Monday, 23 June 2014


John J Hardy at Saxo Bank:

''AUDUSD rally does not sit well with recent development in interest rate spreads. The recent RBA minutes discouraged the notion that the RBA is about to hike rates any time soon, while the US FOMC meeting, while dovish, only saw US rates at the front end of the curve move a few bps lower. Currently, even as AUDUSD is banging on resistance, the 2-year swap spread is near its lowest level since last September at around 226 basis points. The 1,000 day correlation of the spread with AUDUSD is 0.67 while it is a stunning -0.61 for the last 100 days. I doubt if the latter can be sustained for much longer.''

Thursday, 19 June 2014

The Breakout Trader: Mota-Engil Africa

 I am posting another entry from the Blog The Breakout Trader. This entry is about the Construction sector Portuguese Mota-Engil company and its African subsidiary Mota-Engil Africa. The company is preparing a first floatation in the Capital Markets with an IPO in the London Stock Exchange, and The Breakout Trader analyses the share price behaviour in the near term as well as looking to the weeks ahead. For the Portuguese audience please check the link at the bottom. Here it is an English translation:

''Mota-Engil is to proceed with the initial public offering (IPO) of its African subsidiary, which will be listed on the London Stock Exchange.In a statement to the CMVM the construction company announced that this operation will be carried out through two offerings, a "preferential" and other "institutional". Thus, the preferential offer "Mota-Engil Africa allocate new shares to all investors who hold shares of the parent - Mota-Engil SGPS - until tomorrow, 17 June, which is leading to a rush for the purchase of shares Mota-Engil which now rise 4.15%. A parallel run of an institutional offering will happen, which will show the number of shares increase if demand for shares in preferred not cover the entire offer.Investing in Mota-Engil Africa seems to me to be a good alternative for those who want to be exposed to the growth of the African continent. In addition to the shareholder remuneration proposal which is quite generous the company intends to achieve a payout ratio between 50% and 75% and is now guaranteed a cash dividend of 20%, approved by the shareholders of Mota-Engil. Moreover, Mota-Engil Africa will benefit from being listed in an index with greater visibility than the national and aimed more at the construction sector.For shares in Mota-Engil, as already stated in the previous analysis, this separation is rather negative, given the strong impact that billing obtained on the African continent has to the group accounts. Recall that, according to the latest annual report, the activity in Africa accounted for over 40% of the turnover of the parent company.Tomorrow being the last day for the purchase of shares entitled to participate in the IPO, I believe that the shares of Mota-Engil can continue to value in tomorrow's session. After that, we are witnessing a correction in the titles, because we are close to the resistance given by the annual maximum € 6.25 / € 6.40.

The Breakout Trader: Amanhã será o último dia com direito a participaçã...: A Mota-Engil vai avançar com a oferta pública inicial (IPO) da sua subsidiária africana, que passará estar a cotada na bolsa de Londre...

Monday, 16 June 2014

Equity Europe Case

Here today a post on the European Equity Markets Investment case. Dan McCrum at the Financial Times Alphaville with an entry where he comments on the Citi Bank latest Equity report about European Markets and the likely consequences of the recent announcement of ECB's Mario Draghi extraordinary measures. There's a growing expectation, on the positive side about the effects of these measures. Before a major correction.... which might be triggered in the other side of Atlantic Ocean... an European version of Quantitative Easing is becoming highly probable.

We can get a bit of the sentiment of the Citi researchers reading passages like these:

''So says the still optimistic Jonathan Stubbs at Citi, at least. Halfway through the year and the strategy team budge not from their forecast: 20 per cent total return from European equities this year.
''Shares are no longer cheap in absolute terms, but we stay bullish due to: 1) progressive global economic recovery in 2014-15, 2) return to double-digit earnings growth in 2014-16E, 3) super-cheap relative valuations, eg vs credit, 4) rising risk appetite, eg M&A, demand for equity. ECB QE later this year should also be supportive.''
 The sector valuation decomposition is strickingly important, as the consensus is that valuations aren't cheap, as the chart below (... as well as the above) seems to make clear:

''Indeed, the focus list of the bank’s analysts’ 15 to 20 favourite stocks is striking for its inclusion of a few insurers and banks, alongside the target rich environment of pharmaceutical takeover candidates and industrial recovery plays (click to enlarge).''

Wednesday, 11 June 2014

EDPR - Renewable shake down

Today's research note about the Portuguese company EDP Renováveis. Goldman Sachs in a latest research note cuts the price target for the company from a period of three years starting at 2016 (2016-2018). The business paper Jornal de Negócios had access to the American Investment Bank research note, which I reproduce here a translated version with a link to the original Portuguese site.

'' "Our estimates of earnings per share for 2016-2018 were cut by 16%, 15% and 14%," says the analyst Manuel Losa in the analysis note.

"Our target price is based on a combination of 50:50 assessing the sum of its parts, from 4.90 euros, and assessing multiple of EV / EBITDA [enterprise value to EBITDA ratio] of 5.40 euros" , the note explains. The evaluation of the sum of the parts "includes € 1.7 billion of sales to a premium of 30% over the review"  of the investment house, which is "in line with the history of EDP Renewables".

The investment house said that, on the side of "positive" risks are higher than sales to an assessment by the Goldman Sachs bonus. Have the opposite side is the "new government intervention", as well as sales at lower than the rated value.

The shares of the company led by Manso Neto following losing 0.50% to 5.333 euro

Monday, 9 June 2014

Collective Pensions.

In the advanced Investment world there isn't an issue with cutting pensions when costs are high, and the sharing of risks between generations is properly handled.

Tuesday, 3 June 2014

The Breakout Trader: a post on AUDNZD

I will post today a translated version of an entry in the Portuguese Blog The Breakout Trader by trader Nuno Mello. If you want to check the original please follow the link bellow the text.

 ''During the night , the RBA decided to keep the interest rate unchanged
at 2.50% and maintain its neutral position, supported by the fact that
the inflation projection for the next two years , remain stable at 2-3 %.
Data about current account,
higher than expected (Acts AUD -5.7 bn vs Exp CHF -7 million) also helped boost the AUD.

follow with particular interest , the pair AUDUSD but once lateralizes
within a descending channel ( lying at this point exactly halfway
between the lower and upper limit ), I decided to look for other pairs
with AUD.
The AUDNZD pair was the pair chosen for my analysis today.
Now everyone knows my pessimistic view regarding NZD. Technically AUDNZD is a very interesting situation, having activated a head-and- shoulders reversed last Thursday.
This pattern took nearly six months to form and its theoretical target is quite ambitious : 380 pips. In
my opinion the AUDNZD has the potential to go test at least the level
of 61.8 % fibo of descent moves that began in late October last year and
finished in January this year'' 

The Breakout Trader: AUDNZD....