A series of negative surprises on macro data in the world's major economies and a rise in geopolitical tension are playing out in equity markets through a clear uptick in pessimism on cyclical as opposed to defensive stocks. Asia ex-Japan cyclicals have lost 4 per cent of their value from their high in early July and chemicals have had a particularly tough time. Sentiment is now so bad that it might just be about to deliver a contrarian turn, according to Absolute Strategy Research's proprietary sentiment barometer indices of Asia ex-Japan chemical shares. The SBI reading of five as of this week is at a level that, over a 10-year history, has typically triggered a 3 per cent outperformance against the market over the following three months.
