Opportunities
UtdEnvirotech (U19, $1.025) proposes $293.4m purchase of Memstar (5MS, $0.099) unit. It will pay 25% in cash, 75% through issue of some 200m new UtdEnvirotech shares.
Comments: Not positive for both companies in the short-term. Textbook corporate finance tells us that when a company pays 75% of a takeover in stock, it is not a confident move. UtdEnvirotech shareholders can expect to be diluted. Memstar shareholders may not gain much from this either. The little cash paid by UtdEnvirotech is not wonderful. Sentiment-wise, market may sell off after a churn in the past few days. It has already been a weak morning for these 2 counters.
Blumont (A33, $1.415) plunged into the red to the tune of $22.4m during its fiscal Q2 as the company wrote down financial assets. Net earnings for the April-June 2013 period were down from $11.9m during year-ago quarter.
Comments: Not positive on the share price for the moment despite the short jump in price at the opening.
Commentary
A statistic rocks yesterday’s hypothesis on USD weakness may result in weakness in US stocks. Last night, flow data from BNY showed that US stock inflow was at +2.80. 95% of the time, this statistic should be between -1.96 to +1.96 (those who remember your high school statistics will appreciate this much better). US Bond inflow was +2.07 while USD outflow was -2.96. A stark divergence. We can rationalise the bond inflow despite the USD outflow but the stock inflow just shows that support from US investors is exceptionally strong (US investors do not need to change for USD to buy US stocks so their action has no impact on USD flow).
This throws yesterday’s fear that negative sentiment in US may negatively affect Asian markets for now. Contrary to popular belief, I would like to comment that Asian markets appear well supported at the moment. My forecast is this support can sustain throughout this week but it is uncertain if it will carry throughout August. Call it a hunch. I may be wrong.
No comments:
Post a Comment