Morning Mumble: Italics, Copper, along comes a Chinese Stimulus (iron ore?) and Anglo (In brief).

Good Morning,

It’s been about the busiest time on the markets for as long as one cares to remember, more so the demands of one’s time. 

Not only has Glencore's African copper review (ACR) made specific trades a kin to shooting fish in a barrel, but thanks in part by Freeport-McMoRan’s (NYSE: FCX) copper reduction in copper sales of 150 million pounds per year (for 2),  (Circa 68,038T's per annum). There's an avoidance to say much more on copper, at the moment.

One trader that was sweating when Glencore (GLEN) went significantly below 145, can now have a nap whilst the shorts are forced to close by Glencore's lack of confirmation (Shrewd). Are they? Do they need to? How will it be done? Glencore still eyeing options to raise $2.5bn in new equity (FT). We'll await Glencore's updates. Perhaps after they're done unwinding a few items aided conveniently by the ACR, it will give them some clarity on the balance sheet.

China have come out and acknowledged how bad it is (or how good it is about to get), with an intention to stimulate their way out of this rout, glut or downturn (Reuters). You can read this many ways, depending on how one is allowed to write the news. 

Of course, China's stimulus will be supported by the controls that are being introduced by the China Securities Regulatory Commission (CSR) including the soon-to-be married SHCOMP circuit breaker (CNBC). No mention of the reforms regarding to automatic trading? Or selling for that matter! There's more to this, but we're waiting on clarity on a couple of things before commentating further. With some of the tones suggesting there will be limited selling, ever...some long onlys will like this style!

The stimulus woke the iron ore price and likewise the producers appreciated the gesture, RIO/BLT/FMG and even some Jo'burg (JSE) marginal that have formed an EMC fan club. It’s a bounce and a half, perhaps with over-confidence on certain companies that are far from out of the woods. The low cost producers are viable, it's the "leveraged" higher cost crap that is rising that should raise an eyebrow or two. Perhaps, in answer to certain company directors’ prayers, they are now able to consider raising a few quid?  

As a positive, Fortescue Metals Group’s (ASX: FMG’s) white knights may now just be tempted to pay somewhere near Twiggy’s asking price. Shorts would be wise to note this potential event, with the Australian FIRB (Foreign Investment Review Board) unlikely to find any issues with an infrastructure deal. FMG have little choice but to do conduct a deal soon or risk the surplus over the longer-term weakening their hand.

Andrew ‘Twiggy’ Forrest may dislike the current offer on the table, but any deal circa $2.5B+ back on the balance sheet will give the stock more confidence. BaoSteel (EMC: June BaoSteel) are the likely front runners although, China's Hebei Iron & Steel Group and Tewoo Group (separately), will not discount any such deal.  

Keeping with the tone, Anglo American (AAL) has risen today, on the back of "selling" Rustenburg. Whether it'll be cash, shares or a mix, is immaterial to the market celebrating that AAL have removed a boil on the balance sheet. The carrying value from memory was well over £300M (please check), so there's circa £240M of Tipp-ex required on AAL’s part.

What the market should perhaps pay attention to is Sibanye. This company has in essence been "given" a liability, if one is to believe the value of the deal. Sibanye are obviously confident that they can return the operations to profitability, by the very structure of the deal. However, they won't have lost anywhere near as much as AAL! 

Have AAL sold/flogged or gifted an "asset" away when the PGM sector is starting to look like it may actually bear some modest fruit (FT: Platinum output to be hit by investment cut). 

If Sibanye can return the mine to profitability, it will be a testament to the managements understanding of mining and operations. Sibanye have a very good understanding of legacy assets, with keen eyes. It will obviously raise very sensible questions about whom should be running AAL, in the event of a turnaround. More so, what of the Scoliosis and White-Finger class action suits? Has this liability been passed on with the asset? Or are AAL fully on the hook for $1 billion.  

All for now, noted on Monitise. As a side thought, what's the unit cost for Vedanta (VED) on its iron ore operations?

Atb Fraser

Morning Mumble: SHCOMP/SZCOMP farce. Gold & Silver's weakness despite demand (Same for Commodities) and Amur Minerals (AMC), MONI

Good Morning,

If your house is going to be flooded and some rooms are cut off, you save possessions from the rooms you have access to. The exact same thing is happening on the Chinese markets as a result of further trading halts by companies. Traders or blind speculators are saving what they can, whilst the behemoth type stability funds buy large stocks directly or via ETF. 

FT China steps up efforts to halt stock market rout, and wider market are now reported what was widely known on the trading floor and here. The PBOC (People's Bank of China) funds are being utilised by the China Securities Finance Co. (CSF) (CSFP was previously used here but to keep in line with wider commentary the "P" has been dropped) to buy stocks direct in the market, as well as provide margin liquidity to brokerages. The total sum of the parts is approaching $140B, this should be called another form of QE.

On the one hand you have oil dropping, but perversely PetroChina is breaking ranks and staging a bull-run of legendary proportions. Tacking on near 25% price appreciation as the "stability" band aid funds buy less risky investments. So as a trader, you'd sell anything that isn't being bought and buy what the Government/Funds are buying, or run for the hills? 

With promises of improved margin and the like, the rule of 5% short is near non-existent. Li cannot get a short on for love nor money, with technical problems and various other 'reasons'. The Government is attempting to stop any form of selling, from suspension to undertakings from large brokerages (24 now) not to sell. 

Well some are adhering to the no-sales-agreement, but limited time to explain what is happening on “opening", for which followers should check. Simply, China collectively buys stocks the herd are running to the door with, the likes of Yeast Angel and then post lunch the price tanks as the buyers disappear but it’s not 8% down, only say 4%. That's if the entire market isn't in a trading halt by the end of the week. 

There's a number of brokers that have serious liquidity problems. Some of those were "told off" for excessively lending and rolling over positions only 7 months ago. The gossip is they've blown up (financially a la CHF) because clients are unable to liquidate positions that may have been in profit, because they're suspended and are unable to cover serious losses. Until the brokerages have been able to access emergency margin provisions put in place by the CSF, 'traders' accounts' will remain suspended. Another win for the policy makers, limiting sales!

Yesterday, with safe havens been sort in the west in light of China and the EU boil that needs lancing, Greece. Silver was surprisingly weak, the obvious shall occur for those leveraged silver producers we love to kick on weakness (HOC/FRES). The same for gold, with a modest bounce well below what was expected. 

It looks like American Futures traders have such large positions (short) that any headwind of buying is wiped out. The decimation caused by the over-speculation a few years back, has left the gold market unbalanced. Some traders committed such levels of $ in 2012/13 that the thought of speculating long has left the market void. 

The last time the mint ran out of Silver in November 2014, the price spiked near 20% over three months, the same happened yesterday. The difference being the entire absence of Chinese speculators in commodities, the “bears” will have this market for longer. The Chinese cashed in significant positions this week, no doubt as their margin was squeezed in the equity positions, liquidating positions in Nickel, Silver, Iron Ore, Tin and pretty much all commodities. 

The prime example being Nickel, where the Chinese are happy to accept near physical spot prices, with limited futures trading the price fell through the $5/lb support like a brick. Same for Iron Ore, price setting iron ore outside of the market at $45/t well below the market $49/t. With the usual suspects, Rio Tinto (RIO), BHP Billiton (BLT) and Fortescue Metals Group (FMG) all taking a kicking. 

FMG is entirely absent of any support for obvious reasons, being the higher cost producer of the majors. At AU$1.67 a share the $2 support is but mere history, with $1 a share likely, but wisdom dictates to take profits. One hopes those Atlas Iron holders don't hug this stock through the pain, although riskier for the bears with the possibility of event risk.

For those with a memory on this Wednesday morning, Rio is only 240 pence off the 12 month target of 2200 pence, with most Companies tapering back their assumptions / targets to circa 2800-3000 it may just be still too much. It was Deutsche Bank at 4200 pence at the time that raised a few eyebrows a year ago. That case of wine will be thoroughly enjoy from a good sport whom accepts differing opinions are positive for the market. 

The above a complete validation for conviction short Amur Minerals (AMC). The company is still over-valued on all levels. Admittedly depreciating quicker than anticipated but far from complaining. The project is uneconomic and after yesterdays' fall, and the company is "perhaps" worth cash.  

This nicely brings us on to Monitise (MONI) whom are the unfortunate beneficiary of another selling shareholder. MONI inform us that they have been notified by Visa Europe...that it will reduce its shareholding over time while continuing to work with the Company throughout the duration of its current commercial agreement. Those holders in the stock will be used to a declining SP, so perhaps an opportunity to average down further and then hug the stock? Better still embrace the “2016 profit forecast!” Cash is king, and MONI burn it like no tomorrow and whether its profitable or not in 2016, the positive cashflow may not be! 

Some bizarre events on Aga Rangemaster (AGA) today...more later perhaps. With gossip of the deal being off...surely the company would have updated!?!

Atb Fraser