Well it would appear that the press, so in essence the analysts will, are wising up to the growing issues in China and are starting to make a more informed approached to the defaults. Yes its good for any economy where defaults are naturally occurring however it also has certain indications that "contradict" the growth within the economy as a whole.
Further clarification of the contra-indicators of growth are state chinese companies that are already announcing between 2-7% reduction in Capital expenditure; admittedly they have more of a global presence. The knock on issues will not be the end of the sector, but lets face it, contrary to the assertions made by Chinese officials on growth, their earnings/profitability have declined for 5 years, contrary to the presses statements about 7 plus years. What it does suggest is that expansion is likely to have tapered off. The defaults are in-line with these declines and as such, there has to be better assessment of the risks when issuing bonds. This "risk off" approach is likely to see a contraction in certain companies as they fail to raise fresh finance at a sensible level. How Solar bonds and real estate bonds/loans were priced so low in the market that had so much reliance on the state. The Capitalisation of economies is clearly going to have a significant issue.
The press have well documented the Iron Ore issues, albeit the price appears to be holding up better than I expected in the very short-term. The one thing that has kept the price up is the changes last year that allowed the trading of Futures, making swaps not so dominant for the Chinese market. Figures vary on what is % China is consuming, but immaterial of market as China is at least accountable for 50% of seaborne, it comes as no surprise the price has dropped as futures have become more traded. (Common-sense)
The Chinese Iron Ore / Steel market is likely to be driven by Construction Industry as the season starts for planned projects. So one will be looking over the next 8 weeks for price changes in iron ore for the predictable October delivery. This is likely to be peak demand, so in essence, will indicate how strong the markets are and what likely stimulus the Chinese are going to put into the economy. If its as envisaged, it does not bode well with the surplus...
On the micro level, Centamin have come in ahead of consensus and with Russia's/Crimea's/Ukraine's issues it may bode well for the retail contingent that expect a sky rocket. The Geo-political environment appears to be settling in Egypt. Perhaps all the Egyptians a looking for the plane as well? Or Crimea?
Centamin Egypt (CEY) have come in on the money, but based on earnings, forecasts and the like, one does not hold out for a dividend. So for that reason, Centamin, for myself at least does not present as having sufficient upside to hold or long. Albeit the figures do enable holders to take comfort that save for the legal issues and Ampella Holders selling, any shorts would be hard pressed to make more than a few points.
Kentz Corporation Full Year Financial Results 2013 are yet again cooking on gas and ahead of market. I wonder if this will flush out the suitor to offer a more appropriate valuation. The Valerus Field Solutions has been a well-recieved acquisition, the darling of the market over coming months I wonder. What afterall could go wrong?:-)
Ormonde Mining plc Tungsten Offtake Agreement with Noble Group for Barruecopardo should enable the finance to go ahead, albeit, in the interim any upwards movement for me is an opportunity to reduce.
The positive for the rental sector, landlords and slumlords alike is the Bovis deal today with Private Rental Sector Deals. You'd think this deal would impact on property returns. It's likely rental income will increase as there will be less availability for parties to buy. Albeit, why one would buy on a new estate/development, when the yields are higher on older property.
The trader in me, is watching Premier Foods for some decent volumes and an additional 500M shares some will look to exit at a small profit...roll on volatility.
Atb Fraser
Fraser- yes a nice morning for you with plenty of news coming out.
ReplyDeleteCEY did look in line for me, but its still fragile given the overhang of that much deferred court case and despite the v low costs of prod here and my small long, I wont add until the legal matter clears (as it should). They have a good asset and they have done well with it overall, the latest expansion being on costs and time too.
ABM have finally confirmed what we all know- no buyers will pick it up in its current form, the debt holders are in control and the shareholders have had so many warnings and plenty of time to exit, hopefully.
VLS (Im long but have top sliced) have signed what could be a significant piece of business with 3 big boys- Waste Management don't suffer fools gladly and they have picked VLS from several similar plays as partners. I suspect the VLS stake will in the JV will be low (poss 10% or lower) but the importance is the route it opens to commercial roll outs of what could be a v profitable venture. Early days though, as these disruptive techs take loads of time to get past pilots and into full production. QFI are a v good example of the timescales majors need to assess and implement. Anyone investing in this type of company needs to be v patient, as the timeframes are driven by the bigger parties and are almost always slower than one would hope.
Cheers. The Leggie