Comment of the Day
25th July 2023
Eoin Treacy
Jul 26
Video commentary for July 25th 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: Wall Street steady ahead of Fed decision, China rebounds on government support speculation, India hits new high, oil extends rebound, grains pause, gold quiet
Xi's China Markets Lifeline Raises Hope Rally Can Hold This Time
This article from Bloomberg may be of interest. Here is a section:
They’re betting a more forceful pro-growth tone from the top will be enough to fuel a tradeable rally — and may auger more success in tackling China’s wide array of challenges from mountains of local government debt to a slumping housing market.
“Clearly, markets have been disappointed as they anticipated more rapid improvements, but they are now beginning to rationalize their growth expectations,” said Andrew McCaffery, global chief investment officer at Fidelity International. “Our view is that this somewhat unexciting period will eventually give way to a more positive market tone.”
The big question is whether the follow-through from authorities will sustain the rebound. Brief bursts of optimism as China emerged from strict Covid restrictions have repeatedly turned into losses, making Chinese markets among the region’s worst performers amid a stream of grim economic data.
Eoin Treacy's view
The Chinese stock market depends on the patronage of the government to instill enough confidence to propel bull runs. So far, the market has been long government platitudes but short on action. That has resulted in several rebounds from deep oversold conditions, only for the rallies to fail as the absence of a big-bang action weighs on confidence.
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Jaguar Land Rover Owner Tata Beats Profit Estimate With Ease
This article from Bloomberg may be to interest to subscribers. Here is a section:
Tata Motors Ltd. reported better-than-expected first-quarter income as supply-chain constraints eased, helping to lift sales of luxury cars.
Net income was 32 billion rupees ($391 million) in the three months through June, compared with a loss of 50 billion rupees a year earlier, the Mumbai-based company said in a statement Tuesday. Analyst estimates on average were for net profit of 24.5 billion rupees.
Luxury unit Jaguar Land Rover posted a quarterly profit before tax of £435 million ($559 million), compared with a loss of £524 million the year before. JLR’s quarterly revenue surged 56% to £6.9 billion, Tata Motors said. It reported a free cash flow of £451 million.
Eoin Treacy's view
Tata Motors is a wonderful Indian success story. The company generates around 29% of revenue from its domestic market. Buying the Jaguar/Land Rover brand was a master stroke and now accounts for two thirds of global revenue. India has plenty of examples of companies that have grown successfully beyond their domestic markets and done so without overt government support. That’s a clear point in favour of capitalism driven ingenuity and helps to explain why India’s capital markets have been so much more rewarding that China’s over the long term.
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Unilever Shares Gain on Resilient Demand as Inflation Cools
This article from Bloomberg may be of interest. Here is a section:
Investors are scrutinizing the first set of results presented by Chief Executive Officer Hein Schumacher for hints of his strategy to revive Unilever’s sluggish performance. The new CEO, weeks into the job, raised the full-year forecast slightly, predicting revenue growth of more than 5% this year. The guidance may be conservative, as analysts are forecasting 6.1%.
The company chose an external CEO to help fix its bureaucratic culture and deal with critiques that it had become too focused with the so-called “social purpose” of the consumer products it sells.
Schumacher, the former boss of Dutch dairy cooperative Royal FrieslandCampina, is expected to revisit the debate over splitting food brands like Hellmann’s mayonnaise from the faster-growing personal care, beauty, and wellbeing units.
Eoin Treacy's view
The job of a corporation is to ensure it looks after its shareholders. When we rely on repeat business that tends to mean ensuring you have happy customers who think well of your company and its products.
The challenge in the age of social media is there is a vocal minority who are motivated by the desire to be as contentious as possible. Companies are finally beginning to realise the loudest part of the mob does not reflect the majority of consumers. In their desire to appeal to the mob on social media they hopefully temporarily forgot who their customers are. It unfortunately has taken some high profile boycotts to get the attention of company boards.
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Eoin's personal portfolio: July 20th stock index short initiated
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.
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© 2023 Eoin Treacy
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