Deutsche Bank’s shares fell again yesterday (-0,97% added to the 5.16% drop on Friday) after releasing a profit warning for the 2017 fiscal year. This is due to the negative impact of the tax reforms in the US and worse figures in investment banking as a result of low trading levels.
Analysts at Julius Baer think it is “comforting” to see that the bond market is efficient. In other words, they say that for German bond investors it is basically the same whether they invest in negative- yielding German Bunds or buy US bonds and pay for the hedging of the currency risk.
AlphaValue’s experts are worried about the lack of stocks in the Stoxx600 universe that match the requirement of “post Uber” business models: ones where capital intensity is light, where green is more than a buzzword and where businesses can bank on forever free money. As they comment “somehow, the revamped Siemens fits the bill”. Why?
The positive dynamic behind Spanish stocks is a fact. Carax- Alphavalue’s analysts have repeatedly stressed it and indeed have selected to be, for most of H1, over-weighted in Spain in their Portfolio, a selection of stocks for a dynamic return.
Year 2017 will bring a change in trend for Técnicas Reunidas, after two years of sharp declines in investment in the petrochemical sector (-43% in 2015 and -27% in 2016e) as a result of the drop in oil prices. According to ACF’s analysts this hypothesis is supported by forecasts for there being an equilibrium between supply and demand for oil by mid-2017, which should reactivate investment in the sector.
The company is a great business that can raise €8bn to essentially hand over the proceeds to the US courts without destroying its market cap (c.-10% on the news). “Hats off then to Mr Cryan, the CEO of Deutsche Bank, for keeping the benefits of the doubt for more than a year into the job”, says Carax- Alphavalue’s analysts.
In equity terms, Frexit risk would leave financial entities having to fuel the economy while depositors would sell francs and buy euros. Obviously the loss in the lending margin would be a huge multiple of the fear spread.
Behavioural finance theory tells us that markets are susceptible to short term emotional moves and politics can be part of that. For example, the current narrative of isolationism and tariff barriers impacting EM exporters as strategists and analysts try and pull out economic effects from the potential policies of the new US administration.
Since the DB /LSE merger was announced (a year ago officially), it has been more beneficial to LSE shareholders than to DB’s, with a valuation gap (29x for LSE vs. 18x for DB) that has never closed. Respective shares have continued to trade in an uncorrelated way suggesting that not only the deal is not consummated but that the GBP/Brexit tango cannot be ignored.
Carax Alphavalue | The recent OPEC deal was more than welcomed by the Norwegian oil company which has more than 60% of its production coming from the Continental Shelf. With little by way of refining compared to its integrated oil peers’, Statoil’s (Add, Norway) earnings are a near direct call on oil prices.