Preview of the week starting 11 Mar 2024 - Zim to sink or swim?
Public Holidays
No holidays for Singapore, China, the USA, or Hong Kong.
Economic Calendar (11 Mar 2024)
Notable Highlights
CPI will be the most watched economic data for the coming week with an expected 3.1% YoY for CPI. This is one of the 2 main data points used as a reference for inflation.
Auction of bonds and notes. There will be an auction in the coming week for 10-year Notes and 30-year bonds. These are sold to finance the deficits and it will be interesting to see the demand for such assets.
Core Retail Sales & Retail Sales will be announced. These represent the consumption for retail.
PPI data will be released indicating the inflation hitting producers. Typically, these can be passed on to the consumers should the products be price inelastic. Thus, PPI can be treated as a prequel to CPI.
Crude Oil Inventories can be seen as forward indicators of market demand and consumption. If the trend of excess inventories continues, demand erosion can lead to reduced production & weakening consumer spending.
Earnings Calendar (11 Mar 2024)
In the coming week, there are a few earnings of interest like Oracle, Clover, ZIM, UIPath, Dollar General, Adobe and Jabil.
Let us look at the earnings of ZIM in detail.
Zim Integrated Shipping Services Ltd., commonly known as ZIM, is a publicly held Israeli international cargo shipping company, and one of the top 20 global carriers.
The stock has fallen 45.72% from a year ago and currently, Investing has issued a “Strong Sell” rating.
ZIM saw revenue growth for the last few years, from $3,991M (2020) to $13,839M (TTM).
The Operating income has grown from $705M (2020) to $7,551M (TTM).
Unfortunately, EPS (TTM) has turned negative at -17.75.
For the balance sheet, we see growth in Total Assets and Total Debt.
Capitalization has increased over time and ordinary shares have grown over the years.
It is good to have growing free cash flow over the last few years, ending up with $6,479M (TTM).
Zim is also paying down the debts over the last few years.
End Cash positions remain good at around $1,304M (TTM).
For the coming earnings, the forecast of EPS and Revenue are -1.44 and 1.21B respectively. Will ZIM continue to make a loss? Is this a reflection of the wider shipping industry?
Market Outlook of S&P500 - 11 Mar 2024
Technical observations of the S&P500 1D chart:
The MACD indicator is showing a downtrend having completed another top crossover.
Chaikin Money Flow advises an uptrend though the momentum is thinning.
Moving Averages (MA). Both the MA50 line and the MA200 line are on an uptrend. The last candle is above both the MA 50 line and the MA 200 line. Thus, it could be read as bullish for the long-term and mid-term.
Exponential Moving Averages (EMA). The 3 EMA lines are moving in a fanned-out pattern, thus implying an uptrend.
I have replaced Stochastic with CMF to incorporate consideration of volume. Stochastic and MACD are similar with Stochastic being “more active” and more capable for “false” signals.
From investing, it recommends a “Strong Buy” for S&P500 (based on 1D chart).
From the 23 technical indicators and moving averages, a “Strong Buy” rating was suggested. This comprised of indicators showing 21 (Buy), 1 (Neutral) and 1 (Sell).
From the technical indicators, only Stochastic is indicating a “Sell” action and ADX is “neutral”.
All the moving average indicators (1D chart) show a “buy” rating.
Despite the above, we should be mindful that MACD has indicated a downtrend as the current run is losing momentum. So, there should be some correction though it is still possible to range sideways. The coming CPI index update is expected to cause some volatility in the market.
News and my thoughts from the last week (11 Mar 2024)
China has 21 nuclear reactors under construction which will have a capacity for generating 21.61 gigawatts of electricity. That is more than 2.5 times more nuclear reactors under construction than any other country. - CNBC
When we do not qualify migrants, we run the risk of having criminals and extremists who enter with malicious intent.
If America does not give priority to the citizens, there could be forced changes from the ground. We need to secure the border & put the citizens first.
Some of the world’s most prominent exchanges suffered technical issues in the past week, including Binance, Coinbase, Kraken and Bybit, just days after Bitcoin breached $60,000 for the first time in over two years on Feb. 28. - TradingView
According to the Statista company, Vietnam’s real estate market is worth $4.41 trillion in 2024, while the Thai market is valued at $2.51 trillion. - VN Express
Four of the biggest U.S. banks are no longer signatories to the Equator Principles, an industry benchmark for assessing environmental and social risks in project-related finance.
Does ESG need a review? - Reuters
Sales of Apple’s iPhone plunged 24% in China in the first six weeks of 2024, according to a Counterpoint Research report as Apple faced stiff competition from local smartphone firms like Huawei, Oppo, Vivo and Xiaomi. - CNBC
Manila, the capital of the Philippines, has left everyone surprised by being titled the city with the most luxury property growth, dethroning the United Arab Emirates' blingy metropolitan, Dubai. - The News
The capabilities of US-sanctioned Huawei Technologies have come under fresh scrutiny after Nvidia identified the Chinese telecommunications equipment giant as a potential rival in artificial intelligence (AI) chips for the first time. - Yahoo Finance
Huawei's Ascend 910B can reportedly outperform Nvidia's A100 - The DeCoder
Maersk is increasing container rates, shippers are expecting other shipping lines to follow suit. This is inflationary. - Logistics Insider
A senior Chinese official has complained that state-owned automakers in the country are moving slowly on new energy vehicles (NEVs), hinting that more policies are coming. - CnEVPost
if only price reflects the value .. but price is the indicator of demand meeting supply. With Elon and the market, the $TSLA stock can go up, down or range. Avoid leverage. Personally, things could get worse but there is runway to hit some highs like S&P500.
Time to consider wave energy? How can we capture the energy for consumption? Sea charging for electric vessels?
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From @WSJopinion: The real point of Biden’s new price strike force isn’t to help consumers, but to blame business for the price increases. It’s political deflection. - WSJ.
"US household debt is at a record high of 17.3 trillion if you include discouraged workers, the true unemployment rate is 23%." - JF Kennedy.
Growth in empty repositioning since 2019 had seen an increase of 20% in terms of TEU moved in 2023 compared to four years ago, but also the growth in full containers has increased globally by 2.5%, with an 8% increase in TEU miles - SeaTrade Maritime
In the Asia Pacific region, Singapore leads the pack with a requirement of $5.2 million, while Hong Kong comes second at $3.1 million.
In Singapore, this is translated to about SGD$6.92M in net worth. Are you one of these?
My Investing Muse ( 11 Mar 2024)
Some recent layoff news
Fund management giant Fidelity International is planning to cut around 1,000 jobs globally in 2024, equivalent to around 9% of its headcount, according to an internal company memo seen by Reuters.
Morgan Stanley has reduced its workforce by approximately 9% in its asset management division in China. - People Matter
The latest manufacturing data releases suggest the industrial sector is seeing softening demand. States are starting to report rising levels of job losses. And consumers are growing more negative toward the economy. - FX Street
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Should we have concerns when the indices are hitting record highs?
Jobs creation
Here are some updates about Job creation data:
Even though February layoffs are their highest since the Great Recession, the job market is still hot, with 353,000 jobs added in January and unemployment remaining at historic lows. - QZ
From X user KobeissiLetter: The January jobs report number was just revised LOWER from showing 353,000 jobs added to 229,000. This means 129,000 LESS jobs were added in January than initially reported. It also means 10 of the last 12 months have seen downward revisions in their jobs number. The November 2023 jobs number was revised lower, from 199,000 to 173,000. The October jobs report was also revised lower from 150,000 to 105,000. For September, the jobs number was revised lower by 74,000 jobs. We are talking about hundreds of thousands of jobs being revised out of previously reported data.
There has been a downward revision of jobs data. This brings concern as there could be misrepresentations. The revisions themselves do not garner the same magnitude of news exposure. Thus, we should take a “watch and see” approach to these data.
Commercial Real Estate (CRE)
Some news:
Both San Francisco buildings are around 45% vacant, and that number is expected to grow as additional leases expire and more tenants vacate the buildings. - SF Chronicle
Are there more properties affected that are not reported in mainstream media?
Jerome Powell joined a chorus of US officials who have argued that mounting bad commercial real estate loans will likely cause some bank failures, but don’t pose a risk to the overall system. - LiveMint
Does this mean that there are no concerns for CRE? CRE is showing signs of weaknesses and may have a sizeable impact on the broader economy. This is a notable sector to monitor as part of a macro overview.
K Shaped Economy
It all adds up as we are in a K-shaped economy where some sectors advance and some are in decline. S&P500 represents some of the best MNCs in the world with global revenue and thus, this does not represent the USA economy. Referencing S&P500 to the USA would be “overstating” the American economy.
Thus, we need to make appropriate references to the market and economy.
Conclusion
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It used to be the Magnificent 7. Are we looking at Super 6 without Tesla now? Tesla is one of the worst-performing stocks in the market. The price of a stock does not always reflect its value.
Some more market news:
Bankruptcies of companies of all sizes rose 30%, opens new tab year-on-year in 2023. For the first time in 15 years, bankruptcies are rising in all industries and regions. Failures of restaurants rose by a stunning 70%. - Reuters
9 junk-rated borrowers either filed for Chapter 11 bankruptcy or missed their interest payments on a total of $5.97 billion in loans and bonds last month, JPMorgan noted. 3 companies opted for a distressed exchange on a total $3.96 billion. - Reuters
"For whatever reasons, markets now exhibit far more casinolike behavior than they did when I was young," Buffett told Fortune magazine. - Yahoo Finance
With increasing bankruptcies and the warning from Mr Buffett, I concur to exercise caution. We should not be surprised if some stocks or indices hit record highs. Yet, some businesses are also struggling.
Profits are realized when positions are closed. Paper gains are only good when realized. For some of the stocks, we can consider taking partial profits. I would do so if the business is losing its competitive advantages.
Let us continue to exercise due diligence. Let us research before investing.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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