David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Japan is the 'most under-owned stock market on the planet,' and David Rosenberg says buy it

    Thanks to a subscriber for this article from CNBC which may be of interest. Here is a section:

    "The one part of the world which looks very good to me right now, a great turnaround story that's under-owned, is Japan. The Nikkei is breaking out," said Rosenberg said Friday on CNBC's "Trading Nation."

    He added: "I think even a child could see that the 30-year secular downtrend has been broken over the course of the past couple of months."

    The Nikkei 225, Japan's benchmark stock index, has soared nearly ten percent over the past three months. It's now up 15-percent so far this year. But it's still about 56 percent way from its all-time high hit in 1990.

    According to Rosenberg, Japan has one of the few markets that isn't trading expensively to its historical price earnings ratio — noting "almost everybody else in the world is." 
     

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    Video Game Software Industry Primer; Surpassing $100bn in 2017

    Thanks to a subscriber for this report from Bank of America/Merrill Lynch. Here is a section:

    Sony maintaining lead over Microsoft, Nintendo rebounding Sony has enjoyed a strong lead over Microsoft with 50mn estimated PS4 units sold vs. 23mn sold for the xBox as of 2016. We expect Sony to maintain this lead, but will likely lose some market share to Nintendo given the success of the Switch. We forecast total hardware unit sales in this cycle to reach approximately 46mn for the xBox, 112mn for the PS4 and 55mn for the Switch by 2020. With the Sony PS4 Pro driving a modest increase in retail sales, and the xBox One to come, we expect the high-definition console base (which is key to US publishers) to remain relatively stable over the next four years. We assume a higher obsolesce rate as consumers upgrade their existing consoles, but the overall active PS4/xBoxOne console base to remain steady at around 100-105mn units.

    We think that the Switch will have appeal with casual players who do not currently game on PS4 and xBox One and are fans of Nintendo franchises (Mario, Zelda, etc). Based on these assumptions, we are forecasting the total console base to grow to 155mn by 2020, with Gen 9 base flattening and the Gen 10 (Switch) casual user base driving growth.

    Looking out to our 2020 forecasts, we expect Nintendo to drive over 39% of hardware unit shipments in ’17-‘20. We believe Sony could come out with a new or upgraded console by 2019 or 2020 to compete with the xBox One X if the One X gets traction.
     

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    LME Considers New Nickel Contract to Tap Boom in Electric Cars

    This article by Mark Burton and Jack Farchy for Bloomberg may be of interest to subscribers. Here is a section: 

    The LME is considering starting a nickel sulphate contract as part of a trio of new products that take advantage of growing demand for battery metals, according to Chief Executive Officer Matthew Chamberlain. The launch is 18 months away at best, he said in an interview Friday, ahead of the metal industry’s annual gathering in London.

    “Electric vehicles are clearly the growth story for our industry,” Chamberlain said. The bourse will meet with stakeholders in the electric vehicle market during LME Week to firm up plans for new nickel, cobalt and lithium chemical contracts, he said.

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    Amazon Threat Causes Shakeout in the Health-Care Industry

    This article by Robert Langreth, Jared S Hopkins, and Spencer Soper for Bloomberg may be of interest to subscribers. Here is a section:

    Analysts have speculated that Amazon could soon enter the business of selling prescription drugs, threatening to disrupt retail drugstores, drug wholesalers, and the pharmacy-benefits management business. While Amazon has never publicly commented on what its plans may be, CNBC reported this month that the Internet giant could make a decision about selling drugs online by Thanksgiving. The network didn’t name its sources.

    McKesson slid 5.2 percent at 4 p.m. in New York, while AmerisourceBergen shares fell 4.2 percent and Express Scripts sank 3.7 percent following the report on Amazon’s state licenses by the St. Louis Post-Dispatch.

    Bloomberg News confirmed that Amazon had obtained wholesale-pharmacy licenses in at least 13 states, including Nevada, Idaho, Arizona, North Dakota, Oregon, Alabama, Louisiana, New Jersey, Michigan, Connecticut, New Hampshire, Utah and Iowa. An application is pending in Maine. Some of the licenses were obtained late last year and some this year.

     

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    Asia Local Markets Weekly - Slippery slope

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    Away from the debate on whether the recapitalization bonds will – and should – be treated as an ‘above the line’ item in the Budget or not, and hence the optics on the Budget Deficit;

    the issuance of such a large quantum over a period of 12 months will pressurize an already weak technical position for the bond markets by detracting from the public sector bank appetite for general government issuance (center and state). The specifics of the recap bonds (whether eligible for SLR, whether marketable etc.) will determine the extent of substitutability between recap bonds and other government paper. Note also the backdrop of recent lowering by RBI of both the mandatory SLR for banks, and the limit on SLR securities held under the HTM category, which should reduce the overall appetite from banks for SLR paper – and in particular for duration. There are two mitigating factors to consider though – a) that the banking system remains flush with liquidity (as obvious in the money parked with RBI) created by the demonetization exercise from late last year, and b) possible reduction in RBI OMO sales given that this recap bond issuance will, at least temporarily, take some surplus liquidity out of circulation. The net sum though, we expect, to still be negative for the demand technicals of the markets. Comes as this does together with increasing likelihood of slippage in deficit for the current FY (unless the government manages to get additional dividends from PSUs) – and likely putting at risk the FRBM Committee recommendation for 3% target for next FY – the technical picture overall points to risk of higher rates and steeper curves still in India. We stay underweight in our exposure to duration.

     

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    Brent Oil Tops $60 for First Time Since 2015 Amid OPEC Optimism

    This article by Jessica Summers for Bloomberg may be of interest to subscribers. Here is a section:

    Both the global benchmark and its U.S. counterpart have rallied in October amid increasing belief that the Organization of Petroleum Exporting Countries will agree to cut output later into next year, helping to work down global inventories. Statoil ASA’s Chief Executive Officer Eldar Saetre said in a Bloomberg Television interview that he continues to see strong demand and the oil market is “definitely balancing.”

    “People are starting to price in the OECD inventories moving back towards normalized levels into later 2018,” Brad Hunnewell, senior equity analyst at Rockefeller & Co., said by telephone.

    U.S. Army Colonel Ryan Dillon, a spokesman for Operation Inherent Resolve, the U.S.-led coalition against the Islamic State said in a Twitter message Friday that he “incorrectly” said in an interview with Kurdish Rudaw news agency that there was a cease-fire between Iraqi and Kurdish forces. A rally in WTI immediately followed his message. Iraqi Prime Minister Haider Al-Abadi suspended operations by federal forces for 24 hours in disputed areas to allow a joint Iraqi and Kurdish team to deploy forces, Sumaria TV reported.

     

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