In today’s briefing:
- Southern Copper: In a League of Its Own
- Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 28 Jun 2024
- Does Modest Increase in Debt Level of France and Japan Create Problem for Their Economies?
- HEW: Holding Patterns
- Biden’s Catastrophic Debate Likely to Lead to 1968-Repeat; Can It End Differently?
- The Heat Is On: News Flow and Sentiment in HONG KONG
- CX Daily: China’s Popular Plastic Bag Replacement Is Less Green Than It Seems
Southern Copper: In a League of Its Own
- Southern Copper (SCCO US) in the equity space is the best way to play bullish copper long-term with its long-term (10-year) ROCE of >22%
- With low-cost production assets in Peru and Mexico, the company has managed EBITDA margins of> 39% across the cycle (last 15 years) and averaging 50%.
- A 100% payout results in a dividend yield of 3.5%. We believe there is a price for everything, and in the event of a 20% correction, it would be attractive.
Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 28 Jun 2024
- Japanese Yen: The yen has significantly weakened, leading the US to label Japan as a potential currency manipulator; interest rate differentials and potential sales of US Treasuries are key factors.
- Singapore Inflation: Inflation remains high at 3.1%, with historical parallels suggesting potential appreciation of the Singapore dollar by 4-5% if inflation doesn’t fall below 2%.
- US Economic Indicators: Despite perceptions of a strong economy, recent US activity indicators, including manufacturing and services, show persistent weaknesses.
Does Modest Increase in Debt Level of France and Japan Create Problem for Their Economies?
- France and Japan have seen a large increase in total non-financial sector debt/GDP since 2007, though these have been exceeded by China. What are the consequences of this build up?
- Most of the surge in debt/GDP in Japan and 40% in France is due to higher government debt.
- The adverse impact of higher debt and debt servicing on France’s and Japan’s economies should be small given a property crash or anti Euro government are avoided.
HEW: Holding Patterns
- Central banks in Sweden, Mexico, and the Philippines have maintained their rates this week, with EA activity remaining stable according to ESI survey data, and political campaigns nearing their end.
- The upcoming week is expected to be quieter with no significant central bank decisions on the horizon.
- EA inflation data on Tuesday and US payrolls on Friday are the key events to watch, with the latter potentially having a larger impact on global markets.
Biden’s Catastrophic Debate Likely to Lead to 1968-Repeat; Can It End Differently?
- Pres. Biden’s disastrous debate performance (in which he looked senile and cognitively incapacitated) has led Democrats to call on him to step aside in favour of an alternate Democrat nominee.
- In 1968, LBJ stepped aside before most primaries, and VP Humphrey won nomination at the convention. He lost the general mainly because third party candidate Wallace ate into Democrat votes.
- Trump landslide would be inflationary (because of 10% tariffs on all imports, more on China), plus the embarrassment of having a convicted felon as president. Near-term negative for US.
The Heat Is On: News Flow and Sentiment in HONG KONG
- China ETF flows in June continued to show positive momentum while other categories remained flat. Southbound Connect Flows were positive while Northbound Connect recorded a Net Sell.
- Midea Real Estate Holdings jumped on plans to privatize its property development business
- Shanghai Microport fell after launching a share placement at a 15% discount. The share price is hitting all time lows.
CX Daily: China’s Popular Plastic Bag Replacement Is Less Green Than It Seems
- Bags / In Depth: China’s popular plastic bag replacement is less green than it seems Li Jingjing is a firm believer in making use of whatever’s around her.
- Corruption /: Two of China’s former defense ministers expelled from Communist Party
- Personnel /: ‘Big Six’ bank executive looks set to become Everbright Bank’s new president
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