Monday 30 November 2015

BHP mining disaster & the ECB obsessed printing problem

A devastating mining disaster that has hit Brazil when a tailings dam operated by BHP Billiton and Vale collapsed leading to the biggest mining disaster in Brazilian history. Millions of litres of toxic waste and mud flowed into the villages surrounding the dam in the region of Minas Gerais with the water now having reached the Atlantic sea.

The Brazilian government announced over the weekend it's intention to sue both companies for compensation of the losses being experienced by those affected by the disaster. Some reports coming out say the claim could be as high as $7.2 billion.

BHP Billiton, the world's largest mining company stands to lose a lot of ground to other competitors if the Brazilian government gets it right which is highly probable as the company hasn't swayed away from the disaster and actively helping to restore calm in the area which is spreading as the dams content continues to move towards the sea.

In the midst of a commodities rout this is possibly the worst time to be dealing with a situation like this but BHP has always had a strong management team and I'm interested to see how they will approach the matter in months and years to come.

The similarities in terms of scale between this and the BP oil spill in the Gulf of Mexico is  the attracting feature to the story that has claimed the lives of 13 people with an additional 6 missing and hundreds being displaced.

I'll be following this story as it develops.

The age of unlimited money supply has been upon us since global financial markets suffered the worst shock to the system yet after the subprime crisis led to many banks going under water with bad debts that had little chance of being recovered due to the quality of the borrower.

The US government stepped in to save the day but this wasn't enough to prevent what economist termed "double dip recession". So then it was the turn of the Federal Reserve to impose its presence on the economy by purchasing trillions of dollars in a bid to rescue the US and more importantly the world from catastrophe.

There's an old adage that most will know which I think is appropriate; Monkey See Monkey Do

As the US intervened so other economies found the need to do the same to protect their currencies or simply on the basis that if the US, as the world leader of economic trends, could use extraordinary measures to help itself out of trouble then so could they and so it began in earnest.

Coming back to the present we see the second most influential economic zone in the world namely the Eurozone has been battling deflation for a number of years now and with the political impasse amongst policymakers and european citizens at the moment, the easiest solution is to print money.

The problem comes in is when will it all stop?

You may be short circuiting the necessary mechanisms now to allow breathing space for politicians to work on a solution but there doesn't seem a strong commitment from any EU politician involving the continuity of the economic zone.

Then you have the impact on other nations such as the case below of Switzerland whose central bank is looking to depart from already extreme measures placed on money supply that were deemed necessary when the first round of stimulus was announced. It only serves to move the goalposts further making these economies susceptible to even deeper economic crisis.

The world needs to step back and assess what has happened over the last few years and the potential outcomes whether good or bad can come from continued support of these measures without any counter policy to bring balance to the order of things. From the way things are progressing this seems very unlikely.  
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Friday 27 November 2015

Top Tweets Today:27/11/2015

If there's one aspect about financial markets you learn in your dealings, everything is scrutinised to the point where often overreaction plays a role in either lifting or sinking a price. However Chinese authorities still seem to be grappling with this concept somewhat with the latest news out of China being a probe into broker's alleged misconduct which the regulator has claimed led to the dramatic fall of Chinese equities back in August of this year.

The transitioning process was never going to be as smooth as many thought and the problem lies in the fact that financial markets require a certain amount of autonomy to operate with freedom of movement and access to information.

However the government's interference has not only rescinded those requirements, it's opened participants up to criminal liability for something which should be a basic in any free market.

The spotlight has been firmly on OPEC recently with many member nations bemoaning the decision made by Saudi Arabia to keep production steady as oil prices declined. With the price war at its maximum there was always going to be a race to see who could hold out the longest with US shale gas producers facing their own misfortunes of an overburdened debt crisis.

There's been a number of closures in the amount of gas rigs that have been opened which is most probably why the issues been put on the back burner for a while with producers concentrating their focus on the more efficient wells. But these measures are not doing enough to help support oil prices with producers facing a tougher situation of not be able to pay.

It seems as if the vultures are circling as credit rating agencies have said a staggering number of these producers are battling to pay the interest payments given the deteriorated condition in the oil market has led to junk bond status given to the quality of the bonds increasing the yield needed to obtain funding.

There is a bottoming feel around the current price of oil and it'll be interesting to see if we start to see some bankruptcy in the US shale gas sector and if it will have any significant impact on the price of oil but the longer producers hold out the longer we can expect to see the price of oil at these levels or even lower if the current economic climate continues or worse erodes further.

I've been following the headlines for most of the year and must admit I expected to see more development in terms of oil cuts taking place as opposed to what we've seen so far. We only hearing grumblings from those lower quantity higher cost players and my belief is we'll need to see a pinch in the larger producers before we see any reaction.
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Thursday 26 November 2015

Top Tweets Today: 26/11/2015

Following a general end of year weakness in 2014, commodities and stocks in producers have been hammered this year with some big names collapsing in a heap with the latest victim Anglo American receiving an onslaught from investors fearing the worst. Glencore has been the main focal point up until recently as HSBC warned that Anglo's is burning through cash reserves and advised that it suspenses dividends.

The company has been engaged in restructuring but hasn't plug the many holes leading to liquidity issues that's also being faced by the mining industry as a whole that's been battling a fall in commodity prices combined with overcapacity.

It seems as if concerns are coming from the camp where clarity is needed as to how management intends to deal with the matter, much the same sentiment that was felt by Ivan Glasenberg and his management team over at Glencore.

I think we are far from a bottom in these stocks given the level of fear surrounding which we'd need to taper off a considerable amount before any confidence can be injected into them but as prices continue to fall, long term opportunities are presenting themselves in hordes providing investors who are savvy enough to be patient for this sentiment to blow over and pick the right company with excellent management to return a healthy performance for a decade to come.
The love hate relationship between Russia and Ukraine continues as an attack on an electricity pylon left most of the region of Crimea in darkness as Ukrainian nationalists fight to secure the area back from Russia who annexed it in March 2014.

As a result of Russia's preoccupation in Syria, these attacks are met with mere snide remarks over the expressed intentions of these actions if it's only used to cause disruption to the people whom it wishes to liberate from the clutches of Russian hands.Added to this Russia's current state of play in winning over support once again from the West which would only serve to damage the diplomatic work already done.

Russian state owned gas supplier Gazprom has cut all gas supplies to Ukraine as a result with not much reaction yet from Ukraine , it seems a much lighter retaliation than war. However after weighing up the merits of Russia responding to Turkey's downing of a fighter jet as improbable, what would the outcome look like if the Kremlin were to turn it's attention to Ukraine and escalate matters?

Although it's very unlikely as is the case in Turkey, it does point to a rather tense situation building up in the southern parts of Europe and the Middle East, hardly something that would move the ticker of confidence in that region. I find it fascinating how one leader, namely Putin, has sown the seeds of discord in a relatively short span of time putting into question the true intentions of his leadership and whether stability would ever return under his reign as leader.
Problems at Eskom SOE, the national owned electricity supplier in South Africa, seem to be getting worse as the company battles to find debt offered at a low enough interest rate so as to not put further pressure on an already strained revenue model unable to produce sufficient profits that would be needed for it to be capable of increasing infrastructure to meet demand.

Management says it will find other sources of funding besides foreign issued bonds after international rating agencies have lower it to junk bond status.

There's an easier way to solving this dilemma in using the same model as German has implemented which would spread the risk amongst millions rather than just one entity but it would seem as if policymakers don't feel comfortable with the idea.  
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Wednesday 25 November 2015

Russia is angered over Turkey's attack

Tension in Syria have reached a new level as neighbours Turkey shot down a Russian fighter jet who officials say was flying in Turkish airspace without permission and asked 10 times to leave the area for which it didn't.

Russian president Vladimir Putin reacted angrily to the news calling such actions "a stab in the back" following his efforts to rid the region of ISIS terrorists who have infiltrated Syria. It is not yet known the consequential impact these actions will have on the relationship between the two countries who have close economic ties to one another.

Turkey, a nation bordering Syria has been burdened the most following a refugee crisis that has seen over 2 million Syrians fleeing the war torn state settling in Turkey for protection. However Turkey is seen as the entry point for refugees who make their way into other European countries such as Greece, Italy, France and Germany which is why there is much pressure on their government to contain the situation on the border.
Turkey sees Russia's increased military presences as negatively impacting their nation saying that more Syrians will flee to the Turkish border seeking refuge for which the Turks simply cannot deal with the influx of that many seeking help wanting to enter Europe who are already on high alert following the Paris attacks.

It should also be said that Turkish leadership has supported the West in its failed attempt to enter Syria a few years ago in trying to unseat that nation's dictator leader Bashar al-Assad only to be prevented by the veto of Russia from Vladimir Putin.

In the years that have past since then, Turkey has backed the rebels against Assad in the hope that his regime will fall. But if one looks carefully at the attacks Russia's military has effected in Syria, the area is very close to the rebels which Turkey is supporting which does explain why they promptly followed through with actions against the fighter jet.  
But we should take note of how the situation landed in the way it has and that's as a result of the West (not only Turkey) propping up these rebels who have defected to ISIS which leaves open the possibility that these rebels do the same thing which would give ISIS even more control in Syria.

However Turkey says that Russia's involvement is merely a smokescreen to help Assad regime remain in power citing its lack of bombings in ISIS held areas as a reason for this thinking.

The sad reality is the citizens of Syria, who have no interest in war or political agenda whatsoever are the ones who suffer the most while the West and Russia bicker over one another.

While Russia's retaliation against Turkey is seen to take the form of severing economic ties that benefits the latter because Turkey is a member of NATO and instituting an attack on them would bring the support from the larger more militant capable members such as the US.  

The West may have given the nod to Putin to go ahead with his mission to purge Syria of all terrorist but it needs to coordinate its action in line with Russia's or you are defeating the whole point of being their. What are the priorities that need to be met in the short term that will help bring stability to the region? I don't think the West has quite figured out where it wants to be and until then this political to and fro will continue.
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Tuesday 24 November 2015

Platinum price is far from the bottom

As platinum prices continue to sink further into the abyss one strategist at Citigroup Ivan Szpakowski says prospects for the metal is looking up given the dramatic drop in prices which may lure manufacturers of  petrol catalytic converters to consider using platinum instead of palladium which is more commonly used.

I have to say that I disagree here on a number of points some of them stemming from the supply side which has gutted the industry in South Africa, the largest producer of platinum in the world with some 80% of yearly sales.

The drive by policymakers towards cleaner energy pushed car manufacturers to rethink technology and old ideas surrounding diesel being a dirty fuel which led them to catalytic convertors. This in effect created huge demand in an industry that never possessed great demand for the precious metal compared to other ferrous metals such as iron ore and copper.

South Africa as the largest gold miner at the time hopped on the opportunity to add another scarce commodity in demand to their list of  produced minerals as the abundance of the metal wasn't in short supply.

Fast forward to the present and the platinum industry has taken over as the biggest player in the mining sector and employing thousands of people in the process which is why it is so strategic to the South African government because it absorbs a large number of unskilled workers that it has consistently promised jobs too.

However as the pressure starting building in 2012 with a new labour union to front workers demand for a living wage, things began to fall apart for platinum producers who had no support from government who watched idly by as negotiations between the two parties got out of control eventually leading to the tragic death of 34 miners in Marikana who were gunned down by police.

Platinum producers pleaded with all parties to come to the table and be reasonable with demands as the industry was beginning to feel the effects of a drop in demand from China that was pushing the producers towards restructuring to weather the storm.
Again pressure by government on producers to not go through with these restructures has forced the top three producers namely, Anglo Platinum , Impala Platinum and Lonmin Plc to continue producing while demand drops off significantly. The problem only gets worse the more platinum gets brought to the surface.

If we were to see any kind of rebound in the platinum price we need to see a drop off in production something that doesn't seem to be likely in the hands of producers. My thinking is we need to see one of the big three going bust to interrupt production and draw down the abnormally high inventory levels kept by these producers.

Unfortunately the attention seems to be drawn on Lonmin which is looking more frail as the weeks and months go by. The feeling on the street is they won't survive this and the thirty odd thousand workforce may be faced with life without employment especially when you take in consideration the state of the entire industry as well as the two other players who won't be able to absorb these excess labour with problems of their own.

If the company were to go bust I see the result being a positive for the platinum industry although we should not take away the economic impacts such an event will cause on all stakeholders involved.

These problems only detract from further issues laying dormant (for now) in the background. With the progress in technology, it's only a matter of time before the uses of platinum become obsolete, not immediately but over the long term the risks will present themselves. There has been some initiatives on the part of producers in the use of platinum to generate electricity but the capital allocated to the
research of this technology barely touching the needle with priorities set on survival.

On the whole the industry is in distress and I don't see the situation changing anytime soon so my belief is we need to see some material evidence that platinum production will be curbed or else the industry is doomed.
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Monday 23 November 2015

Is the EU finally standing in solidarity?

As the world gets to grip with the reality of ISIS becoming an ever increasing threat to world peace, EU countries have been on high alert following the terrorist attacks on Paris over a week ago. The latest country to raise the level of security to the maximum is Belgium where it has been reported that members of the group who had planned the attack were living in the country before they executed their cowardly act of terror.

This has resulted in the capital city of Brussels to be placed on lockdown as government fears that more accomplishes may still be roaming the street planning fresh attacks given the city is a major political meeting point for government namely the EU parliament and NATO.

I wrote on piece on Friday's blog stating that EU nations reactionary stance rather than proactive measures had been brought on by all member governments lack of interest in immigration control with this latest terrorist attacks catapulting the issue into the light forcing governments to deal with the issue immediately.

There are no short term solutions when it comes to dealing with these problems which add further woes to the EU region that has been caught squabbling over political ideologies over ways to deal with a overburdened debt crisis and citizens refusal to become meaningfully productive.

One positive thing that comes out of this is that all governments in the eurozone will stand in solidarity against these heinous crimes. Let's us hope that all political players pay close attention to the inner workings of co-operations and the fundamental benefits every nation can enjoy when a united front is held.
In a game changer for both Argentina and the South American region of politics, Mauricio Macri was elected the leader of Argentina in a tightly contested vote that saw the ruling leftist party being overwhelmed by dissatisfied voters who say they've been left with empty promises and an ailing economy in urgent need of repair.

 Argentina, the second largest economy in South America has suffered the same fate as most emerging market economies have over the past year from the deepened commodities slump that many leaders had taken advantage of previously but now somewhat caught in a economical storm of disaster as activity sinks in tandem with the rout.

Counterparts Brazil have seen the same effects, if not worse, on their economy with many pointing fingers squarely at Dilma Rousseff  whose head has been on the chopping block for some time now with public confidence dropping to all time lows on record for any sitting Brazilian president.

The best part of it is South Americans are actively participating in the decisions made in the politics of their countries which does bode well for future investment confidence that has been lacklustre over the decades as dictators have wrecked the continents potential with a few cases of some remaining in power.
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Friday 20 November 2015

Top Tweets Today: 20/11/2015

Much debate has been set in motion after the tragic Paris attacks that happened a week ago with many policymakers calling for a clamp down on laws allowing the free movement between countries in the EU which some see as being the root cause of the problem to terrorists infiltrating Europe.

One of the trademark decisions when the EU was formed was the free movement of each nation's  capital and citizens within the trade zone which at the time seemed like the right thing to do because the less the restrictions on the movement the factors of production the more easier it was to allow economic activity to flow without hindrance contributing to significant economic opportunities.

But as European politicians began pushing socialist agendas the citizens of the EU were no longer interested finding work but more so sourcing income from a government program which is why the EU is in the mess it's in presently.

This left the door open for citizens in the Middle East who face economic disparities in their own nations to seek out employment in the EU who gladly accepted them as their own people were living on the promises of governments who guaranteed well being provided by the state till the end of their days.

Immigration will become the focal point in election campaigns for years to come in the EU and it's something government's have silently ignored as the problems have grown bigger only until a terrorist act like we saw last week jolts them to sit up and address the issue directly.      
In a promising story for China, the International Monetary Fund will include its currency the Yuan in its basket of currencies that can be use for special drawing rights. This the money that can be used to keep as reserves and paid out to taper the fluctuate nature of inflows and outflows happening in the trade account of nations.

The move signals a shift in the currency market that sees over $5 trillion worth of transactions turned over each day. China's ascension as a top player in the trade of goods and services with it's fellow peers around the world has help reach a position where it has overtaken other countries such as the US, Europe and Japan as the largest trading partners for a handful of countries.

Although there's speculation that the weighting that will be allocated to the Yuan may come in less than expected due to a technicality of placing more emphasis on financial flows rather than exports, the inclusion does set a trend which will definitely be in place for a few decades to come as China's economy continues to grow.
Things aren't going to well with Africa's largest mobile telecommunication giant MTN as a fine imposed on them from the NCC (Nigerian Communication Commission) looks more and more likely of going through with the latest sting in the tail coming from Nigeria's governor supporting the move. The company has asked for leniency which looks like it's pleas are falling on deaf ears.

Nigeria has for too long been known for it's corrupt and briberous nature when doing business so the move comes as a shock to many who hadn't expected it including MTN. However the company was signatory to legislation implemented last year that clearly laid out the guidelines to what telecoms companies could expect if found not abiding by the law.

The question now lies squarely with management with whom knew that 5 million unregistered subscribers continued to use their network which they failed to disconnect. If that figure were to be dropped by a fifth the fine still would look enormous but how could management have walked themselves into this mess?

The law is the law and one wouldn't think a global multinational company would want to find itself on the wrong side of it with the potential to ruin its reputation or did management feel the risk of leaving these subscribers connected equated to more profit in the long term than what a fine may potentially wipe out. Guess they called that one wrong.
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Thursday 19 November 2015

Emerging markets may be forced to intervene with a strong Dollar

With the Federal Reserve looking set to raise rates this coming December it would be negligent to not consider the impact that has been felt by global currencies and more so emerging markets leading up to the decision and most likely for some time after the first rate has been initiated.  

We've seen a drastic reduction in the amount of commodities being exchanged between nations one reason being the result of a slump in Chinese economic activity that so many had been hoping would switch on the growth engine globally as well as a stronger than usual Dollar that has made these items expensive in dollar terms to nations except the US.    

However thinking about the trillions of dollars created from the Quantitative Easing program executed by the Fed it's no wonder there are worries about the future of emerging market currencies in the light of a proposal to lift rates. 

Most of these countries provided a home for capital who would have otherwise earned very low returns for its owners and thus were actively driven towards foreign homes in the hope of finding greater returns.  

This in turn has attributed to a big surge in foreign reserve holdings by these nations who now sit on a pile of dollars at a much appreciated price but battling to contain their own home country's currency weakness. 

After China decided to intervene in the renminbi on the 24th August 2015 it set a precedent to what lies ahead for most emerging markets although some nations such as Nigeria and Russia have already put in place foreign reserve sell downs for reasons other than the above, it does paint a worrying picture. 

The term Quantitative Tightening started being bantered around at the time of the PBOC intervention and immediately I tried to think of this could all mean. 

Effectively the trillions of dollars created would need to find their way back to the US but the scale of the easing program does leave one wondering as to how all this money would return without shifting the balance of things and tipping the world economy into a state of flux? 

I'm going to post a few charts to explain what I think could possibly help explain what could happen; 

Brazil 


The country has been hit with a fiscal nightmare after funding two major sports events namely the Soccer World Cup in 2014 and the Summer Olympics to be hosted next year. Added to this is the downturn in commodity prices has put further strain on the situation. 

On the graphs above you'll see that the Brazilian Real has touched major resistance and authorities wouldn't want any further depreciation as it could damage the trade balance. We see the foreign reserves have been steady since 2012 but are at elevated levels. 

Malaysia 


A similar looking chart to the Brazilian economic numbers but this time of the Asian nation Malaysia however notice how the foreign reserves are depleting quickly. This is because the central bank has continuously intervened in the market to try curb more depreciation. 

The nation's largest trading partner is China and given the extent to which the downturn has affected most countries around the world you can understand why Malaysia has suffered so badly. The most notable sector that plays an integral role is the oil industry that has been hit hard after the price war between OPEC and the US. 

It is clear to see that Malaysia has suffered from two economic setbacks and as a result is fighting back to stabilise the situation, but from the charts above it doesn't seem as if the efforts from the central bank selling off reserves has had the desired effect on the currency. 

South Africa 


One of Africa's top economies, South Africa has battled with continued labour relation problems as well as mining production declines that have halted the economy from its hay day. The South African Rand has blown out past previous highs and seems to be set around the R14 to the dollar level.

SARB governor Lesetja Kganyago has stated previously that if intervention is required the central bank will step up to the plate and do what is necessary to defend the Rand. If you look at the foreign reserves they have been in decline over the past two years as a result of less commodity sales the most important being platinum. 

The SARB has said it will be buying platinum bars as a reserve asset in a bid to mop up the surplus that is hurting the industry. 

Conclusion 

These three cases are not the only such developments with many other emerging market players facing the same dilemma. I believe that with such a vast amount of dollars invested in them over the duration of the QE program does open up potential for extreme volatility. 

I think that with foreign reserve holdings at elevated levels and interest rate hikes doing very little to aid these currencies. Emerging markets will have no choice but to intervene in the foreign exchange market but at the cost of removing the excess amount of dollars in reserve held that provides a cushion for trade fluctuations. 

By defending their currencies they would be feeding the dollars created by the Fed back into the system but the real question now is if the actions were to be taken by the central bankers would succeed or could it be a catalyst to a bigger financial disaster?   
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Wednesday 18 November 2015

Top Tweets Today: 18/11/2015

As we get closer to the OPEC member meeting to be held from the 4 December this year, tensions are already high ahead of the meeting with some members not in agreement with the way the collusive body has handled the glut in oil output that has affected many members.

I've said numerous times on this blog that if Saudi Arabia continues to ignore the cries of concern from its fellow members then they could very well be faced with member cheating in the form of cutting production and not meeting production targets.

The cracks are starting to show with nations such as Venezuela, Nigeria and Algeria indicating the longer term problems each of their economies are dealing with as a result of unsustainable oil prices.
It's been a few weeks since mining house Glencore saw a wave of panic that resulted in a huge dip in their market capitalisation after a note was sent by Investec highlighting the continued weakness in resources stock and pointing out that if we were to fail to see a bounce anytime soon it could be doom and gloom for Glencore whose management who have set out an ambitious target of cutting back debt by 33% in less than a year.

Although the price shock did leave bargain hunters with the opportunity to scoop up some great deals  but it proved all too short for the company that has seen its stock price once again slumping but this time at a much more pacing rate making the move feel sustainable.

At the time it didn't feel as if commodities had tired out from their extensive selloff that's been in place for over a year now. Perhaps a little breather before more negative sentiment fed their way through to skittish investors.

What I do believe though is Glencore CEO Ivan Glasenberg has shown the market his willingness to inject confidence if need when judging from the aftermath of the shock drop. It's a step in the right direction for the company but I firmly believe we need to see more mining companies go bust before we start to see excess supply flooding the market at present being soaked up.
In yesterday's blog I detailed how the current global political stage is heating up following the Paris attacks over the weekend and what Russia stands to gain from its military involvement in Syia at present.

A statement made by the US president Barack Obama today show all the hallmarks of a stamp of approval for Russian president Vladimir Putin to go ahead and root out ISIS militants in Syria. He also said that Putin should concentrate on defeating terrorism instead of propping up Assad.

The moment is right for Putin to win over the support from the West once again, so these comments made by Obama won't divert Putin's attention from getting the job done.
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Tuesday 17 November 2015

Putin holds the key for the West in defeating ISIS

After the devastating terrorist attacks that took place in Paris over the weekend leaving 129 dead, world leaders gathered at the G20 summit and vowed to stand in unity in the fight against these acts of terrorism meted out onto innocent civilians.

ISIS claimed responsibility for the attacks and warned other nations who are involved in Syria that the same actions will be used as seen in Paris.

Syria has been a political hotbed over the past three years with the US remaining firm with its stance that  Syrian President Bashar al-Assad needs to be removed from power and his dictatorial rule was interfering with the freedom of Syrian people who were revolting against him and his government during the Arab Spring.

But in came Vladimir Putin who veto an UN security council meeting vote that would allow the US from invading Syria. Putin and Assad are known allies with the latter spending a good amount on weaponry from the former. This resulted in Putin receiving pressure from the West with many speculating the revival of the Cold War.

So when Putin annexed Crimea , the West took retaliatory action against with little time to spare in the decision making process and found the most drastic measures to take against this act would be to place sanctions on the Russia economy which has had disastrous effects.

However since all parties are at loggerheads with one another the situation on the ground in Syria has descended into chaos with ISIS taking full advantage of this which has resulted in a number of regions being overthrown by the terrorism group and used as a base to plan it's cowardly attacks.

In sweeps in political contortionist Putin to the rescue by increasing the military intervention knowing fully well that the West can't allow terrorism to take hold of the Middle East after years of getting to grips with it. It would only serve to increase the volatility in the region and expose Europe and the US to more danger to terrorist attacks.

 Because the situation has gotten out of control the West has no choice but to allow Russia to intervene since they drew their alliances when declaring Assad must be ousted as leader.
This falls nicely into the lap of Putin who needs to regain lost political ground that he threw away playing political games. He's seen a dramatic drop in economic activity as a result of the sanctions and knows that if they were to continue the political support he was once afforded could diminish very quickly.

It's because of this that it seems as if the West might start easing up on sanctions on Russia in support of the military actions, especially after the attacks on Paris that threatens the whole world's safety.

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Monday 16 November 2015

Reasons why Price Action works

One of the most misunderstood concepts in trading has to be the use of indicators when deciding whether to initiate a trade or not. Mistakenly believed to hold the key to trading successfully, many new traders often fall into the trap of "more is better" by overcrowding their charts with unnecessary tools that only serve to distract your attention from the more important details of the trend. 

Price action is the study of the relationship between buyers and sellers in the way they interact in response to new developments evolving as time goes on as well as the acceptance or rejection of a certain price level. In its most basic form it shows us quite simply if a price is moving upwards or downwards. 

So why is price action a simple yet effective way of identifying highly probable trades? 

Most trading indicators derive their values from price

Price is a key input in popular trading indicators that many use so instead of distorting the entries and exits by manipulating them through deviant equations, seek out increasing the probability of a trade by finding widely followed price patterns and use the indicators as the confirmation. 

Before there were any indicators there was price which has been used for decades as a primary method of spotting the direction of the trend and because this has been a familiar feature with traders it's a widely followed indicator.

It's elementary compared to other indicators

The ease of understanding and identifying a price pattern is basic whereas using indicators tend trigger false signals too often making it harder to find the high probable trades needed to set the edge in your favour. Indicators clog up the screen by hogging the attention with some giving both buy and sell triggers at the same time putting more anxiety on the trader to pull the trigger. 

Price has four components; High, Low, Open and Close and the right combination hit's off an immediate signal with no second thoughts in the way to prevent you from entering or exiting the trade. Simple is easier. 

Support & Resistance

When prices climbs higher or plunges lower it forms levels which are often marked by buyers and sellers as points where if the price were to pullback or throwback they'd likely load up again. Because these points show where the buyers and sellers lie we know in advance the areas of interest price could get. 

This is crucial in determining the strength of the trend by ascertaining whether buyers or sellers are willing to take up or drop the price asserting their dominance in the trend, if not the trend has broken and a new interpretation of the price can begin. 

Indicators however can stay overbought and oversold for long periods of time without resulting in a significant move in the opposite direction of the trend which can lead to being frustrated. 

Price action is universal

Regardless of the market, price action methods holds the same for all markets with little in the way of transitioning from one to the other. 
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Friday 13 November 2015

Great Trading Quotes from Trading Proverbs

I must confess that there are occasions when I feel upset or troubled by the performance of my trading but it's always good to reinforce the best principles needed to succeed in this field especially when you've hit a low point. This is the reason I follow Trading Proverbs, so I've found some of the best quotes over the past week or so and decided to share it with you.






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Thursday 12 November 2015

Top Tweets Today: 12/11/2015

Portuguese citizens took to the voting booth 6 weeks ago and handed a socialist party a resounding victory which displaces its previous government headed up by Pedro Passos Coelho. The election was closely watched as a gauge what might happen with elections approaching in Spain who have already had the region of Catalonia earlier this year.

The newly elected government is proposing to pull measures put in place to secure financial aid which could tip the scale against the nation. There's been a way of radical leftism overrunning all sense of rationalism in the EU and one has to wonder when politicians will come to their senses and realise that Europe is looking more likely to fail if it can't sort out it's financial woes.
I recall writing a blog post a few weeks back about the state of the African economy given the drop in commodities since most of the continents foreign income are derived from the sale of these much needed materials. At the time Zambian finance minister had presented a budget

Today it was the turn of the central bank as it began intervening in the foreign exchange market as the nation's currency, kwacha, hit an all time low this week against the dollar. I have to say I'm skeptical about this kind of action especially given the leveraged nature of forex markets. It's reported that the Zambian Central Bank has $3.5 billion in reserves but this certainly won't last.

If commodities continue to weaken it could spell disaster for the African nation who ranks as the second largest producer of copper on the continent. The government has implemented strict policies to try cut back the budget deficit it's facing so I can't envision seeing the economy getting better before it gets worse.
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Wednesday 11 November 2015

Negative interest rates don't help mend a broken economy

I've been following commentary from central bankers who feel poised to tell the market that if things don't come right with the amount of stimulus already being pumped into the system then there's a possibility that negative interest rates could come into play.

We've seen the likes of Sweden, Denmark, Switzerland and more recently the ECB lower rates to below zero in the hope of dissuading those sitting with hordes of cash in the bank accounts from keeping high balances in their bank account and instead withdraw it in an effort to stimulate the economy that's been sieged by deflation. 

The Fed Chair Janet Yellen came out not so long ago stating that if the economy were to weakening enough the monetary policymaker couldn't discount the use of negative rates which at the time spooked the market into thinking Fed members saw greater risks than what was presenting itself at the current time. 

Before that suggestion was made by Yellen, there were many on social media calling for the introduction of QE 4 which can only be described as absurdity as the markets reliance on free money is starting to imitate that of a junky realising that it was less than a year ago that Fed stimulus had stopped. We can't hide from the facts that these monetary easing programs has help lift most stock markets around the world as this money needed to find a home where returns were higher than the arbitrary low level of interest paid for keeping it in a bank account.  

If one considers the state of European politics and the mess that's been created by socialist governments promising the world yet delivering nothing that has led to somewhat of a revolution by voters demanding that the promises that were made be met. The problem comes where you have a nation that refuses to work and rather rely on social payments as a means to earn an income or where the retiring age has been dropped as low as 55 in some cases. 

The massive amount of debt racked up to fund this social experiment has reached new heights to the extent that it has resulted in many governments falling prey to being too reliant on this money and not doing enough or rather being squeezed when it comes to raising revenue for government to implement such policies.  

This all falls back on the ECB to pull a rabbit out the hat with no political cohesion taking place it forced to do whatever it takes to prevent deflation from gripping the economic region which is why Mario Draghi is on a continuous fight to ensure the eurozone doesn't fall victim to the same fate being felt in Japan.   

However the point being that politicians too easily fall back on the ECB for help because they themselves cannot maneuver as they come to the party with a bag of promise but are threatened to implement austerity measures from lenders leaving them stuck between a rock and a hard place. 

One such case was when Greek prime minister Alexis Tsipras called a referendum vote to decide whether Greece should accept bailout demands from lenders. The desperation EU leaders will go to after they know very well that what they are proposing is simply impossible is simply gobsmacking especially when it concerns a vote of which the voter must decide if the process whereby Greece must implement austerity measures to secure bailout is tantamount to asking a 6 year old child if misbehaviour deserves appropriate consequences. 

To add some flavour to the hold saga, Tsipras merely negotiated himself into more stringent measures that were proposed to him before the Greeks rejected the bailout terms meaning there's only more problems to come in the future. Simply a case of kicking the can down the road. 

In conclusion, an economy operates with two policy frameworks that are used to speed up or cool down a economy and that's the fiscal and monetary policy. There's only one predominant policy in play right now and that's the ECB. The longer governments hold out on fixing their economies the deeper the troubles will get for the eurozone.  
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Tuesday 10 November 2015

Lonmin could a basket case for not investing in South Africa

South African troubled platinum producer, Lonmin Plc has responded to investors deliberate refusal to support a rights issue announced last month in an effort to raise $400 million to help reduce its debt exposure as the company is battling to plug the seepage on its financial statements following a plunge in the price of platinum that's resulted in the company being forced into a corner.

I touched on the topic briefly in yesterday's blog where I was discussing the possibilities of seeing a revival in the price of most commodity prices after an unusual strength in the dollar and lack of demand coming out from China.

The ailing platinum producer has had it's fair share of negative press over the past three years with the most notable being the massacre of 34 miners in Marikana who were gunned down by the police following an illegal strike over wage demands. Since then the spotlight has been firmly on the platinum sector and more importantly Lonmin management.
Government's role in pressuring the major mining players in the platinum industry to hold out on retrenchment has led the company to seek out the option of borrowing debt to cover it's cost as the platinum price continues to tumble leading to a financially dire situation. The company has nowhere else to turn except shareholders who are refusing to budge after footing a previous capital raising exercise only a few years ago to the tune of $800 million.

I tend to sympathise with shareholders anger after placing its trust with management who have only squandered the cash to appease political role players without taking a firm stand on what would be deemed in the best interest of shareholders who retain the biggest risk out of all role players.

The deal however has been underwritten by the government investment arm PIC (Public Investment Corporation) as well as Standard Bank and JPMorgan & Chase but to name a few. This was enough to satisfy shareholders only momentarily as management proposed that the rights issue will be priced at 1 pence or 22 South Africa cents adding that every 1 share held will entitle the shareholder who takes up the offer to 46 new shares.

Following the rumblings in sentiments pre-announcement of the details of the rights issue, management basically came to the conclusion the only chance it has to raise the necessary funds is to force the hand of shareholders by offering such a significant discount in the price that it would result in complete dilution of a shareholder's stake if they didn't take up the offer which does smack in the face of shareholder confidence

Shareholders are voting with their feet today and have smacked the price of the stock by a whooping 35%  today as they show disapproval of management's tactics. If management is shovelling out such distressed actions in response to no confidence on behalf of shareholder you really have to wonder how much longer the company has as a going concern.

We have to face a number of realities that have caused the situation to spin out of control as it has, one being that the government's role has only made things worse instead of improving it. At the time when retrenchments were vehemently shouted down, there was already a glut of supply in the platinum market. If producers were allowed to cut back as proposed we probably wouldn't be in this situation today.

The continued production of platinum to fund this political power struggle has only resulted in more supply coming to market exacerbating the glut further, driving down the price of platinum. The trade off has been short term gain and long term pain which should've been the reverse.

Seeing Lonmin going bankrupt might be the best outcome for both Anglo Platinum and Impala Platinum who are both the world's biggest and second biggest suppliers of platinum as less platinum would come to market curbing the supply side of things but one really has to question the action of government.

Lonmin might be the face of future investment decision made by foreign investors seeking opportunities outside the borders of their home nation. If the government is willing to allow a company with such a elaborate history spanning over 100 years go to waste then what are the chances of the rest of the already listed companies of being saved from the same fate?
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Monday 9 November 2015

Commodities terrible year and future prospects

Commodities have been a hot topic this year with many plunging to lows last seen during the panic of the Financial Crisis. The two factors stirring problems within the sector is a stronger dollar and weaker Chinese demand with the former burying the dagger deep in the soul of most producers that have been grappling with the failure to export enough to in demand nations as the dollar hampers the affordability.

I wanted to deal with a few cases and commentary around widely followed commodities and see if there's a distinct trend emerging and whether producers need to prepare themselves for a more bleak 2016.

Coal

One of the key players throughout the world and probably the easiest prey for climate change activists, coals use in the generation of electricity largely contributes to industrialised economies that rely on a consistent supply of electricity to power energy demanding machinery that manufacture millions of consumer goods in a day.

Coal is the cheapest yet the dirtiest form of commodity to produce electricity which is why some nations opt to build coal power stations to relieve short term demand. China is one of those examples as the migration of many people to newly built cities has required the government to set up these power stations in a relatively short span of time allowing the spotlight to be shone  on the nation's contribution to climate change.

I don't think the dip in coal consumption we seeing out of China has much to do with policy enforcement regarding the transition from dirty to clean energy, a programme like that would likely take years before we start to see any real changes, however I do believe that it's been caused by an overestimated expansion in output that has resulted in millions of tonnes of coal being brought to surface with no buyer able to purchase it due to demand.

We saw a huge spike in demand as China electrification process took flight so much so mining houses were unable to keep up with demand, we are now placed in a predicament where there's simply too much coal. I have no doubts that once China starts to grow again we could see a surge in prices but how long that will take is anyone's guess.
Grains

We'd all like to think cheaper grains price means less hunger in the world but we need to take cognisance of the fact that climate change is affecting the output every year and with an ever increasing global population refusing to halt, that in itself is placing a massive burden on farmers and various roleplayers to come up with a sustainable soultion.

We can see from the chart above the southern hemisphere nations producing wheat and corn are currently experiencing adverse drought conditions that could throw the balance out and possibly push up the price of both commodities.

Oil

The biggest casualty of the downturn that started before the rest of the commodities rot set in, oil players have been playing tug of war with each other over supply. The US who delivered on a threat to become energy sustainable by producing its own oil by capturing shale gas and then converting it into fuel has had its efforts hampered by the actions of OPEC who is insistent on not cutting back production.

OPEC's thinking is if it can lower the price of oil to such an extent it would push out shale gas producers who have to grapple with a higher cost per barrel due to high capital layout in setting up new wells. So far OPEC is succeeding with most wells operating dropping every week in response to the supply shock.

But that doesn't stop other players from taking advantage, nations such as Russia. The former communist state has been sealing crucial deals with big buyers such as the likes of China whilst the bickering in the oil price war continues.  The combined contribution to oil supply by Russia and OPEC is equivalent to 50% with the former making up 10%.

Countries such as Venezuela and Nigeria who aren't particularly efficient in the production or capable of managing such a dramatic downturn have both called on Saudi Arabia, the leader of OPEC to called an emergency meeting due to be held in December with Venezuela asking that Russia be included however that suggestion was shot down.

I believe the oil industry is an interesting place at the moment with many players now posing a threat to global oil supply dominance. There's a lot of politicking behind each one's motive but the trade off is greener energy becomes more expensive relative to the downturn in oil prices with not much optimism heading into 2016.

Platinum

 Precious metals and most notably platinum have seen prices fall off the cliff as the world demand for cars crashed into expectations with no sign of revival. Even the drop in oil prices wasn't enough to push consumers from trading up or buying a new vehicle.

Again this comes down to China where most of the growth in car sales is seen however with the drop off in economic activity and a debt burdened consumer dealing with constraints there isn't likely a chance of seeing any vigour coming into the sector.

In South Africa where the majority of the world's platinum is produced, miners have faced an uphill battle with labourers demanding a living wage that has led to unrealistic wage increases to be passed through ramping up the costs of production so much that it's forced these mining houses to start the process of retrenchment.

But the SA government has stepped in on a few occasions and pressured these companies to not go down the route of mass retrenchment as it would stall the economy. The real problem here is the government doesn't want egg on it's face by promising employment for all when the situation on the ground is anything but.

This has led platinum producers to continue producing at levels that are not sustainable and if they had a chance to cut back on the supply it could help prop up the price but at what cost. Lonmin the world's third largest producers has battled as hard as it could and is now facing possible closure due to its debt exposure it took out to appease everyone else.

The SA government is sitting in a catch 22 situation, it's either you let the platinum producers die and no one has a job or renegade on your promise and allow retrenchment to start, really tough choice but priorities have to be weighed up.
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Friday 6 November 2015

What's in store for major currencies if the Dollar strengthens?

The Dollar grows stronger everyday as the date approaches for the Federal Reserve to finally lift rates in the US in nearly a decade. We've see the profound effect not only on the expectations around the date when we will see the rate rise but also the strengthened nature of the dollar shaking major economies in emerging markets as well as handing a firm punch in the face of commodity prices.

I thought it would be the right time to assess the US dollar versus other major currencies to map out where these developments could possibly take us. I don't think a stronger dollar is a good indication of prospective economic activity globally and we could see currencies playing a big role in determining the global growth going forward. 

USDCAD

 The US Dollar Canadian Dollar currency pair is what you would consider a good indicator of the direction commodities could be headed to in the months to come. Long term charts assist us in seeing the whole picture as it has come to be and holds a greater priority to shorter timeframes on account of reliability, when these technical patterns break they show a deeper shift in sentiment.

We see on the chart below that the price has broken a long term downtrend and subsequently rallied where it has lobbied itself above a resistance zone which seems to confirm a cup and handle formation. The price has since retested that zone and looks as if it is ready to start it's ascent once more.

On the long term basis this paints a grim picture for commodities in the next 2-3 years. If you thought the slump we've so far witnessed was enough to make valuations in commodity producers look cheap, think again as the dollar plays a crucial role in the trade of these important resources.

Commodities are traded in dollars so a stronger dollar makes it more expensive added to the fact that China has yet to confirm a bottoming out of it's economic slump and you have a recipe for disaster.   
EURUSD

When Mario Draghi announced a new round of QE stimulus earlier this year it provided a much needed boost for the Eurozone that's been suffering from seismic deflationary pressure over years now with some expecting them to head the same way as Japan.

The monetary injection was all what was needed to weaken the Euro further and please policymaker who hope to see some economic recovery especially in the exports area. However given the political turmoil currently facing the region, the currency hasn't staged the bounce many thought would materialize.

Draghi has stated in a more recent ECB meeting that he is ready and willing to stimulate the Euro economy if needs be which did excite the markets and possibly why we've seen a resurgence in global equities. It's for this reason that  the Euro will depreciate further and with the Fed ready to hike it al but provides a double whammy effect on prices.  

The real risk here is although this might be positive for the short term the EU cannot sustainably keep rates on hold and print money, there needs to be a rethink of how the economic operates especially when they grappling with an aging population and many of those relying on the state to provide grants.
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Thursday 5 November 2015

Top Tweets Today: 05/11/2015

Time might be running up for the third biggest platinum producer in the world, Lonmin Plc as it warned investors ahead of a proposed cash injection from a share sale, that should it not go through the company will be faced with no options but to close it's doors.

Management wants to raise $400 million to help reduce its debt levels that are hampering the company's profitability. Added to this the platinum price has hit lows crippling the entire platinum mining industry.

The company has fallen on hard times after a period where short term loans were taken out to keep operations continuing however with the slump in plaitnum prices has reduced the company's ability to service these debt let alone pay them down.
Not so long ago there was an increasing cloud of negative comments coming from the investing community over Chinese authorities failure to prevent a hard landing. So much so it was the cause of a mini meltdown in global financial markets.

However with economic data numbers slowly stabilising, although still bad it is still better than armegaddon as was predicted a few months back. Fed Chair Janet Yellen even cited the headwinds to global markets stenmming from the Chinese stock market rout as a risk to raising rates in the US.

 Today was the turn of the Chinese to throw stones at their economic counterparts in an attempt to get investors off their scent of the real situation happening in China. Weighing both economies up, China is the better of the two because it has a lot more policy options still open it can implemented in addtion to existing measures.

The US however is stting with near zero interest rates and a lack of activity pushing the economy forward. I tend to side with the Chinese on this view when you think of the scale of money that had been created since 2011 that needed to find a home where returns would satisfy investors appetite. Most of that all went into emerging market economies, a part of the world economy that has really been battered this year.

In essence as the date draws nearer to hiking rates all the money that flowed out of the US is now making it's way home putting a tight grip on dollar strength. This will continue to be a theme that will dominant investors mood to investing.  
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Wednesday 4 November 2015

4 things to consider when trading a small account

Most of us aren't lucky enough to have hordes of capital to commit to trading, in contrary most trading adverts that try lure you into buying services claim with small amounts of capital (I've seen ridiculous figures as low as $20) you can quit your job and trade from the comfort of your home.

Nothing can be further from the truth in these statements once you've experienced firsthand the realities of trading. Hard work, determination, persistence, patience and many more strong emotive forces will push you through the highs and more importantly the lows you encounter along the way.

If you were like me and started trading with a small amount of capital you're not alone, in fact it's a common reason why so many fail in their attempts at trading.  So I thought to share with you some important things to consider when dealing with a small account when you can't quite attain the level of consistency you desire.

Cost of doing a trade

 Probably the most critical part of trading with a small account is the costs you incur executing a trade. Whether your broker is charging you a fixed percentage commission of the trade exposure or shading by using a spread you need to know how much it's costing you to transact because at the end of the day it affects your level of profitability.

A good example is some brokers charge a fixed percentage per trade but then impose a minimum commision that will be charged if your exposure is below a certain amount. The lower your exposure is below that level the higher the commission becomes and an increasing price level to breakeven.

Eg ABC broker charges 0.25% commission per trade but charges a minimum of $25 for trade exposure lower than $10 000. The total percentage gain in your favour to break even would be 0.5% however if you were trading with an exposure of $5000 you would need a gain of 1% to do the same thing. The less the cost to do the trade the higher the probability of you succeeding.

Discipline & Risk management

 This follows on from the previous point in terms of wanting to make the trade efficient as possible but the trade off would then mean you would be risking more capital than what you should be, putting pressure on you both financially and mentally.

You have to come to the realisation that if you want to create consistency in your trading you have to actively employ proper risk management rules constantly which means trading with a position that may not be as big as you want. However you won't suffer the same fate so many others do when they ignore these rules and end up losing bigger than they thought.

Same goes for discipline, if you can't manage trading with a small account then how can you expect to manage a bigger one?  By practising discipline with a small account you are preparing yourself for when you eventually trade with a bigger account and won't have to reset the learning process every time you adjust your trading to a larger account size.

Focus on finding what works for you

 You won't simply start trading and instantly make money as is claimed so you need to set aside a good amount of time to study markets behaviour and patterns that will give you the edge. This requires you to deal in the market with little to no knowledge in order to understand how it works but in doing so you are putting your trading capital at more risk since you are bound to hitch a problem in the process of your experimentation.

This is why using a small account keeps the losses to the minimum ensuring that if you do lose it all you aren't ruined financially.

Don't try succeed by overgearing

 I've seen this happen so many times to traders who fallaciously believe that being successful in trading means turning over large profits all at once in an attempt to cut corners. Unfortunately there are no shortcuts when it comes to trading and success doesn't only rely on the amount of profit you can accumulate in a short span of time but more of an accumulation of good traits that prevent your ego from interfering with your decision making process.

Trading is about profiting in small amounts and being disciplined enough to hold onto those profits.
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Tuesday 3 November 2015

Will the S&P 500 produce a Christmas rally?

Markets have been lethargic of late as traders begin to assess the strength of the present rally that was spurred on by possibilities of monetary stimulus by various central bankers however at the same time being fed (excuse the pun) with hawkish statements from the Federal Reserve.

The initial reaction after the announcement last week was negative with a comeback rally from the bulls that helped the index finish strongly up by over 1%. But since then we've seen the market digesting the news with not much movement in a either direction leading to frustration on both sides.

 With less than 60 days left in the year everyone's focus starts to shift towards the much anticipated Christmas rally to try cheer up the dismal stock performance seen so far this year.

An interesting development that is unfolding at present is the new highs made by the Advance/Decline line on the S&P 500. But what is the Advance/Decline Line?

It is the net advance of the gainers and faders on the S&P 500 accumulated everyday. So a correct analysis would say that making new highs means there are more stocks advancing than declining indicating underlying strength in the market.
If one looks closely at the S&P 500 you'll notice that there is divergence here where the index is making lower lows and the Advance/Decline line is going higher. This indicates a degree of weakness to come in the short term.

Although we cannot say for sure what will emerge over the long term but I think it's safe to assume that after such a mammoth rally it's good to see a pullback or consolidation take place. Whether buyers have the ability to take their cue from there is to be seen, but if they do I'm certain we'll see a Christmas rally materialize.
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Monday 2 November 2015

PR disaster haunts Africa's largest mobile telecommunication giant

Last week turned out to be the worst for mobile telecommunication giant MTN on an announcement from the NCC that it will be fining the company $5.2 billion because they had failed to disconnect unregistered subscribers within the time parameters set out by the regulatory body. Most commentary that has swirled around is such a fine is too exorbitant for the scale of the crime with some saying this could be a way for the Nigerian government to raise money after the collapse of oil which contributes  a large portion of economic activity.

But perhaps the biggest contention was the failure by MTN management to disclose this fact to shareholders based in Johannesburg where the company has it's main listing. Reports had come out hours before management released any sort of statement thereafter silence with investors left scratching their heads.

Today more reports surfaced from Nigeria indicating that the company had failed on its appeal to the NCC to lower the fine and caved in into the demands and will pay the fines with rumours abound that management was able to negotiate to pay off the fine in a series of payments. As of now there has been no confirmation from the company so we treat these reports as speculation.

This sent the stock price plummeting below the R150 mark reaching a low of R142.50 shortly before bouncing.
There was initial confusion as to why the share was suspended from trading with most believing it was due to the excessive movement experienced in the first two hours of opening trade, however this notion faded fast as the usual time up counter had passed and no trading resumed. This resulted in even more speculation of what was developing.
Until finally, an hour after the suspension of trade the public was informed of a decision taken by the JSE group to halt trading saying there was a pending SENS announcement in a vague statement released by the exchange.
There's a few things that I'd like to address;


  1. Why is information that has a material effect on the business of MTN kept being released to the media before it's dissemnated to shareholders?  Today was the second time in less than a week that reports were found in Nigerian media which eventually filtered its way through to shareholders which is a clear violation of exchange rules. Being amongst the bigger listed stocks on the JSE the company can't play ignorant in this respect as it sets a precedent for the smaller players. 
  2. Management's silence hasn't helped investor confidence and ignoring questions only serves to increase the uncertainty of trade around the stock.  
  3. The JSE needs to address its own communication channels as informing the market only an hour after trade was suspended is simply unacceptable. Shareholders rely on the prompt and effectiveness of the delivery of information to make a decision and leaving them in the dark only heightened speculation. 
These raise serious doubts over positive sentiment finding it's way back into the stock anytime soon with many long term investors now questioning management's handling of the whole situation which could have been dealt with in a better way. Whatever happens from here onwards is anyone's guess but I think management is going to have a hard time convincing shareholders that it's actions were in the best interest of all. 

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