China is the single most important factor for commodities
This week’s headlines • Bottom position for Scandinavian Airlines • Tesla to recall 90000 cars • The Renminbi is gaining ground • Chinese zinc producers reduce Output
WEEK 48
China is the world’s second largest economy and has contributed greatly to global economic growth. With Chinas rise came a commodity boom that took some commodities to unprecedented heights. In 2011 the price of iron ore had risen to 190 dollars per metric ton, compared to 12 dollar per metric ton in 2000. China is by far the largest consumer of commodities like coal, aluminum, nickel, copper, zinc, lead and therefore these commodities have become extremely dependent on how fast the Chinese economy grows. However, since 2011 China’s economy has slowed down resulting in falling commodity prices. This in turn has put a lot of financial pressure on mining companies, who are seeing revenue streams dry up. The falling commodity prices creates uncertainty regarding the health of the Chinese economy, especially considering that Chinese demand represent 30-‐50% of global demand for many commodities. Investors searching for bargains are increasingly turning to the commodity sector. However, anybody investing in mining companies or steel manufactures has to answer a very difficult question; will Chinese demand increase or decrease in the coming years? It is almost impossible to have opinion on any commodity business without including an analysis of Chinese future demand. The gigantic construction boom in China, lead by slogans like; “if we build it, they will come”, drove the commodity boom forward and created demand for almost every metal. China`s construction boom peaked in 2011 and at the same time most commodities peaked as well. Between 2011 and 2013 China used more cement than the United States used between 1901-‐2000. Chinese demand created the boom in commodity prices and now the boom has turned to bust, but the apartments and cities in China remain. Nobody should count on any “China dependent” commodity
reaching the previous record levels in 2011, because no single demand factor can replace the massive construction boom in China prior to 2015. China could possibly embark on a new construction boom, but that would be foolish considering the apartment supply glut currently in China.
Sweden Bottom position for Scandinavian Airlines Home service companies have already noticed the coming changes in the RUT and ROT deduction, which is going to make it more expensive to hire construction workers, maids and people of similar occupations. Many customers have frozen their RUT purchases to gain maximum advantage of the ROT dedication before the tax level is lowered. The deduction limit for RUT services and the fact that more services are pressed into RUT prevents growth in the home service industry, Eva-‐Karin Dahl, CEO for Homemaids, mentioned to Swedish Enterprise. She does not understand the government's decision in the situation that prevails. ‘The new, more restrictive spending limits for RUT services will only lead to a redistribution of jobs.’ her statement went further to say. Elsewhere, ICCTS announced that SAS airline has the second worst fuel efficiency among the major transatlantic airlines. Their survey research question seeked to establish the fuel consumption rate per passenger kilometer travelled, across the Atlantic. The list was topped by Norwegian, followed by Air Berlin, while the bottom positions went to British Airways followed by SAS and Lufthansa. In total, the three companies at the bottom represented 20 percent of the available passenger kilometers, and used 44 to 51 percent more fuel per passenger kilometer than Norwegian. "It is surprising that there are such large differences in fuel efficiency between airlines that fly across the Atlantic. The airline you are flying with and the aircraft they use plays a major role if you care about the environment, "said Dan Rutherford, one of the report's authors in a press release.
Stocks Tesla to recall 90 000 cars After finding a defective seat belt in one of their Model-‐S cars sold in Europe, Tesla is now recalling 90 000 cars to make sure no other Model-‐S have a similar installation problem. This was announced to customers via email on Friday. Tesla share which opened Friday at 221$ tanked on the news, hitting 214$ but later recuperated, closing Friday at 220$ a share. Following word of the recall, Swedish seat belt supplier Autoliv went out in a statement and distanced itself from the issue saying that the Model-‐S is not equipped with their seat belts. General market resilience to bad news seems high right now. Global stock indexes, after an initial sell-‐off triggered by the events in Paris, have shrugged off the recent rise in terrorist threat. The Nasdaq rallied on the back of Amazon and Alphabet (formerly Google) and closed Friday 3.6 percent higher than it opened on Monday, thereby almost regaining all of the previous week’s decline. Another major company that did well last week was Nike, as they announced what investors saw as a trifecta of reasons to buy the stock. Nike reported a dividend increase of 14%, a massive share buyback program and a stock split and got awarded handsomely by investors, rising 8 percent on the week. After initially reaching a high of 20 on the back of the events taking place in France, the VIX index (measuring expected future volatility in the S&P) is down to 15.47. The volatility index is still somewhat elevated, but compared with August when VIX spiked to 40, it’s clear to see that the stock markets have calmed down substantially since the late summer. But even though the increased geopolitical risk doesn’t seem to have affected general valuations, we note that the global security firm Securitas is up almost 10% on the week and 30% on the month.
Bonds and Forex The Renminbi is gaining ground "The Renminbi meets the requirements to be a 'freely usable' currency and, accordingly, the staff proposes that the executive board should decide to include it in the SDR basket as a fifth currency." Christine Lagarde, IMF´s Managing Director, said in a statement dated November 13th. The Renminbi will finally join the club of reserve currencies, with the decision expected to be finalized next Monday. The Chinese government over the last few years has introduced financial reforms to loosen government control, and in so doing, has made its currency a more viable option for the global market. Being included in the basket seems to be the blooming cusp of the current Chinese monetary policy arc. China is likely to reap numerous benefits from this decision including a more stable currency and economy going forward. Perhaps dreams of enjoying a standing as something akin to an Asian USD have been dreamt a few times over at the Beijing, Peoples bank. But as with other things in Asia, there is tough competition to be found in their Japanese counterparts. At the moment the Japanese Yen is the third most traded currency in the world, after the US dollar and the Euro. In this respect the Renminbi is lagging behind. Japanese macro figures have been weak for a long time. An aging population, low inflation, poor consumption and Japanese exports do not seem to yield increases, despite the currently weak Yen. These factors have resulted in yet another recession and as such a bearish to go to catch up with the other reserve currencies, it may very well find it easier than anticipated to gain ground at the moment.
Commodities Chinese zinc producers reduce Output Commodity prices were a mixed bag during Friday´s trade. The brightest star was zinc, which had a great surge after it was reported that the ten biggest Chinese zinc producers are interested in reducing the supply of zinc. According to a statement on the Shanghai based consult firm SMM´s webpage, the producers plan is to reduce their output by over 500 000 metric tons a year. Oil had a calm Friday until new statistics on American supply were announced, and the price took a leap upwards. For the first time in many weeks, statistics showed that American supply had decreased during the week. As a result, the market closed with a 1,5 per cent surge to 44, 15 dollars in the Brent oil and a 0,3 per cent decline to 39, 39 in the WTI-‐ oil. Michael Lynch at Strategic and Economic research, was not however all too optimistic about the surge. In an interview with Bloomberg news he expressed that it will take quite an effort to make the oil prices fall even lower than they are at the moment.
Indian Investor Makes Nordic Mines Stock Skyrocket. Nordic Mines (NOMI), the Nordic mining-‐ and exploration company announced on Monday the 16th of November that a new main owner has stepped in as a buyer of last week’s equity issuance which was directed to existing stock owners. The new industrial main owner is the holding company Lau Su Holding AB which has announced that it will invest approximately 47 million SEK, thereby Lau Su now owns 61.5 per cent of the stocks in the company. Lau Su is a consortium of investors with history in the Indian gold market. As a result of the new owner, NOMI has had a turbulent week on the market, rising more than 400 per cent and being amongst the 15 most traded stocks on the Stockholm Stock Exchange. According to the CEO of Nordic Mines, Eva Kaijser, the new capital will enable Nordic Mines to keep its Finnish mine, Laivagruvan, and pay off much of its larger debts. Lucara Diamond Makes Biggest Finding in 100 years As we wrote last week, the Africa-‐based diamond mining company Lucara Diamond (LUC) had a special sale on the 12th of November that did not meet the markets expectations. This week has been quite the opposite. On the 18th of November the company announced that it has found a staggering 1,111 carat diamond in the Karowe Mine in Botswana. The stone is the second biggest in the world and is the biggest to be found in over 100 years. This is huge for Lucara since a diamond of this magnitude has never been sold in modern time. They followed up the grand diamond with another two diamonds of white character on the 19th on 813 and 314 carats respectively. Due to this week’s findings the stock has been traded up almost 50 per cent and got buy-‐recommendations from both RBC and Swedbank. myFC joins together with ABB myFC has initiated a collaboration with ABB’s new YuMi robot technology. YuMi robots will produce the powercards for myFC’s new fuel cell charger, JAQ, and with this collaboration, myFC will build their first factory in Sweden. myFC’s JAQ is the world’s smallest charger which uses
environmentally friendly fuel cell technology to generate electricity instantly for smartphones and tablets. JAQ helps users to charge their batteries without depending on an electrical socket. Björn Westerholm, CEO at myFC comments: “the reason we are now initiating cooperation with ABB and the new YuMi robots is so that we can control the whole fuel production while at the same time become location independent. This is why we are placing the first production facility in Sweden so that we can make sure that the whole assembly and production is 100% green using only renewable energy. The automation also means that we bring down the production cost for the card” Christian Berner Tech Trade is preparing for new listing The board of Christian Berner Tech Trade has decided that the company will apply to be listed on Nasdaq Stockholm, Small Cap. The company is currently registered at First North and the switch is intended to create better opportunities for growth and expansion. Christian Berner has been listed on First North since October 2014 and the company is aiming at trading on Nasdaq Small Cap after mid-‐2016. CEO Bo Söderqvist sees the change as an opportunity to grow in the whole Nordic market and to reach more investors. He also perceives the new listing as the next natural step for Christian Berner in their expansion strategy as this will increase public knowledge of the company and solidify their position on the market. Christian Berner’s specializes in technical solutions that lowers cost and reduces the global footprint for its clients. MACRO EVENTS WEEK 48 Monday: Germany: Markit Manufacturing PMI Flash NOV Euro Area: Markit Manufacturing PMI Flash NOV, Eurogroup meeting Russia: GDP YoY OCT United States: Chicago Fed National Activity Index OCT Markit Manufacturing PMI Flash NOV, Existing Home Sales MoM OCT
Tuesday: Japan: Nikkei Manufacturing PMI Flash NOV Finland: PPI YoY OCT and Unemployment Rate OCT Germany: GDP Growth Rate YoY Final Q3 France: Business Confidence NOV United States: Corporate Profits QoQ Prel Q3, GDP Price Index QoQ 2nd Est Q3 and GDP Growth Rate QoQ 2nd Est Q3 Wednesday: Sweden: Business Confidence NOV, Consumer Confidence NOV, PPI MoM OCT and PPI YoY OCT Euro Area: Financial Stability Review Great Britain: Government Autumn Forecasts United States: Durable Goods Orders MoM OCT, Personal Income. MoM OCT, Personal Spending MoM OCT New Home Sales MoM OCT. Thursday: Sweden: Balance of Trade OCT and Household Lending Growth YoY OCT. Euro Area: M3 Money Supply YoY OCT and Loan Growth YoY OCT. Friday: Japan: Core Inflation Rate YoY OCT, Inflation Rate YoY OCT and Unemployment Rate OCT. Great Britain: Consumer Confidence NOV Euro Area: Business Confidence NOV and Economic Sentiment NOV
SPOT PRICES and one week change OMXS30 1 521,87 +3,09% NASDAQ 5 104,92 +3.61% S&P – 500 2 089,17 +3,26% DAX 30 11 119,83 +3,84% NIKKEI 19 879,81 +1,44% HANG SENG 22 754,72 +1,72% Gold spot 1076,80 -‐0,64% Crude Oil (Brent) 44,44 -‐2,96% USD/SEK 8,719 +0,46% EUR/USD 1,065 -‐1,39% WRITERS
v Tomas Nylén
v David Ingman
v Carl Dalerstedt
v Mark Thiong’o
v Matilda Andersson
v Emma Egnell
v Olof Svanemur Technical analysts
v Carl Becht
v Daniel Rosengren
OMX Stockholm 30
OMXS30 has been trading in a primary uptrend since 2009. Recently the stock has tested the bottom of the trend channel at two occasions, most recently at 1369 points. If the stock was to close beneath this trend channel it would be very bearish and indicate a trend reversal. Currently there are many buyers present at levels beneath 1500 points and the stock is closing in on the roof of the middle-‐long trend channel. If it would break this resistance line with accompanied high volume it would indicate we are to test previous highs at 1700 points. RSI is neutral but the MACD line is about to cross the signal line from beneath which would be very bullish. A stop loss could be placed beneath the support line 1458 points. We are technically positive to the index in the short-‐term, somewhat positive in the middle-‐long term and positive in the long-‐term perspective.
Christian Berners B
Christian Berners stock price has developed very favourably lately, and we have seen a steeper upturn since the stock broke up from the trend channel on October 28. We have also seen a reverse and go formation which has formed a support level around 13.7 SEK. After this the stock has peaked at 15.8 while we can ensure a weaker momentum and less volume the past few days. This together with the red marubozo candle stick from Friday's trading gives many indications that we can get a continued rebound down towards support at 13.7 SEK. Stop loss suggested to somewhere around 13.2 SEK. We are at present technically negative in the short term and technically positive in the long term.
Ambia Trading
Ambia Trading Group has been trading in a downtrend since November last year. It created both a double bottom formation and a double top formation which is contradictive but the sellers won the fight. However, the subsequent volume of the breakout was low which indicates a false breakout. The stock traded downwards to the levels indicated by the double top formation and seemingly found a bottom at 9 SEK. Currently the stock is trading in a rectangle formation. RSI shows that the stock is somewhat overbought and the MACD line is closing in on the signal-‐line from above which could trigger a sell-‐signal. A stop loss could be placed beneath the support line at 12.6 SEK, or a less tight stop loss could be beneath 9 SEK. We are technically negative to the stock in the short-‐term, somewhat positive in the middle-‐long term and negative in the long-‐term.
Nordic camping
Nordic Camping is moving inside a long-‐term positive trend. Nordic Camping has been trading quite aggressively over the whole trend channel range the past month. We have seen a very high volatility and volume after the stock went through resistance level at 22.6 SEK. This means that the stock price could swing in a wide rage the coming period of time. MACD is at a high level and is on its way down, which may be an indicator for fall in the stock price. We would suggest a tight stop loss just below 22.6 at present. We are technically neutral in the short term and technically positive in the long term.
Doxa AB
DOXA AB has recently broken the upward trend channel on the downside, the stock had been traded in the positive trend since it reached a low of 0.86 SEK in October 2014. The stock is at present traded in a low volatile and slightly negative rectangle formation with decreased volume. This can result in a greater movement in both directions out of the formation in the near future. Also the MACD indicator has had a calm and downward development and provides no direct guidance in this case. Stop loss suggested to just below 1.50 SEK in a slightly longer perspective. We are in in the long run technical negative to Doxa and also in the short term we have a negative view.
Unlimited travel Group
Unlimited Travel Group has been trading in an uptrend. After a breakout from a rectangle formation on the upside the stock hit the resistance level 25.4 SEK, where sellers returned and took over. The stock has since then been trading closer and closer to the bottom of the trend channel. Right now the stock is using the floor of the trend channel as a support line. If the stock would close beneath the trend channel with accompanied high volume it would indicate a trend reversal. RSI shows that the stock is oversold, however the MACD line is closing in on the signal-‐line which it crossed would be very bullish. Stop loss could be placed beneath the support line 18 SEK. We are technically positive to the stock in the short-‐term, somewhat positive in the middle-‐long term and positive in the long term.