In today’s briefing:
- MSCI Australia Nov SAIR: Significant Pre-Positioning on the Potential Deletes
- Eagle Cement (EAGLE PM) MTO Open, Closing on 5 December
- Graftech: Operational Issues Plague Thesis
- Copper Long Needs USD to Break Lower
MSCI Australia Nov SAIR: Significant Pre-Positioning on the Potential Deletes
- We see two inclusions and two exclusions for the MSCI Australia Index at the November SAIR. Passive trackers will need to trade between 5-8x ADV on the stocks.
- Cumulative excess volume on the stocks has been increasing steadily over the last few months, indicating a fair amount of pre-positioning.
- Short interest on the potential deletions has spiked over the last couple of months and pre-positioning could be close to (or larger than) the estimated passive selling.
Eagle Cement (EAGLE PM) MTO Open, Closing on 5 December
- The MTO in relation to San Miguel (SMC PM)’s acquisition of 88.50% of Eagle Cement Corp (EAGLE PM)’s shares is open. The MTO will end on 5 December.
- The MTO price is PHP22.02. The net MTO price after deducting the selling charges (0.621% of value) is estimated to be PHP21.8833.
- At the current price and for the 14 December payment, the gross and annualised spread to the net MTO price is 1.8% and 19.2%, respectively.
Graftech: Operational Issues Plague Thesis
- GrafTech International Ltd (EAF US) thesis has taken a turn for the worse with the suspension of the operations in Mexico (impact 50% of production in Q4 2022/H1 2023).
- The negotiations of LTA pricing ( based on spot pricing ) in the near term also prove to be a headwind, with spot prices 40% below the contract.
- At 7.3x PE FY23 (earnings down 60% YoY), the stock price reflects these challenges. The recovery for the company to normalized cash flow levels will take much longer.
Copper Long Needs USD to Break Lower
- Copper’s bull wedge b -wave breakout stands out (high conviction set up) but needs a weaker USD for follow through. China is the wildcard but seems a bit early still.
- Gold trendline and price pivot at 1,700 the key level to clear or will retest the 1,620 triple lows.
- DXY to rally off of 110 support within the triangle range and will see metals pullback. Bigger picture needs a break below 109.50 (bearish) to overlay with metals.
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