Good Morning,
PLUS's RNS was lacking a number of details, namely a trading
update. If the gossip from some alleged recently departed employee is correct,
trading has been significantly lower than expected. As always, there is a bias
with ex-employees, so it’s wise to factor that in a significant degree of BS.
Playtech (PTEC) have ignored the Material Adverse Effects (MAE) and simply
bought the stock. So today' there's the sponsorship
of Atlético Madrid. One assumes in agreement with PTEC?
Brand recognition in Spain? Give over! It’s wise to a)
consider the deal done b) limited upside so why speculate positively c) Look at
PTEC's earnings. Something a few funds may be conducting at the moment. PTEC
should be towards the top of a funds lists of stocks to consider. The same as
Slater and Gordon (ASX: SGH), whom must be near the most shorted stock on
ASX!
With a near 100% increase in shorting activity on the ASX, a
weakening currency and issues with commodities. Australia may be entering
choppy seas, positively this is good as its the main FX trade. Having performed
very well for near two years solid long, but with intra-months/weeks/days
shorts. In the absence of a material change those speculators will be looking
to GBP1: AUD$2.5.
The shorter’s preference appears to be consumer staples,
industrials/transport and energy sectors, although mining and finance are not
exempt. There's been disproportionate increased in retail, industrials and
energy stocks for obvious reasons. The mirror trade appears to be in China as
well, with a similar pattern emerging, especially in light of the
growth/appreciation on the Chinese markets.
It’s no wonder with the Shanghai Stock Exchange Composite
Index (SHCOMP) rising at silly speeds, it has to consolidate at some point. The
trend has been commodities, housing, internet of things and then equities
(long). It certainly looks like the trend is on negative betting/derivatives on
the SCHOMP is now upon it. Where some suggest a more realistic level of 3,500
on the SCHOMP is sustainable, with sensible appreciation, rather than over
inflated stocks.
Although one is wise not to bet against the Chinese
Government. Expect to see "services" being listed as the shift from
manufacturing, moves to services and support type companies. Certainly in light
of the PPP's (Public Private Partnerships). The issues aren't unknown, where a
"Weak Corporate Governance" has necessitated change for a number of
reasons. Not only to shift "some debt" off a municipals balance sheet
but also to improve productivity and create a more logical flow of wealth from
corporate parent to civilians.
China, with its archaic laws and policies relating to
promotion and opportunity are stifling creativity. Its beyond sensibility that
China still operate a level of promotion that is age related, where if
"passed-over", workers may as well spend 20 years getting ready for
retirement. In essence if you miss an age related status-attainment scheduled promotion, the opportunity thereafter is very limited. Save for the comrade
that gets caught with his hand in the till, its likely there will be no further
promotion.
It’s no coincidence that Hu Jintao was considered young at
(near 50) when he came to notoriety being elected to the Politburo Standing
Committee (PSC) and later taking charge of the Secretariat of the Communist
Party of China. At near 50, it raised a few eyebrows.
China needs to evolve, it will do, certainly with the
preferred way forward being PPP's but likewise, expect the herd to follow suit
as the roll out gathers speed. Poor Governance and the increase in peaks and
troughs within sectors is dire for growth, as short-termism sets in. Not only
in construction quality but financial management, where myopia and bonuses will
win the day.
Having sold everything in Amur
Minerals (AMC) and gone short, its starting to make one wonder who is
ascribing a valuation of £120M to AMC. The asset needs a lot of work and does not
appear economic at the prices today.
One has a suspicion that AMC are out with their cap, based
on an unrealistic current valuation, with a logistical nightmare upon them as
well. Even if they can raise that "not-so-insignificant" amount of
cash to develop the project (Kun-Manie PFS).
With a commitment to "pre-production evaluation" to the
Government by 1 December 2020. Its got more downside risk than
anything...you've been warned!
We have first ore for Wolf
Minerals (WLFE). The hard work is paying off, although the share appreciation that
was expected is yet to occur. Perhaps in part due to tin and tungsten
prices, but also a tightly held stock with limited possibilities, save for
production and returns. Dull? Not likely...
Finally, the ESKOM announcements will be unwelcome to most
this morning. Worthy of a read SA
unites against Eskom tariff hike bid and bringing forward the need for
cash for some miners already in the crapper!
Atb Fraser
