China lit a fire under Asian markets last night which has carried over to European market this morning. Local media reports began surfacing that the Chinese government is looking to increase spending on infrastructure projects to utilize the excess production of many building materials including steel, cement and most importantly labor. Apparently the government wants to keep economic growth above 7%, so now that we know this we should file it away. It is not a number that can be used as a benchmark forever, but it is a benchmark that the market can use for the next 1-3 years as a floor.
India is having some troubles and the decline in the Rupee tells the story. It is something we have been watching over the past few weeks but honestly thought that the situation would have resolved itself by now. Apparently the world's largest democracy is even more dysfunctional than our government here in the U.S. The situation is starting to get worse (see story here), with officials very aware that they do not want to sound any warning bells and doing their best not to at this moment out of fear of creating an even larger problem. Right now it appears that state owned banks and other companies will issue U.S. dollar denominated bonds (euro bonds!) in order to bridge the account deficit and help with the currency situation, but we also bet that the country's citizens living abroad come to the rescue once again.
Chart of the Day:
This two year chart highlights the strong support which was broken. The move since May of this year has been big, and almost unheard of when discussing economies the size of India.
Source: Yahoo Finance
We have economic news due out today and it is as follows:
- FHFA Housing Price Index (9:00 a.m. EST): N/A
Asian markets finished higher today:
- All Ordinaries -- up 0.24%
- Shanghai Composite -- up 1.95%
- Nikkei 225 -- up 0.82%
- NZSE 50 -- up 0.58%
- Seoul Composite -- up 1.27%
In Europe, markets are trading higher as well this morning:
- CAC 40 -- up 0.24%
- DAX -- up 0.12%
- FTSE 100 -- up 0.21%
- OSE -- up 0.12%
Last week we highlighted DuPont (DD) as one of the types of stocks that inflowing capital was gravitating towards. With the company reporting earnings this morning we only feel it proper to keep readers up-to-date on the story as the company had some very interesting news. First, for the quarter DuPont reported profits which beat by $0.01 but saw sales which were weak (official press release is located here). One can hardly be surprised by this as Corporate America's cost cutting has improved the bottom line as the top line growth continues to stagnate. The big news though was the company simultaneously announcing along with their earnings that they are exploring either the sale of or a spin-off of their performance chemicals (i.e., the paint pigments) business (press release located here). The segment is about a fifth of overall sales and generates solid cash flow, however it is a highly cyclical business and prone large swings in operating results. The company would shift its focus towards its other segments (food, energy and security) for future growth. A spin-off would probably create the most value for shareholders, especially if DuPont was able to shift some extra debt onto the books to leave it with the financial muscle to quickly build up its other businesses to replace those lost revenues.
Last time we talked about America Movil (AMX) the company's share price was in free fall after the Mexican government positioned itself to go after the monopoly that Carlos Slim has enjoyed within that country's borders. Lost on many is that Mr. Slim's companies hold stakes in many other companies and that is why the mobile telecom deals in Europe caught our eye this morning. The New York Times reports (see story here) that KPN will sell E-Plus to Spain's Telefonica (TEF) which will combine the unit with its O2 Germany, as Germany's smaller number three and four operators team up to take on T-Mobile Germany and Vodafone (VOD).
The stock is still not back to levels seen prior to Mexico's anti-monopoly announcement and we question whether this move by KPN helps America Movil's case.
Source: Yahoo Finance
If you are trying to find the link within all of those companies, it is KPN. Mr. Slim's America Movil owns almost a third of the company's shares and has two board seats at the company yet KPN still moved to sell E-Plus to a competitor which is arguably America Movil's main nemesis in Latin America. Maybe the goal is to force Telefonica to focus upon Germany and the required network improvements over there and attack some of their larger markets in South America. We do not know, but it is very interesting that Mr. Slim was a seller as opposed to a buyer here, and even more interesting who he was a seller to.
Shares in Biocryst Pharmaceuticals (BCRX) continued their run yesterday as shares rose $1.26 (51.22%) to close at $3.72/share on abnormally high volume of 15.5 million shares. As we reported yesterday the company released good results from a Phase I study, which the company further discussed in a conference call yesterday (transcript available here). This morning the company announced that Fred Cohen, of TPG, will be joining the company's Board of Directors (see press release located here).
The stock broke through the $3/share level easily yesterday and is approaching its yearly highs as well as two year highs. We would expect some profit taking soon.
Source: Yahoo Finance
With the big caps in the sector turning in awful numbers thus far the smaller names in tech sure look like the place to be right now. Adding to this thinking are the moves some of the larger names have been making lately as it pertains to investments in their pipelines, product offerings and main businesses. Google's announcement that they were making an investment in Himax Technologies' (HIMX) display unit, Himax Display which will be used in Google's new product Google Glass. Himax's stock has been one of the better performers this year and turned in another good day yesterday on the back of this news as shares closed at $6.74/share after rising $1.57/share, or just over 30% with volume hitting 38.6 million shares. Barron's has an interesting summation of the events from yesterday which is not behind a pay wall and can be accessed via this link. Long-term we could see Google make an outright buy of the company if others do not develop technology to off-set them as Google has not been afraid to invest (either in house or by venturing outside) in actual hardware and/or parts that power their growing empire over the past few years (think Android, Motorola, etc).
This is an impressive chart and reminds us of many of the charts for companies which have become suppliers for big tech companies and their gear over the years. Yes the company has sold ownership stakes in arguably its most valuable asset, but there is still plenty of opportunity for investors to make money here.
Source: Yahoo Finance
The solar stocks saw increased interest once again yesterday as there were some positive news pieces announced early in the morning. ReneSola Ltd. (SOL) announced yesterday that they would be supplying 63 megawatts of PV modules for a project in Thailand this year which got investors excited (press release located here). Shares rose $0.48, or nearly 13%, to close at $4.20/share on volume of 4.4 million shares on the news from the company as well as news that others in the industry had also secured projects, including one company operating under bankruptcy protection. As much as we hate to say it, yesterday's news in the industry was certainly bullish.
This morning the company announced (press release here) that it has been awarded a credit rating of AAA from China Export & Credit Insurance Corporation, the entity the Chinese hope will rival S&P and Moody's someday. We have always held AAA ratings near and dear, so we take this one with a grain of salt. It is only worth as much as the reputations of the companies involved, so take it as you may.