Yesterday, China Evergrande Group received a liquidation order from a Hong Kong court, which was no major surprise when we consider the company's share price over recent years. China's property crisis continues to unfold, although a market nadir is often plumbed on headline bad news. The collapse of this previous poster child is by far the largest failure in the world's 2nd largest economy's property market, which has witnessed several defaults by developers, aka a falling pack of cards. In the short term, the move by Judge Linda Chan is likely to see some asset sales in a property market lacking liquidity and confidence; the world will be watching closely.
Reporting season, both locally and in the US, has already started to increase volatility on the stock level, with the majority of companies still to face the music, e.g. winners so far include ResMed (RMD) and Kogan (KGN) & losers Dominos (DMP) and Nanosonics (NAN). However, on the index level, we are still targeting a push to fresh highs by the ASX200, now less than 2% away. It's important to reiterate that MM is looking to migrate down the risk curve into such a move, but we are only looking to tweak portfolios as opposed to adopting an outright bearish stance.
Beijing has announced the PBOC will cut the bank's Reserve Requirement Ratio by 0.5% effective the 5th of February, the announcement sent stocks in Hong Kong surging up over 3.5% in rapid fashion, its largest daily gain in four months. The move is aimed at stimulating the economy by relaxing lending restrictions as the banks aren’t required to hold as much cash in reserve, a significant move which frees up about $US140bn. As we know, Beijing is also likely to put “pressure” on the banks to put this money to work, which should help their goal of kick-starting the economy.
The local index triggered a buy signal for MM on Monday when it traded back above 7460, with our ideal target being the 7650-7700 area, suggesting further “risk on” is the order of the day into February. However, it's important to reiterate that while MM is bullish over the coming weeks, we continue to believe the strong advance from late October is maturing, and we intend to migrate portfolios down the risk curve into further strength.
The collapsing nickel price bears a painful resemblance to lithium, both of which are used in EV batteries. However, the surging increase in demand that was anticipated to propel the sector higher has arrived with a relative whimper, while supply has increased unabated from Indonesia in anticipation, with the result being a glut & depressed prices, e.g. the nickel price has halved over the last 12-months. We’re now seeing the likes of Twiggy Forest shutting down Nickel operations his private company Wyloo acquired just six months ago, while BHP is facing similar issues.
Global equities have maintained their bullish advance, which started back in October 2022. There have been plenty of reasons for risk assets to roll over in recent years, from wars to an embattled Chinese economy and surging interest rates, but stocks have continued to rally – plenty of pundits are licking their wounds at the start of 2024. As we often say at MM, a market that can advance on “bad news” is a strong market that should be respected.
We are less than three weeks into 2024, and it's evident that today's market is focusing more on the micro/stock news as opposed to the macro, at least for now. The US NASDAQ registered fresh all-time highs overnight, even as Fed members attempt to rein in the market's optimism with regard to rate cuts in 2024, i.e. a market that rallies on bad news is a strong market. At MM, we have been bullish towards tech for over twelve months, targeting the recent advance by the “magnificent seven.”
Gold stocks have disappointed investors over the last forty-eight hours, with Barrick Gold (GOLD US) and Evolution (EVN) delivering poor production numbers, pushing up unit costs, which unfortunately has been a consistent thematic over recent years. The issues with some of the heavyweight gold stocks have been painfully reflected by their share prices; even as gold tests its all-time high, both GOLD & EVN have more than halved from their post-COVID high – good job, gold hasn’t fallen! MM has been overweight gold through 2023, which has delivered a reasonable return but nothing like our positioning in uranium stocks, illustrating that picking the macro picture is just one part of the puzzle.
The ASX200 fell over -1% on Tuesday, with broad-based selling washing through the market as US S&P500 Futures declined throughout our session – they seemed to get a sniff of what was to come overnight. This year’s news flow is set to be dominated by the US election, and Trump's storming victory in Iowa cemented him as the likely candidate to poll against Biden come November – at this stage, Trump is already a solid favourite with the bookmakers to take his second term in the White House. Hence, in a similar fashion to the Christmas Rally, it's prudent for investors to be aware of the market's usual performance in an election year.
It was interesting to read in the last few days that car rental company Hertz was going to sell 30% of its US electric vehicles (EV), citing higher repair costs and diminishing demand for EVs – they are buying back the dreaded petrol vehicles! The rental giant hasn’t necessarily been a leading light over the last few years, with its shares falling in a bullish market. However, with increasing lithium supply, the commodity doesn’t want to encounter reduced demand for EVs or at least slower growth than is being priced in by markets. To put things into perspective, Hertz bought 100,000 Teslas in 2021, but the US isn’t buying into the EV story and the US accounts for well over 10% of the global car market.
Reporting season, both locally and in the US, has already started to increase volatility on the stock level, with the majority of companies still to face the music, e.g. winners so far include ResMed (RMD) and Kogan (KGN) & losers Dominos (DMP) and Nanosonics (NAN). However, on the index level, we are still targeting a push to fresh highs by the ASX200, now less than 2% away. It's important to reiterate that MM is looking to migrate down the risk curve into such a move, but we are only looking to tweak portfolios as opposed to adopting an outright bearish stance.
Beijing has announced the PBOC will cut the bank's Reserve Requirement Ratio by 0.5% effective the 5th of February, the announcement sent stocks in Hong Kong surging up over 3.5% in rapid fashion, its largest daily gain in four months. The move is aimed at stimulating the economy by relaxing lending restrictions as the banks aren’t required to hold as much cash in reserve, a significant move which frees up about $US140bn. As we know, Beijing is also likely to put “pressure” on the banks to put this money to work, which should help their goal of kick-starting the economy.
The local index triggered a buy signal for MM on Monday when it traded back above 7460, with our ideal target being the 7650-7700 area, suggesting further “risk on” is the order of the day into February. However, it's important to reiterate that while MM is bullish over the coming weeks, we continue to believe the strong advance from late October is maturing, and we intend to migrate portfolios down the risk curve into further strength.
The collapsing nickel price bears a painful resemblance to lithium, both of which are used in EV batteries. However, the surging increase in demand that was anticipated to propel the sector higher has arrived with a relative whimper, while supply has increased unabated from Indonesia in anticipation, with the result being a glut & depressed prices, e.g. the nickel price has halved over the last 12-months. We’re now seeing the likes of Twiggy Forest shutting down Nickel operations his private company Wyloo acquired just six months ago, while BHP is facing similar issues.
Global equities have maintained their bullish advance, which started back in October 2022. There have been plenty of reasons for risk assets to roll over in recent years, from wars to an embattled Chinese economy and surging interest rates, but stocks have continued to rally – plenty of pundits are licking their wounds at the start of 2024. As we often say at MM, a market that can advance on “bad news” is a strong market that should be respected.
We are less than three weeks into 2024, and it's evident that today's market is focusing more on the micro/stock news as opposed to the macro, at least for now. The US NASDAQ registered fresh all-time highs overnight, even as Fed members attempt to rein in the market's optimism with regard to rate cuts in 2024, i.e. a market that rallies on bad news is a strong market. At MM, we have been bullish towards tech for over twelve months, targeting the recent advance by the “magnificent seven.”
Gold stocks have disappointed investors over the last forty-eight hours, with Barrick Gold (GOLD US) and Evolution (EVN) delivering poor production numbers, pushing up unit costs, which unfortunately has been a consistent thematic over recent years. The issues with some of the heavyweight gold stocks have been painfully reflected by their share prices; even as gold tests its all-time high, both GOLD & EVN have more than halved from their post-COVID high – good job, gold hasn’t fallen! MM has been overweight gold through 2023, which has delivered a reasonable return but nothing like our positioning in uranium stocks, illustrating that picking the macro picture is just one part of the puzzle.
The ASX200 fell over -1% on Tuesday, with broad-based selling washing through the market as US S&P500 Futures declined throughout our session – they seemed to get a sniff of what was to come overnight. This year’s news flow is set to be dominated by the US election, and Trump's storming victory in Iowa cemented him as the likely candidate to poll against Biden come November – at this stage, Trump is already a solid favourite with the bookmakers to take his second term in the White House. Hence, in a similar fashion to the Christmas Rally, it's prudent for investors to be aware of the market's usual performance in an election year.
It was interesting to read in the last few days that car rental company Hertz was going to sell 30% of its US electric vehicles (EV), citing higher repair costs and diminishing demand for EVs – they are buying back the dreaded petrol vehicles! The rental giant hasn’t necessarily been a leading light over the last few years, with its shares falling in a bullish market. However, with increasing lithium supply, the commodity doesn’t want to encounter reduced demand for EVs or at least slower growth than is being priced in by markets. To put things into perspective, Hertz bought 100,000 Teslas in 2021, but the US isn’t buying into the EV story and the US accounts for well over 10% of the global car market.
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