TOL @ August 26, 2018
Time to buy Tencent ?
Tencent has corrected from HK$480 to about HK$320 recently. That's a one-third drop in about 5 months.
So will it continue to drop further or has it hit Support at about $320?
Intuitively, I think that the selling is a bit overdone.
The reason given ere:-
1. Gaming Revenue is weak as the new regulators have not been approving new games for the past few months.
2. Some of their Investments are not doing that well eg. China Literature, Tesla (3rd largest position, US$1.5b at US$220) etc
3. Tenpay transactions are no longer that strong
4. Tencent is losing market share in the Social Media space.
On the positive side:-
1. Valuation is not streched ( Forward PE30, Revenue 30%, Margins 30%)
2. 1b Active Monthly Users
3. 1m Mini-Programs
4. Invested in 600 companies; Constant stream of IPOs
I'm vested in Tencent and the following are my notes:-
viewtopic.php?f=41&t=7579&start=200
On the horizon, we have the following:-
1. CMOC Board Meeting on Aug 27
2. Decision on Rusal at end of August
3. Congress hearing on US-China Trade War at end August
4. New Money From New Month of Sept
As expected, China mentioned that the US-China Trade War will not be resolved before the Mid-Term elections. Therefore, the share markets of EM will probably be choppy until November.
Market Risk Indicators
1. Euphoria: 6 (Low: 1; High: 10) - FAANNG, ETFs; Margin Debts; SWFs; Central Banks; Fund Flows;
2. Credit Problems: 7 (Very Good: 1; Very Bad: 10) - Housing, Subprime Auto; Student Loans; Credit Cards; Junk Bonds
3. Recession: 7 (Strong Economy: 1; Depression: 10) - GDP; Taxes; PMI; Housing; Auto; Retail; NAFTA; Trade War; 2019?
4. Liquidity: 7 (Very Liquid: 1; Tight 10) - QE (Feds, ECB, BOJ, PBOC); Interest Rates; Rotation (Bonds); Asset Shrinkage 2018?;
5. Inverted Yield: 8 (Low Inversion: 1; High Inversion: 10) - Rising Interest Rates; Slope; Inversion; US 10 Years < US 2 Years; Expecting 2019 to 2020
6. Valuation; 8 (Safe 1: PE15; Danger 10: PE30) - PE S&P 24, Nadsaq 26; Revenue; USD; Tax Reform; Deregulation
7. Geopolitical Issues: 7 (Peaceful: 1; War: 10) - NKorea; Syria; Iran; Qatar, Afghanistan; South China Sea; Europe; Venezuela; Russia
Total: 50 out of 70 (71%); (Safe: 50%; Danger: 80%)
Commodities: Risk-On (Data from Commodities Live)
1. WTI Oil - Higher. US$68.54 from US$65.89 last week from US$67.78 two weeks ago; Support: US$58; US$34; Resistance: US$75, US$105
a. Rebalancing in 3Q 2018?
b. Stockpiles: 2.5b barrels;
c. US SPR: 679m barrels (33 days); To sell 190m over 8 years.
d. US imports 8m bpd (Total Demand of India and Japan combined)
e. US: Capex: US$1t; > 4000 "Drilled but Uncompleted" (DUC) Wells?
f. US: Active rigs currently at 1057 vs 316 in May 2016
g. China (4th largest producer; largest importer) - Reserve life: 10 to 6 years
h. China: Ban on Petrolchemical Cars in 5-10 years ? Quotas?
i. IEA: Lowest amount of new discoveries in 2016; Supply shortage in 2020?
j. Saudi Aramco's IPO 2019?; Incentive to push prices up; Saudi -200k bpd
k. China: SPR reached 51/90 days; 2018 Imports to decrease?
l. Libya: -850k bpd; Brazil +200k bpd; Canada +200k bpd; Nigeria -300k bpd; Iraq +500k bpd; Kurdistan -350k bpd; US +1m bpd (2019); Russia +200k
m. US Fracking: +0.5m bpd US$60; +1m bpd US$70; +1m bpd 2018
n. Venezeula: -1.2m bpd; Worst Case -2m bpd supply (50% cut by 2020)?
o. Trade Wars will reduce demand for Oil?
p. Iran: -700k bpd; On sanctions: -1m bpd?
q. IEA expects oil prices to dip in 2H as Shale Supply increases
r. OPEC cut 1.8m bpd; Increasing 1m bpd in 2H 2018? +0.5m in 2019?
viewtopic.php?f=33&t=7550&start=210
2. Gold - Higher. US$1212 from US$1191 from US$1219
Support: $1150; $1050; Resistance: $1400
a. Global 33,000 tons; US 8000t; China 5000t; IMF 3000t; Germany 3000t
b. Electronics, Coins, Central Banks Reserve, Jewellery etc.
c. 250 oz of paper contract for every oz of physical gold holding on Comex?
d. Output fell by 100 metric tons (3%), from 3,150 in 2015 to 3,050 in 2016
e. Demand increasing in Muslim countries as Gold is now a halal investment
f. Rising USD & Interest Rates, would not be good for gold
g. Gold only occupies 0.03% of US investments. In 1981, it was 8%
h: India Demand: Since 2010, down each year. 2017 (700t); 2020 (900t)
i. China Demand: Since 2013, decreased 33% from 940t to 630t last year
j. Global Demand: 1Q 2018: -7%; US & European ETFs buyers; China weak
k. Central Banks: +20% yoy; Strong Russian buying
l. U.S. government holds 261.5m ounces at book value of US$42m
m. China: Reserves 160m oz; 400m oz ground; Output decreased 6% yoy
n. US: Reserve 260m oz
viewtopic.php?f=33&t=7589&p=202084#p202084
3. Silver - Flat. US$14.79 from US$14.78 from US$15.31
a. Support: US$16.10; US$15.20; Resistance: US$18.50; High: US$49
b. LED chips, Cell Phones, Nuclear Reactors, Photography, Solar Panels, RFID Chips, Semiconductors, Water Purification, Data Storage, Antibacterial products, Silver Coins, Jewelery
c. Demand: 1.2b ounces in 2015;
d. Supply: 0.9b ounces in 2015.
e. 4th year of deficit
f. 35% (7700 metric tons) for Electronics
g. 25% (5500 metric tons) for Bullions & Coins
h. India imports more Silver than the US
i. JPM has 67m ounces
j. High Gold/Siver Ratio: 50 t0 70; Currently 76, 50% higher than average
k, Production declining
l. Demand: 40% Investments / Speculation; 60% Industrial
m. About 1b ounces stored in China; 1 Year Production
n. How will US tariffs on Solar Panels affect silver prices?
viewtopic.php?f=33&t=7589&p=202084#p202084
4. Platinum - Flat; US$791 from US$789 from US$829
a. 28% for jewelry
b. 42% for diesel catalytic converters
c. Remainder for other industrial applications
d. Huge discount to Gold
e. Sixth year of deficit
f. 10 times more gold than platinum
g. Costlier to mine than gold as located deeper
h. Diesel cars losing market share
i. Strong demand from vehicles destroyed by Hurricanes (1m cars)
5. Zinc - Higher; US$2533 from US$2380 from US$2540
a. Global Demand: +14% pa for past 4 years
b. Supply: 13.7 tons; Supply Deficit 1.2m tons;
b. Breakpoint: High US$4400 (2007); Low $1600 (Jan 2016)
d. Used to prevent rusting, zinc oxide (paints), brass (copper), coins, fertilizer
e. Zinc inventories at the LME have dropped to their lowest level since 2009
f. Vehicle: DB Base Metal (Zinc, Aluminum & Copper)
viewtopic.php?f=33&t=367&start=208.
6. Copper - Higher; US$2.69 from US$2.66 from US$2.75
a. Higher inventories at LME
b. China - 50% of global consumption
c. China - Lower Power Grid demand
viewtopic.php?f=33&t=5598&p=215285#p215285
7. Aluminium - Higher; US$2093 from US$2034 from US$2093
a. Sanctions on Rusal has removed 7% of world's supply
8. Uranium - Flat; US$26.10 from US$26.00 from US$26.00
a. Breakeven: US$40 per lb
b. Range: $20 (2005) to $136 (2008); 580% rise in two years
c. Global Supply: 158m lbs pa; 15% from decommisioned weapons
d. Global Demand: 190m lbs pa to 300m lbs pa (2030)
e. Stockpile: 1b lbs (till 2022?) ; Companies normally store 5 years supply
f. Japanese Demand: 3m lbs pa; Starting 21/54 reactors? Currently, only 9
g. No. of Nuclear plants: +8 pa for next 20 yrs, 440 to 595; Current 452
h. 56 new reactors being built; 481 planned;
i. China: 35 existing plants; Building 21; To build 177 more?
j. India: 22 existing nuclear plants; Building 5; To build 64 more?
k. 25% long-term contracts expiring in 2017-18; 75% between 2017-25
l. 200 European nuclear reactors will be shut down over the next 25 years
m. France: Reduce nuclear to 50% from 75% by 2025 and closure of 20
n. Long term contracts being locked at US$40, twice spot rates
o. Kazakhtan reducing supply by 10% (40% of global production)
p. Competition: Natural Gas, Solar, Wind, Wave etc
q. US: Nuclear - 20% of electricity; 99/447 Plants; 25% drop by 2025; Two Year Moratorium on Closure
r. Supply: 50k tons; Demand: 68k tons; 2k tons enriched for weapons
s. 1b pounds to be purchased for long-term contracts over next 5-10 years
t. Average reactor needs 600,000 to 700,000 pounds to run for a year
u. US: 100/420 reactors; Importing 95% uranium; Demand 50m lbs pa
v. Uranium from Sea Water; Viable at US$180/kg (US$80/lbs); Timing?
w. Glut at 15m pounds (23 reactors for 1 year)
x. Cameco mothballed McArthur River & Key Lake; 10% world's supply
y. Kazatomprom, world's second largest, cut production by 20% for 3 yrs
z. Russia banning export of Uranium?
8. Cobalt; $29.26 ($64500/t) Aug 23 from $29.26 ($64500/t);
Low $10; High US$43
a. Electric Vehicles (8 kg), Smartphones (8 grams), Jet Engines; Gigafactories
b. Congo: Supplies >50% world's supply; Child Labor?
c. Demand: 8% to 10% pa
d. Shortage: 2022 and beyond
e. Cobalt Reduced EV is 5-10 years away? Musk: Cobalt in Tesla heading to 0;
f. 2018: 1m EVs (10k tonnes); 2027: 27m ( 27m tonnes)
9. If there's a crash, Commodities would not be spared
10. The High USD is not good for Commodities
Equities - Mixed ( Data as of Saturday every week )
1. US Equities - Higher. 2875 from 2850 last week from 2833 two weeks ago
a. Support 2740; 2560; Resistance: 2880; Fwd PE 16
b. No Trade
viewtopic.php?f=11&t=7643&start=200
2. HK Equities - Higher. 27672 from 27213 from 28356
a. Support: 26900; 25400; Resistance: 29200; 31600; 38,000; 43,000
b. Traded Tencent (0700)
c. Traded CMOC (3993)
d. Sold CNOOC (0883)
htttp:/investideas.net/forum/viewtopic.php?f=10&t=7470&start=120
3. Shanghai Equities - Higher. 2729 from 2669 from 2795
a. Support: 2600; 2450; Resistance 3300; 3600
b. No Trade
viewtopic.php?f=10&t=7190&start=210
4. Spore Equities - Flat; 3213 from 3211 from 3285
a. Resistance 3850
b. No Trade
viewtopic.php?f=10&t=6828&start=b110
5. Japan Equities - Higher. 22602 from 22270 from 22298
a. Forward PE 13
b. Resistance 24,000
c. No Trade
viewtopic.php?f=10&t=7138&start=200
6. Malaysian Equities; Higher; 1809 from 1783 from 1806
a. No Trade
viewtopic.php?f=10&t=6292&start=30
Currencies- Risk-Off (Data from XE.com)
1. USD to JPY - JPY Weaker; 111.23 from 110.47 last week from 110.86 two weeks ago
a. 52 week range is 76 to 126
b. Aging Population
c. High Debt Ratio
d. Why is it a Safe Haven ?
viewtopic.php?f=32&t=4205&start=180
2. SGD to MYR - SGD Stronger; 2.9899 from 2.9788 from 2.9834
viewtopic.php?f=32&t=136&start=110
3. AUD to USD - AUD Stronger; 0.7324 from 0.7282 from 0.7303
a. The range is 0.70 (2016) to 1.10 (2011)
b. Commodity Currency
c. I need to diversify my AUD into another currency
viewtopic.php?f=32&t=5256&start=130
4. AUD to SGD - AUD Stronger. 0.9999 from 0.9997 from 1.0016
a. The range is 0.98 (2016) to 1.36 (2012).
b. I would choose the AUD over the SGD
5. AUD to MYR - AUD Stronger. 2.9983 from 2.9891 from 2.9837
a. The range is 2.20 (2008) to 3.41 (2017)
6. EUR to USD - EUR Stronger. 1.1628 from 1.1410 from 1.1448
viewtopic.php?f=32&t=5523&start=100
7. USD to HKD - HKD Weaker. 7.8514 from 7.8497 from 7.8494
a. 52 week range is 7.7452 - 7.8530
b. Will they remove the peg to the USD during the next crisis?
c. Will China ask HK to depeg from the USD?
viewtopic.php?f=32&t=3529&start=40
8. USD to MYR:- MYR Stronger. 4.0931 from 4.1046 from 4.0844
a. 52 Week Range is 3.27 to 4.54
b. Lowest: 4.885 (1998)
viewtopic.php?f=32&t=397&start=60
9. USD to SGD:- SGD Stronger; 1.3655 from 1.3728 from 1.3715
a. High 1.70 (2004); Low 1.20 (2011)
b. Am very uncomfortable holding the currency of a small country
viewtopic.php?f=32&t=136&start=100
10. USD to CNY:- CNY Stronger; 6.8058 from 6.8777 from 6.8505
a. When is the right time to buy some CNY? How?
viewtopic.php?f=32&t=7720&start=90
11. GBP to USD:- GBP Stronger; 1.2839 from 1.2731 from 1.2767
a. Brexit; Politics;
viewtopic.php?f=32&t=333&start=80
12. GBP to MYR:- GBP Stronger; 5.2563 from 5.2249 from 5.2160
13. Dollar Index - USD Weaker. 95.15 from 96.29 from 95.16
viewtopic.php?f=32&t=7616&start=60
Others
Sentiment - Complacent?
Headwinds
i) Derivatives (US$700t);
ii) Debts (US$237t, 318% GDP);
iii) Corporate Debt (US$50t); US Corp Debts (US$6t)
iv) Institutional Investors (US$0.5t)
v) ETFs AUM (US$3.4t)
vi) Bitcoin (US$200b)
vii) US Pension Short-Fall: US$385b
viii) NPLs at European Banks: EUR$1t
ix) China's Bond Market: US$12t (third largest)
Tailwinds
a. Low Interest Rates
b. Cash Sidelines (US$50t)
c. QE US$18t: US (US$4.5t), ECB (US$3.7t), Japan (US$4.4t) & China (US$5.1t)
d. Negative Yield Bonds (US$6t from US$10t)
e. US Foreign Funds Repatriation (US$2.5t)
f. Cash US Corporations (US$1t)
g. Cash Japanese Corporations (US$2t)
h. Buybacks: US$120b 2Q, 2017 (-10% qoq; -6% yoy); US$3.2t since 2009; i. US Household Net Worth (US$90t)
j. EM Consumption
k. Private Client Cash Levels as a % of Total Assets: Record Low (10.4%)
l. Institutional Investors: lowest levels of cash for past 8 years; 1/3 high in 2016
m. Private Equities: US$600b Cash
Risk Management:-
a. Global Diversification
b. Asset Class Diversification
c. Diversity of Industry & Company Exposure
d. Currency Hedging
e. Tactical Asset Allocation
f . Inverse ETFs and Put Warrants
HK Properties
1. Vacancy tax
2. 9000 vacant apartments
3. CLSA, UBS and Citi - Prices may 10% to 15% by end 2019
4. Rising Interest rates
5. Slowing Economy
6. Depreciating Yuan
7. Weak Stock Markets
Spore Properties
1. 60,000 Units of Supply (7 years Supply of 6500 Homes per year )
Yield on 10 Year US Treasuries - Lower; 2.81% from 2.86% last week from 2.87% two weeks ago
a. Low 1.32%; High 3.12%
b. Resistance 3.3%
Yield on 2 Year Treasuries - Higher; 2.62% from 2.61% from 2.60%
Interest Rates:-
a. Expecting US Interest Rates to remain low and will only rise slowly over next 2 years
b. About US$6t or about 15% of the world’s bonds have negative yields
c. Two more US rate hikes in 2018? Two in 2019?
viewtopic.php?f=16&t=7319&start=70
JNK (SPDR Barclays High Yield Bond ETF) - Higher; 36.01 from 35.86 from 35.81
HYG (iShares iBoxx $ High Yid Corp Bond ETF) - Higher; 86.35 from 85.94 from 85.89
Baltic Dry Index - Lower; 1709 from 1720 from 1691; Low 290; High 2330 (2013)
The above is to from help me crystallize my thinking. It's not a recommendation to Buy or Sell. Use the above comments at your own risk and please do feel free to provide me with your kind thoughts and comments
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