Continue active refreshing of this index's data?

Continue active refreshing of this index's data?

ROOF Highlights — July 3, 2023

Qontigo ROOF™ Score Highlights – APAC: July 2023

Global Summary:

Investor sentiment continued to ease last week, settling into the neutral zone ahead of the Q2 2023 earnings reporting season. The only exception was in the US, where investors ended last week bullish, encouraged by the sustained decline in inflation and a resilient economy. Sentiment among global emerging-markets investors continued to decline, ending the week bearish for the first time since April. Meanwhile, investors in China pared down their pessimism about the weakness of the country’s economy, ending the week neutral ahead of expected stimulus measures by the authorities. Overall, the US market continues to present the best case for an extension to the recent rally. The case for Europe is neutral, the one for Japan is weakening, and the one for China will hinge on the largesse of stimulus measures.

For a detailed report on global markets, please visit the ROOF Highlights page.

Note: green background = bullish, red background = bearish

Jump to a specific market

Asia ex-Japan

Investor sentiment in Asia ex-Japan declined sharply from strongly positive at mid-month to neutral on June 30th, erasing all the gains made since early May and holding markets at current levels in the process. Investors’ concerns center on the strength of China’s economy, a worsening of US-China relations, and rising US interest rates. The average traded volume is lower than a year ago, with all sectors seeing lower turnover except Industrials and Utilities. In late April, sentiment was lifted by better-than-feared Q1 earnings, only to later be driven down by unfavorable geopolitics and a weak macro picture. With the start of the Q2 earnings season only two weeks away, company-specific news and forward guidance from CEOs will again dictate the direction of sentiment for the summer. Market risk remains low and has declined since last November, boosting the case for equities in the short term. Any rise in volatility, however, could be a precursor for a market correction if sentiment weakens further.

Jump to a specific market >


Investor sentiment in Australia declined continuously during June, ending neutral and well off its bullish highs reached at the start of the month. Low market volatility and a rebound in commodity prices has kept markets moving sideways since April as investors remained invested but rotated from risk-tolerant sectors into risk-averse ones, preferring the safety of large-cap dividend-paying stocks. As of last week, our short-horizon fundamental factor model has started to predict a higher market risk than the medium-horizon model, indicating that risk is on the rise after seven consecutive months of declining. Additionally, the 20-day rolling average asset pairwise correlation has increased sharply, indicating that investors are once again demanding a macro risk premium for staying in the market. With a stubborn inflation picture, interest rates are likely to rise further and remain elevated for longer-than previously thought, adding more pressure on sentiment.

Jump to a specific market >


Investor sentiment in China failed to hold on to gains made in May and early June, weakening along with the economic picture. Talks of further stimulus from the authorities has so far failed to materialize to investors’ expectations, weighing on sentiment in late June. It was those expectations that had helped sentiment recover to neutral as investors awaited more details. Our short-horizon risk model has predicted a higher risk than our medium-horizon risk model since the beginning of June, putting an end to seven consecutive months of declining volatility. This has also raised some concerns that returns expectations will need to be raised for investors to remain invested if risk increases. The economy was weaker-than-expected in the first half of the year, putting more pressure on the second half. Geopolitical headwinds between the US and China are also adding pressure on the authorities to find ways to stimulate domestic consumption and make up for a declining global trade picture. The current divergence between market returns and sentiment, along with rising volatility and low volumes, could lead to a market correction if investors are once again disappointed by the new stimulus measures.

Jump to a specific market >


Investor sentiment in Japan ended the first half of the year at neutral, after three unsuccessful attempts at turning bullish since November 2022. The bull case for Japan was that volatility has been declining since Q1 2022, volume has been rising since last September across all sectors except Energy, the Bank of Japan remains accommodative, and the yen remains weak. This positive environment supported a 20%+ rally since the start of the year. The bear case for Japan has recently started to attract investors’ attention. Volatility has risen since March, the increase in trading volumes year-to-date has been mostly linked to the realignment of the supply chain for the global technology sector to locations outside China, and the yen may have bottomed out and could well start rising from now on. For now, sentiment has lost its momentum and remains neutral. It will take good news on the earnings front and a halt to the rising volatility for investors to regain the confidence to push valuations higher.

Jump to a specific market >

Charts display changes to investor sentiment over the past 180 days for each market

How to read these charts: The top charts show the ROOF ratio (investor sentiment) in green (left axis), against the cumulative returns of the underlying market in black (right axis). The horizontal red line at -0.5 (left axis) represents the frontier between a negative sentiment (-0.2 to -0.5) and a bearish one (<-0.5), and the horizontal blue line at +0.5 (left axis) represents the frontier between a positive sentiment (+0.2 to +0.5) and a bullish one (>+0.5). Around the horizontal grey line at 0.0 (left axis), sentiment can be considered neutral (-0.2 to +0.2).

The bottom charts show the levels of both risk tolerance (green line) and risk aversion (red line) in the market. These represent investors’ demand and supply for risk. When risk tolerance (green line) is higher than risk aversion (red line), there are more investors looking to buy risk assets then investors willing to sell them (at the current price), forcing risk-tolerant investors to offer a premium to entice more risk-averse counterparts to take the other side of their trade, which drives markets up. The reverse is true when risk aversion (red line) is higher than risk tolerance (green line). The net balance between risk tolerance and risk aversion levels is used to compute the ROOF ratio in the top charts, representing the sentiment of the average investor in the market.

The blue shaded zone between levels 3-4 for both indicators represents a reasonable balance between the supply and demand for risk in the market. Conversely, when both lines are outside of this blue zone, the large imbalance in the demand and supply for risk can lead to an overreaction to unexpected news or risk events.

Back to the top >

For questions or comments about this data, please contact the Qontigo Applied Research team.