rebased to 100)
Green New Deal (GND)/energy policy: Almost all Democratic candidates
expressed support or proposed some version of the GND, including Joe
Biden. Sustainable energy stocks could see the largest potential impact
from a GND and be impacted by some of the most important policy shifts in
the case of a Democrat victory in November.
We have put together a custom basket of green/clean energy names that we
think could outperform in the case of a Democrat victory in November.
However, in our view it is also well-positioned regardless of the election
outcome, to benefit from a secular ESG tailwind.
Sector focus: The BNP GND basket is overweight tech, industrials and
utilities, and underweight consumer staples, consumer discretionary,
financials, energy and health care.
Link to note: Election protection: Expect policy-induced US equity volatility,
published on 9 October 2019. Sources: Bloomberg, BNP Paribas. Past results are not indicative of future
performance, which may be better or worse than prior results. Baskets are for
reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions.
Screening criteria
Change, %
The GND basket comprises 25 US names and two Canadian names that Basket
have been selected on: 1) the basis of liquidity, and 2) after screening out 20Q2 20Q1 19Q4 19Q3 19Q2
names with a large short interest or very negative price momentum. BNPUDGND 26.2% -23.3% 6.7% 0.0% 10.6%
SPX 15.0% -20.0% 8.5% 1.2% 3.8%
RTY 16.8% -30.9% 9.5% -2.8% 1.7%
Sources: Bloomberg, BNP Paribas.
Greg Boutle, Head of US Equity Derivatives Strategy | BNP Paribas Securities Corp
25US GND basket: BNPUDGND
Performance of BNPUDGND versus SPX and RTY (ratio, rebased) Net sector exposure in the Green New Deal basket
Real Estate
Materials 2%
5%
Information
Utilities Technology
27% 38%
Industrials
28%
Note weights are when the baskets went live.
BNPUDGND versus SPX 12m forward PE Factor exposure of the US GND basket
0.15x
Beta of relative performance
0.10x
0.05x
vs. m arket
0.00x
-0.05x
-0.10x
-0.15x
-0.20x
-0.25x
Small High-Div Mid cap Value Growth Min-Vol
caps
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future performance, which may be better or worse than prior results. Baskets are for reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions
Greg Boutle, Head of US Equity Derivatives Strategy | BNP Paribas Securities Corp
26US sustainable buyback long/short baskets
BNPUBBKL/BNPUBBKT/
Long/short baskets of US stocks that may have high/low capability to sustain buybacks.
BNPUBBKS
Strategy view Performance (ratio, rebased)
US sustainable buyback long/short baskets: The current economic
environment could call into question the sustainability of many of the
largest share buyback programmes. We have already seen a temporary
suspension by some of the largest US banks. Further pressure could also
come from the November presidential election, with leading Democrat
candidates talking about buybacks during debates.
Our US unsustainable corporate buyback basket consists of names with
very large buyback programmes and high balance-sheet leverage. In our
view, these corporates could significantly underperform, and are most at
risk of having to reduce or completely stop buyback programmes.
Link to notes: Q1 2019 Equity Outlook: A Change of Air, published on 5
December 2018 & Election protection: Expect policy-induced US equity
volatility, published on October 9 2019.
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future
Screening criteria performance, which may be better or worse than prior results. Baskets are for
reference purposes only. Baskets can be obtained by an OTC derivative by
Sustainable buyback basket BNPUBBKT: Consists of names that have appropriately sophisticated institutions.
large buyback programmes, but also low leverage (often net cash). This
basket is tech heavy. We have also constructed a version capping the sector Change, %
Basket
weight at 25%, BNPUBBKL. 20Q2 20Q1 19Q4 19Q3 19Q2
BNPPUBBKL 12.4% -20.7% 12.0% 2.6% -0.1%
Unsustainable buyback basket BNPUBBKS: Consists of names with large BNPPUBBKT 15.6% -25.2% 17.0% 2.2% -0.5%
buyback programmes, that rank negatively in terms of the ratio of BNPPUBBKS 14.4% -38.1% 9.2% 4.8% 4.3%
buybacks/net income and leverage.
Sources: Bloomberg, BNP Paribas
Greg Boutle, Head of US Equity Derivatives Strategy | BNP Paribas Securities Corp
27US sustainable buyback long/short baskets
Recent rally could favour short positions in BNPUBBKS basket Sector weights of short basket
BNPUBBKS
Materials
5%
Consumer
Information Discretionary
Technology 25%
20%
Industrials Consumer
5% Health Care Staples
15% Utilities 10%
Energy 10%
10%
Note: weights are when the baskets went live.
Median attributes of short buyback baskets versus SPX Gap between buyback authorisations and completion
1Y Buybacks %of Net Debt %of Buybacks to Net
Baskets & Index
Market Cap Markeet Cap Income Ratio*
BNPUBBKS 11% 54% 1.4x
SPX 2% 17% 0.4x
*median of companies with positive trailing 12m net income
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future performance, which may be better or worse than prior results. Baskets are for reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions
Greg Boutle, Head of US Equity Derivatives Strategy | BNP Paribas Securities Corp
28Rising tech: BNP Paribas China ATM+ basket
BNPBTECH A basket of the top eight Chinese technology companies listed in Hong Kong.
Strategy view Performance (rebased to 100)
The behavioural shift from the Covid-19 pandemic could be here to
stay: long the China ATM+ basket. To tackle the Covid-19 outbreak and
reduce the risk of virus transmission, China has migrated its work,
education, consumption, and entertainment to various mobile/online
platforms. In our view, the acceleration of 5G deployment, as one of the
fiscal stimulus measures, will further strengthen the appeal of these new
tools by enhancing the hardware ecosystem.
In addition to benefitting from the behavioural changes driven by Covid-19,
we think the allocation of index-tracking passive funds will provide
incremental medium-term support, as we expect three of the eight
constituents of the BNPP ‘ATM+’ China Internet/Consumption basket
to be included in the benchmark HSI and HSCEI indices.
Link to note: China: Impact of W-share inclusion on HSI & HSCEI, published on
19 May, 2020. Sources: Bloomberg, BNP Paribas. Past results are not indicative of future
performance, which may be better or worse than prior results. Baskets are for
reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions.
Screening criteria Change, %
Basket
20Q2 20Q1 19Q4*
To help investors capture the rising appetite for Chinese technology stocks
listed on the HKEX, we have created an equal-weighting basket of the top BNPBTECH 23.6% -6.9% 4.9%
eight technology companies. The acronym ‘ATM’ refers to the top three stocks HSCEI 3.5% -14.1% 6.4%
by market cap (Alibaba, Tencent, and Meituan Dianping). This basket has an KWEB US 16.3% -7.0% 3.6%
estimated liquidity of >USD300mn per day. * Since inception (11 Dec 2019)
Sources: Bloomberg, BNP Paribas.
Jason Lui, CFA, Head of Equity and Derivative Strategy APAC BNP Paribas Hong Kong Branch
29BNP Paribas China ATM+ basket: BNPBTECH
Peak-to-trough performance around Chinese New Year Initial composition of BNP Paribas China ATM+ basket
Mkt Cap 1m ADVT 3m ADVT Basket
Ticker Company
(US$mm) (US$mm) (US$mm) Wgt
9988 HK Equity ALIBABA GROUP HO 542,135 678 678 12.5%
700 HK Equity TENCENT 413,723 678 655 12.5%
3690 HK Equity MEITUAN DIANPI-B 73,967 290 302 12.5%
1810 HK Equity XIAOMI CORP-B 30,280 121 110 12.5%
2382 HK Equity SUNNY OPTICAL 19,378 106 101 12.5%
2018 HK Equity AAC TECHNOLOGIES 9,818 98 92 12.5%
981 HK Equity SMIC 7,251 49 42 12.5%
3888 HK Equity KINGSOFT CORP 3,246 40 32 12.5%
Note: weights are when the baskets went live.
The rise of consumption/tech market cap in the HKEX Southbound investors’ strong appetite for W-shares (USD bn)
Total market cap of companies listed in HK 7
45% Xiaomi
6
Meituan Dianping
40%
5
35% 4
30% 3
25% 2
1
20%
2014 2015 2016 2017 2018 2019 0
Consumption/Tech Financials Others Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20
Sources: WIND, HKEX, Bloomberg, BNP Paribas. Past results are not indicative of future performance, which may be better or worse than prior results. Baskets are for reference purposes only. Baskets can be obtained by an
OTC derivative by appropriately sophisticated institutions.
Jason Lui, CFA, Head of Equity and Derivative Strategy APAC BNP Paribas Hong Kong Branch
30BNP Paribas Japan cash-rich basket
BNPBJPCR Candidates for share buybacks with relatively low credit risks.
Strategy view Performance (rebased to 100)
Cash rich companies generally have more tolerability against recession and
less vulnerability to credit risk. Somewhat surprisingly, massive cash in
balance sheet allows Japanese companies to increase payouts even the
current extreme economic downturn. For cash rich companies, it is a good
opportunity to buy back shares when the stock market is in correction as a
whole. After the financial markets recover, several companies in this basket
are likely to consider buybacks.
We created the BNP Paribas Japan cash-rich basket (BNPBJPCR) to help
investors monetize a potential increase in buybacks. At 2.8%, the total
shareholder return yield for Japanese corporates is still significantly below the
5% level achieved by other DM. Japanese companies will need to conduct
more buybacks to attract and retain global investors as well as to create a
more sophisticated corporate governance system.
Link to note: Japanese buybacks – monetising an acceleration, published on 25
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future
November 2019.
performance, which may be better or worse than prior results. Baskets are for
reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions.
Screening criteria
Change, %
BNPBJPCR: We selected 20 companies with high net-cash balance and high Basket
20Q2 20Q1 19Q4 19Q3 19Q2
free cash flow.
BNPBJPCR 10.0% -12.9% 8.2% 6.8% 2.4%
We estimate that the average liquidity of the BNPBJPCR basket is about TPX 6.5% -17.5% 8.6% 3.4% -2.4%
USD600mn/day.
Sources: Bloomberg, BNP Paribas.
Jason Lui, CFA, Head of Equity and Derivative Strategy APAC BNP Paribas Hong Kong Branch
31BNP Paribas Japan cash-rich basket: BNPBJPCR
Total shareholder return of TSE1 listed companies Global total shareholder returns (%) comparison
25 8.0
20 19.0 6.2
16.0 15.5 16.4 6.0 5.2 4.8 4.8
15 12.8
9.8 4.0
10 2.8 2.8
7.9
2.0
5
0 0.0
FTSE S&P/ASX S&P Stoxx TOPIX Nillei
2012 2013 2014 2015 2016 2017 2018 100 200 500 600 225
Buybacks (trillion yen) Dividend (trillion yen) Buybacks (% of M.cap.) Dividend yield
.
Sources: QUICK, TSE, Bloomberg, BNP Paribas Sources: QUICK, TSE, Bloomberg, BNP Paribas
Price-to-book versus total shareholder returns Sector composition of BNPBJPCR
3.0 Materials, 10% Health Care,
Communication 23%
2.5 S&P 500 Services, 11%
Price to book ratio
2.0
ASX 200
1.5
Nikkei 225 Information
1.0 Topix Technology,
Stoxx 600 FTSE 100 15%
Consumer
0.5 Discretionary,
22%
0.0
0% 1% 2% 3% 4% 5% 6% 7% Industrials, 19%
Total shareholder return (Dividend + Buyback)
Sources: QUICK, TSE, Bloomberg, BNP Paribas Sources: QUICK, TSE, Bloomberg, BNP Paribas
Jason Lui, CFA, Head of Equity and Derivative Strategy APAC BNP Paribas Hong Kong Branch
32Japan 'top' vs 'poor' corporate governance baskets
BNPBJTPG/BNPBJPRG Long/short basket of Japanese companies with top or poor governance.
Strategy view Performance (rebased to 100)
We have created two custom-themed, net-total-return baskets for trading
purposes: the 'Nikkei 225 top governance 20 basket (BNPBJTPG)' and the
'Nikkei 225 poor governance 20 basket (BNPBJPRG)'. Specifically, we
selected 20 companies from the Nikkei 225 with the highest governance
scores in their main respective sectors, and 20 companies with the lowest
governance scores. These two baskets were set to equal-weight (5% per
constituent) as of 28 December 2018 (see Japan: Corporate governance
shows clear progress, published on 26 July 2019 for details).
Over the past six months, the relative ratio of our ‘top' and ‘poor' corporate
governance baskets has generated steady alpha opportunities, both during
the Q4 2019 rally and the recent sell-off.
Link to note: Update on Japan corporate governance reform, published on 23
August 2019.
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future
performance, which may be better or worse than prior results. Baskets are for
reference purposes only. Baskets can be obtained by an OTC derivative by
Screening criteria appropriately sophisticated institutions.
Change, %
BNPBJTPG: We selected 20 companies with the highest governance score in Basket
20Q2 20Q1 19Q4 19Q3 19Q2
their respective sectors, among Nikkei constituents.
BNPBJTRG 6.9% -19.2% 9.6% 4.4% 0.3%
BNPBJPRG: We selected 20 companies with the lowest governance score in BNPBJPRG 1.8% -24.0% 8.7% 3.4% -7.0%
their respective sectors, among Nikkei constituents. TPX 6.5% -17.5% 8.6% 3.4% -2.4%
Sources: Bloomberg, BNP Paribas.
Jason Lui, CFA, Head of Equity and Derivative Strategy APAC BNP Paribas Hong Kong Branch
33Japan 'top' vs 'poor' corporate governance baskets
Providing alpha during Q4 2019 rally and Q1 2020 sell-off Ratio of companies with nominating committees (%)
Note, weights are when the baskets went live.
Appointment of independent outside directors (%) The building blocks of good corporate governance
Composition of board of directors
Composition of shareholders
Capital productivity
Investor relations system
Sources: Bloomberg, BNP Paribas. Past results are not indicative of future performance, which may be better or worse than prior results. Baskets are for reference purposes only. Baskets can be obtained by an OTC derivative by
appropriately sophisticated institutions.
Jason Lui, CFA, Head of Equity and Derivative Strategy APAC BNP Paribas Hong Kong Branch
34CONTACTS Edmund Shing, PhD Global Head of Equity & Derivative Strategy +44 (0) 207 595 8984 edmund.shing@uk.bnpparibas.com Europe Ankit Gheedia, CFA Antoine Deix Andrey Maramzine Equity & Derivative Strategist Equity & Derivative Strategist Senior EQD Delta One Strategist BNP Paribas London Branch BNP Paribas Arbitrage BNP Paribas Arbitrage +44 (0) 207 595 1215 +33 (0) 1 40 14 06 22 +33 (0) 1 55 77 83 69 ankit.gheedia@uk.bnpparibas.com antoine.deix@bnpparibas.com Andrey.maramzine@bnpparibas.com Asia Jason S Lui Naoki IIZUKA Head of APAC Equity & Derivative Strategy Japan Equity Strategist BNP Paribas Hong Kong Branch BNP Paribas Japan Securities +852 2108 5732 +813 6377 1610 jason.s.lui@asia.bnpparibas.com naoki.iizuka@japan.bnpparibas.com US Greg Boutle US Head of Equity & Derivative Strategy BNP Paribas Securities Corp +1 212 841 3950 greg.boutle@us.bnpparibas.com
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The information contained herein is not and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada, the U.S. or any other province or territory nor shall it be deemed to provide investment, tax, accounting or other advice. Transactions involving the product(s) described in this document may involve a high degree of risk and the value of such transactions may be highly volatile. Such risks include, without limitation, risk of adverse or unanticipated market developments, risk of counterparty or issuer default, risk of adverse events involving any underlying reference obligation or entity and risk of illiquidity. In certain transactions, counterparties may lose their entire investment or incur an unlimited loss. The information relating to performance contained in this document is illustrative and no assurance is given that any indicated returns, performance or results will be achieved. Moreover, past performance is not indicative of future results. Information herein is believed reliable but BNPP and its affiliates do not warrant or guarantee its completeness or accuracy. All information, terms and pricing set forth herein reflect our judgment at the date and time hereof and are subject to change without notice. In the event that we were to enter into a transaction with you, we will do so as principal (and not as agent or in any other capacity, including, without limitation, as your fiduciary, advisor or otherwise). Only in the event of a potential transaction will an offering document be prepared, in which case, you should refer to the prospectus or offering document relating to the above potential transaction which includes important information, including risk factors that relate to an investment in the product(s) described herein. | DATA WATCH 29/05/2020 36
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