Oil markets are more concerned by Saudi Arabia's oil production than geopolitics in the region, says Barry Dawes, head of resources at Paradigm Securities.
Blog
Oil markets are more concerned by Saudi Arabia's oil production than geopolitics in the region, says Barry Dawes, head of resources at Paradigm Securities.
- Gold sector leading the market upturn
- Gold stock market action confirming new year long bull market
- Major players in gold physical market covering shorts
- Australian Gold Index up 46% since 1 December 2014
- Paradigm Portfolio is up 78%
- Resources turnover market share downtrends decisively broken
- Global economic activity still lively
- Global bond market continuing to roll over into bear market
- Further STRONG BUY signal for Australia gold stocks
- Preferred stocks NST, EVN, MLX, BLK, DRM, DCN, MML, RSG
- Smaller plays with TNR, TYX, PNR
The XGD is barely above the levels of 2003 and PERs and yields are now very attractive for this sector. Also the buybacks of so many Australian gold mines from the likes of Barrick and Newmont is actually giving domestic companies a more significant share of Australian gold production again.
The A$ below US$0.75 has provided an average gold price of around A$1,550 so far in 2015 and helped a large build up in cash for gold producers.
Dividends are flowing again.
Gold production in Australia is increasing and several new important expansions should see further growth over the next several years.
Source: BREE and Paradigm estimates
The action in the gold share market here in Australia is strongly suggestive of the bottoming process being mature and the real long term uptrend in gold and gold stocks is resuming.
As stated, this market action is very constructive and an improvement is being noted in market breadth, smaller stocks are running and investors are taking up capital raisings again.
I actually have my first gold sector IPO sponsorship since 2007 now underway with A$4.2m for Golden Eagle Mining coming soon.
The market action is very encouraging with XGD's share of All Ordinaries market $ turnover now well over 2% again and looking to double from here.
The prospects for earnings and dividends is what drives stock prices and gold companies always have also had the option value of a higher gold price or increased resources. The prospects in recent years have been quite the opposite so all option value has been squeezed out and value is now substantial.
The prospects now are greatly enhanced but sentiment is still very poor so the opportunity has ''once in a generation'' status.
The XGD is still 70% below the April 2011 high when A$ gold was A$1408/oz. It is now A$1550.
As always, it is important to put all market action in to perspective and to consider what the markets are really telling us.
Again, the adage, `heed the markets, not the commentators' has helped so much.
The markets are also saying that the physical demand from India and China is strongly underpinning demand and that, in great contrast, the record level of over 300 futures contract ounces sold for each deliverable ounce registered on COMEX says a serious mismatch might just develop along the way.
The current market is not a just a random point in time but a manifestation of the long term global outlook but coloured by today's sentiment.
Returning to my previously published long term themes we can note that the oil price bottomed at around US$10/bbl in Dec Qtr 1998 and then had almost 10 years of rising prices before peaking at US$147 in May 2008. The CRB index of commodities (itself highly skewed to energy) showed a similar rise.
The forces behind the commodity bull market were global growth and the remarkable entry of China and its voracious demand for raw materials. From the resource sector perspective, the rise of the steel industry in China to over 800mtpa and China being responsible for the consumption of around 50% of most industrial metals dwarfed anything in modern economic history.
Export volumes and market prices were very strong and the marginal increases in demand required marginal increases in output and often these marginal increases were from marginal projects.
So a slowing in demand growth created a change in the market momentum and sentiment and brought about a sharp fall in prices and over seven years of bear market since mid 2008.
The speculative blip was 2010-2011 but this has now been thoroughly squeezed out.
We can see this in the performances of the various resources indices in terms of price but we can see this even more painfully in the declining share of ASX market turnover.
Mining and Metals had 25-30% of turnover for 2007 to 2012 with spikes to 35%. Its down to just 13% now. Google, Apple, Tesla and banks have been far more attractive to investors.
But this downtrend has now broken and like the Gold Sector is attracting accumulation.
However, we should all note that the real reason for this improvement is what Dawes Points has been saying all along.
The Chinese economy is still growing and with the important One Road One Belt Silk Road concept the demand for raw materials will be maintained and will continue to grow.
Crude steel production has held up well against the calls for a major fall but surging steel exports to ASEAN and to the numerous China-sponsored infrastructure projects in many parts of the world have hidden weaker internal demand.
Nevertheless there has been a major drawdown of iron ore inventory on the part of the steel mills in China, a drawdown in the port stocks in China from over 110mt to under 90mt and all the major producers have run down their own mine and port stocks. Obviously the high cost exporters around the world have stopped and domestic magnetite concentrate production in China is falling sharply at last.
I had expected a short cover rally in iron ore in this half year as this inventory reduction is readjusted upwards but it hasn't eventuated.
Consumption of most metals however is still at record or near record levels and LME inventories continue their declines.
This is not the stuff of recessions and major declines in economic activity.
The GFC only spurred China onward but its 1,375m people have had a taste of a better life and this can only grow stronger.
China has also the long term goals of its westward-looking agenda that aims to link not only the 3,300 mi people Dawes Points referred to over the past few months but to Europe linking another 1,100m to East Asia.
In today's crisis with IS in the Middle East, the infrastructure quest through the `Stans might actually change the power base and outflank the extremists and lead to Islam's own Reformation. Who knows!
We still need to continually revise what we think of China. Those 1,375m people will be 1,400m very soon and the build of infrastructure will continue to change trade patterns.
The Dongfang Modern Agricultural Holding Group IPO by Paradigm Securities also gave us a very important window into another side of China. (The IPO raised over A$39m and so far has reached a peak of 45% gain on the IPO price.)
China has so many important regions that have over 200m people individual economies that can be operating economically quite separately from each other so we should be wary of commentary from Guangzhou or Shenzhen close to Hong Kong when all the action might be in faraway Chongqing or Chengdu.
So China has this combination of 50% of global consumption on one hand and then the emergence and entry of so many new intermediaries with different trading policies and procedures. For the resources sector this really means numerous new players in the supply chains and the participation of these new traders with or without inventory. Who is long or short on anything? Who is a producer or user?
Extremely hard to know yet.
More new players are in the markets but many of the established groups elsewhere in the world are now holding back.
Could this be new but inexperienced players trading in the futures markets?
Following the sentiment and not the facts? Heeding the commentators and not the markets?
In my experience, all this is almost guaranteeing a return to robustly positive markets in the decade ahead.
In contrast, the market place is still extremely bearish and copper hit a six year low last week but some interesting things are taking place elsewhere.
Firstly here at home Australia is a major global producer of raw materials. The lower A$ has been very helpful in allowing A$ cost producers to recover and rapid changes have been made in the domestic cost structures as well. Some stocks are holding up well and like the Gold Sector, are leading the world out of the gloom.
On a bigger scale, the performance of commodities and the equities of those companies that produce and use them often give us clues to the sentiment of the market place.
Oil may be bottoming because major integrated oil and gas companies' stock prices and the US E&P indices are not confirming recent lower oil prices. Oil demand is still rising at 1.5mbopd each year and US tight oil output is declining.
We can look at Exxon, Conoco, Chevron, SHELL, BP and BG Group to show constructive market action and the S&P E&P (Exploration and Production) Index may be indicating its 60% fall in 18 months is overdone. In Australia, Woodside, Beach/Drillsearch and Origin look better and Santos after its capital raising might just get by.
Iron ore stocks FMG and Rio are not confirming a lower US$ iron ore price although BHP and Vale are weaker and are carrying the weight of the SAMARCO tailings dam collapse. (We might ask what the Brazillian bureaucracy was doing about the standards they had previously laid down.)
All this is against a global economy that hasn't fallen over and the US, China and India may just get stronger. Even Japan with its stagnant economy is still cranking out steel at full capacity of 110mtpa.
So the outlook is looking even more encouraging and for us in Resourcesland this graphic below is speaking volumes in clear data.
Our basic livelihood of emerging resources companies (XSR) is showing another clear break in the decline of market share of All Ords turnover.
The market for small resources is improving. This is hard evidence here but the signs are everywhere.
Interestingly, while the XMM and ASX200 Resources were breaking to new lows the XSR has been assisted by the XGD and has held up well.
Dawes Points also knows this from recent capital raisings for small resources companies.
THE BIG PICTURE AGAIN
The major trend assessments for investment markets have to start with assessing the direction of the bond markets. It is so clear that the growth figures in the US with record sales levels in many markets sectors and declining unemployment that interest rates must rise. US Housing Starts are still well below replacement levels of 1.5m units pa and the Philadelphia Housing Stocks Index looks to want to surge soon.
So the US bond market is looking very toppy with the 10 year having its peak over three years ago. It is taking a long time to roll over but the result is inevitable. The downward adjustment could take place at anytime now and the raising of short term interest rates may be the trigger.
The world has invested almost US$90trillion in bonds.
Even a tiny flow into hedges could be massive in commodity and resources stocks.
Stocks to think about
The recommended Gold stocks noted above are for Core Positions that should be held for years and not really traded. Stock | Price cents (AUD)
More speculative plays are
I own DRM, NST,MLX, RSG, TBR, GOR, BLK, MML, TNR, TYX and PNR. STO, BHP, DFM, BPT.
Edition #43 
Barry Dawes was recently interviewed on "The Magic in Mining" show by Kerry Stevenson. Talking about his early passion and interest in rocks, his introduction to China, and his enthusiasm for gold, this interview highlights how Barry is able to understand the resources markets as well as he does.
The Magic in Mining show is available to stream from the website or as a podcast download from iTunes http://magicinmining.com.au/podcast/015-barry-dawes-on-china-and-gold/
Nostrum deleniti ducimus provident gravida consectetuer, aute rem lobortis phasellus nibh est, optio veritatis ultricies mattis, etiam aenean. Lobortis assumenda, nulla orci massa platea, cum taciti nunc eaque molestie per reprehenderit eros, eum odio doloribus minima fuga faucibus penatibus animi, ratione occaecati? Ullamcorper aptent porttitor netus, sem ipsam inceptos congue, soluta! Soluta eveniet lorem iaculis adipiscing, voluptates placerat quasi sociosqu.
Aliqua cubilia eleifend sed est aliqua, venenatis expedita atque veniam corrupti nisl, nec error, justo! Facilisis! Ante, platea expedita sed cupiditate, facere, aspernatur fermentum sagittis, officiis, aptent! Minus, omnis magni, taciti habitant voluptatem platea natus optio? Numquam erat ipsum sociosqu? Quis exercitation exercitation dui conubia. Mattis architecto aspernatur, metus rem, phasellus, felis soluta expedita, parturient veniam pariatur aptent vivamus accusantium.
Tincidunt modi nisi occaecati voluptatibus ullam tenetur turpis cum ligula vivamus quisquam est parturient consectetuer excepteur, quisquam dictum. Consequuntur erat sit facilisis nostrud est numquam optio felis. Perferendis! Doloremque penatibus officia sagittis? Conubia, aperiam consequat proident, mollis ut inventore mi iure tellus, lacus itaque qui odit cum laoreet, diam voluptatem hendrerit rem, bibendum tortor, natoque tenetur, feugiat adipiscing ipsum tristique.
Key Points
- A$39.2m raised in A$390m market cap IPO
- DFM.ASX is one of China's largest growers/harvesters of citrus produce
- Produce sales expected to be 15% higher in 2015 at 230,000 tonnes
- Harvest season providing all DFM income now underway in Dec Qtr
- Prospectus forecast give A$75m earnings (EPS A$0.19) and PER <5.5x
- Cash balance of A$80m rising to A$150m (pre acquisitions) by end Dec 2015
- China consumer goods demand still growing strongly
- Excellent long term growth prospects
You can draw some very interesting conclusions here about sector rotation.
So when looking at Dongfang Modern here is what you find.
First of all I hope you expect that the Due Diligence carried out on this company is of a high standard. The Legals were overseen by Piper Alderman and the accounts were reviewed by PKF Lawyers. The accounts have been audited since 2009 by PKF Hong Kong so the data is reliable. The cash on the balance sheet is actually there!
I have made mention previously that this has to be the most impressive set of accounts I have seen in my +30 years.
This company was set up in 2005 and in 2008 the current Chairman injected about US$6m to acquire an 89% holding.
This was the last capital injection to the company. No more equity and no debt at all.
The plan was to acquire as many plantations as possible and by 2012 it was 9 plantations over 4500 hectares and by end 2015 it will be 19 plantations over 9,000 hectares.
That initial investment of US$6m in 2008 has probably provided the highest multiyear IRR ever recorded. After A$57m (A$ equivalent) earnings in 2014 DFM's June 2015 Interim showed Retained Earnings of A$216m. All done without additional equity capital and without debt.
These numbers are attractive and make interesting reading. 2015 and pre 2015 are PKF numbers and the forecasts post 2015 are Dawes Points alone.
The company is now probably the largest citrus grower/harvester in China with about 1.3% market share by revenue in a very fragmented industry. So many industries in China seem to be highly fragmented and the aggregation and consolidation process there has probably twenty years more to run. These are important business drivers and help to show another side of China.
Paradigm carried out major financial due diligence and modelling and made a site visit to several of the plantations.
Detailed forecasts were made based on all available published information and then some conservative assumptions were made.
Growing and harvesting citrus produce isn't all that far from something like coal mining.
You have a resource (trees) that should give a certain grade (harvest) with output of net fruit (grade) and at an expected recovery (yield). The selling price is the market price so revenue is saleable output time's price. Costs are roughly fixed so improved yields and productivity improvements can increase volume without fixed costs rising. Dongfang is hoping improve yields by about 4-5% pa for the next few years. So output should rise and costs rise less so.
Output will also rise as additional plantations are acquired.
Prices have been rising over the past few years too because demand has been stronger than supply and supply growth.
Dongfang's operating margin has been over 40% for the past few years and it expects to will stay high.
A study of future earnings for the next decade based on increasing tree volume through plantation acquisition, rising labour cost (which they are doing), modestly improving harvest yields and marginally higher product prices gave some quite astounding numbers.
Dongfang was #2 by sales revenue in 2014 with 1.2% market share after AIM listed Asiatic Citrus but the increased output to 230,000tpa in 2015 by Dongfang coupled with a couple of operational issues for Asiatic Citrus should now make DFM #1 with about 1.3% market share.
Market leader with 1.3% market share reinforces this fragmented industry concept.
Dongfang would like to go to 4-5% market share over the next several years so that implies organic and acquisitional growth
The numbers for Dongfang as assessed from public information by Dawes Points look like this with historic data in RMB and converted to A$ at historic rates or using the IPO Prospectus forecast of RMB 5:A$1.00.
This Valuation Matrix shows DFM's P&L and Balance Sheet in one and also gives a valuation target for DFM.
Note three years earnings history, the current year estimate and three years forecast for EBITDA on a product basis (note the very low D&A levels) and no interest cost.
Forecasts are deliberately conservative on prices, output, acquisition growth and costs but still show earnings rising steadily rather than surging.
The staff levels are low (only about 100 people) so administration expense is low and all harvesting is by contractors so EBITDA for each product is net cash. Note no tax is payable on earnings from agricultural food production and that almost all earnings have been reinvested, with capex mostly into acquisition of additional plantations.
The balance sheet is cash-rich without debt and EBITDA against estimates of sector assets gives a Return on Investment (on book value) of 30% overall and almost 100% for tangerines.
If we put each product division on 5x EBITDA, and add the cash, the appraised value for DFM is over A$500m and A$1.47/share compared to the IPO price of A$1.00.
Note that the forecasts have used 5:1 on the exchange rate, well above the current level, so A$ earnings would be higher with today's 4.62:1.
I expect over time that the market will give a much higher rating after DFM delivers on its plans.
The Chinese Equity Market
The recent volatility in the Shanghai Index had many calling for the end of China. The commentary had conveniently ignored that China's equity markets had declined a total of 65% over 7 years whilst its economy more than doubled. The 150% rise in less than a year seems quite modest compared to previous surges.
Dongfang Modern is one of the largest China operations listed on ASX and shouldn't be the last.
If you came into the IPO, (and thanks for your help), you probably only came in in a modest contribution.
If you haven't, the hard work has been done so you should now be able to come in at lower entry risk to share the gains.
Barry Dawes
19 October 2015
I own DFM and Paradigm was the lead manager of the DFM IPO.
Edition #42 Key points
- ASX Gold index up 71% from Nov 2014 lows to 2819
- Paradigm Dec 2014 Gold Portfolio up 91% weighted (unwtd +76%)
- Major rerating in gold stocks only just starting
- LME metals surge on 9 Oct with no inventory left
- Equity markets oversold - bull market resumes
- A$ jumps and US$ slumps
- I think we are getting our boom!!
- Talk to me about the next winners +61 2 9222 9111 bdawes@psec.com.au
This index has bounced from the bottom.
Try to keep in mind the time frames in these markets we have been following.
Commodities last bottomed in Dec Qtr 1998 and rallied for almost the next 10 years into 2008. The GFC gave a big selloff followed by a rally into 2011 with new highs for some metals but not for most. The recent lows give almost 7 years of decline.
Seventeen years up and down cycle of sorts. I would expect at least another 10 years upward from here!!
The US economy seems to be strengthening (no Greater Depression there yet!!) with basic indicators such as housing and auto sales very robust, China is still doing 7% GDP growth and the Shanghai stock market seems to bottoming out OK despite the hysteria. India is off to double digit growth and all those 3,300m people in Asia are doing OK.
Dawes Points views on metals consumption growth have held up with record levels still being achieved in most and this seems to be clearly shown with the continuing decline in LME inventories.
The LME inventory graphic says so much. No LME inventory for most metals. Even Aluminium has had 21 months of relentless decline from 5.4mt to 3.1m against nearly 50mtpa consumption – just 3 weeks there now.
So much in fact that the LME metals decided to have a major surge last Friday in London.
So after all the media focus on Glencore and how its impending demise was going to bring everything down it seems that maybe things aren't so bad after all.
For oil, US crude production has begun what I consider will be a sharp decline of about 800,000bopd. It is already down 400,000bopd from the highs. The high decline rates accompanying shale oil wells are still applying and the number of new wells has dropped sharply. Significantly higher productivity per well including through the use of multiple fraccs and increased charges of proppants is helping but a gross US$50/bbl is not enough for profitable operation and the drilling of the next well. Those days of +100% IRRs on US$100 oil seem far away today.
Global oil demand has been rising with the lower oil prices and the market still needs about 1.5mmbopd new supply each year.
No wonder WTI has jumped up through US$50/bbl again.
The ISIS battles and aggravation in the Middle East are getting very close to the internal workings of Saudi Arabia. Oil purchases for inventory security are likely to increase despite the current high levels. I have always considered the last fall in oil prices as a correction in the bull market.
Gold Sector Opportunities
Back to gold, Asia's strong economic growth and particularly in India and China is increasing demand for gold which should be in robust growth mode for now and for the foreseeable future. The tightness in the gold market continues and premiums are being paid for physical delivery. The COMEX games of selling paper gold where there is only one physical ounce available for every 200 contract ounces will not end happily for many who have short positions but as to when we can only ponder. The ASX gold index closed on Friday on 2819, up 72% from the Nov 2014 low. The ASX Australian Gold Producers are leading the entire resources market but I still see considerable upside in the gold sector ahead of a more general market surge. By my reckoning, a break through 3000 on the XGD would see a move to 4500 then to 6300 in quite a short time.
After almost five years of declining market interest in ASX gold stocks the trend has now clearly changed so the graphic above should show continuing relative strength as an underweight market plays catch up. Obviously initially in the leaders, NCM, NST, EVN, SBM and OGC but the smaller plays will provide exceptional returns as even modest new capital inflows to the sector just won't find enough stock.
My 30 stock ASX gold stock universe still shows an unweighted PER average of
The ASX Gold Index should now show a major increase in market share of the All Ordinaries turnover.
I will reiterate my views on the gold mining sector in Australia where I see new focus around Kalgoorlie and in particular the Strzelecki and Zuleika Shears. These gold bearing `structures' are proving to be strong continuity narrow high grade deposits that have low costs and are delivering handsome cashflows to the owners. The strike length of the Shears is tens of kilometres.
You need to know what NST is doing here and why EVN and Zinjin are so keenly interested.
From Northern Star:-
Kundana – A Corridor of Riches
- East Kundana JV Gold Output 200koz at AISC A$711/oz and grades of +8g/t,
- FY16 Gold Production 220koz at AISC of A$850-A$900/oz
- Resources 1.6Moz, up 134% and
- Reserves 0.45Moz, up 61% even after mining 200koz in FY15
- Skinners, Pope John, Moonbeam, Centenary, Strzelecki and Barkers
And watch this too:-
A little company called Cascade/Torian is very active here too on tenements that stretch along over 40 km of strike. And its share price is up almost 100% since June.
You will need to get to know this map as well.
Discoveries here have been brought into production very quickly and local excess mill capacity means rapid cash returns and very high IRRs. As an example, Barrick found the indications of the 1.2moz 11g/t Pegasus deposit in mid 2013 prior to its sale of the East Kunduna JV interest to NST in March 2014. NST had subsequently proved a 750koz resource by Dec 2014 and began mining in Feb 2015 after upgrading it to 1.1moz @ 10.6g/t. It is now 1.2moz. Most of the 220kozpa EKJV output will come from Pegasus. I like NST, TBR and TNR here.
Also ask me about a Nov 2015 A$4.2m high quality gold mining IPO I am doing in this region. Might just be the first ASX gold IPO since 2013.
And while we are talking extensive mineralisation along strike have a look at our favourite Blackham Resources (BLK.ASX).
This is a good analogy to the Strzelecki Shear projects and BLK owns 55km @ 100%.
Oh yes, and BLK is fully funded to restarting gold production at Matilda through the Wiluna mill. Up to 100,000ozpa by July 2016 at costs under A$1000/oz AISC. That's A$60mpa net cashflow (EBITDA) for a company with a market cap of just A$45m. My numbers say PER
Blackhams abridged 25km of strike along the Wiluna Structure
The ASX gold index closed on Friday at 2819 which is a 72% gain from the low in November 2014.
Some very important technical issues actions suggest much more is to come and that something very special is about to happen.
Long term Dawes Points readers will know my view on Disbelief, Pessimism, Optimism and Opportunity before the Euphoria sets in. Investors should also understand that each leg of the market has taken many years to unfold.
My view has been that Disbelief was 2000-2011 and Pessimism was 2011-2014. We are now finally into that Optimism Leg that should last at least as long as Disbelief (~10 years (say)).
This next leg will be driven by earnings and dividends and then by production growth and then by the US$ Gold price.
So there you have it.
I called the low in ASX Gold Sector in Dawes Points on 1 December 2014. I rang the bell again for gold in August and in September rang the bell for resources generally.
Opportunities abound and I am well prepared for it. Are YOU??
Call me. +61 2 9222 9111. Email bdawes@psec.com.au
I own NST, SBM, TBR, TNR, MLX, MML, RSG, BLK.
Edition #41 - US June Qtr GDP hits 3.7%
- Commodity price bottom finally here?
- Sentiment says `Ring the Bell’ for all Resources
- The herding into Bonds is turning back
- Gold Sector earnings delivering the goods
- Exploration prospects providing tangible results
- Oil prices have probably bottomed
- Bank cash deposit levels still very high and climbing
- Buy gold stocks, BHP, S32 and oil and gas stocks
- Do it this time - call +61 2 9222 9111 or email to me at bdawes@psec.com.au
The S&P Materials Sector sentiment readings are at full pessimism. Awaiting that banking sector failure in the US that is going to be even worse than 2008 – or so we have been warned! And of course the collapse in China! And Greece!
I didn’t expect to experience in my lifetime, with so much data about, that the market place perceptions would be so at odds with reality. Fear abounds. Yet the world’s largest economy (US) reports 3.7% June Qtr GDP and the world’s second largest (China) reports GDP growth of 7%pa in June Qtr (oil consumption in China was up 7.3% in the June Half of 2015 for those who think it is all faked), so the US markets have a short panic and Harry Dent and Co are now screaming the Greater Depression is upon us! The correction in the Shanghai market was just reflecting a 150% index gain in less than a year after 65% decline in a seven year bear market. And these economy figures are nothing like any recession I have noted. More like a boom really.
|
2013 |
2013 |
2014 |
2014 |
2014 |
2014 |
2015 |
2015 |
|
| US GDP |
Sept |
Dec |
Mar |
June |
Sept |
Dec |
Mar |
June |
| % over pcp |
3.0 |
3.8 |
-0.9 |
4.6 |
4.3 |
2.1 |
0.6 |
3.7 |
And it would seem to me that some humans, especially those cautious souls associated with the financial markets, have charged headlong and mindlessly into cash and bonds for safety. Yes The End of the World has been flagged since the Subprime Crisis in 2007 and the GFC in 2008. The world now has about US$90 trillion in bonds priced for zero inflation and stable global politics for the next decade. Good luck.
Of course if the US equity market does weaken it is worth noting what happened after the US peak in 2000 from whence it fell over 40% and resources with BHP as a proxy just kept rising.
SPX and BHP
BHP vs SPX
Well anyway, I recently attended and presented at the Territory Resources Week Conference in Darwin. It was my second attendance there and was pleased with what I saw and heard after being most impressed with last year’s event, particularly on the oil and gas side.
Darwin is only 3300km from Singapore and 4300km from Hong Kong so it really engages with Asia far more than SE Australia. Sydney is 3151km from Darwin.
So the first slide focussed on this map.
Try to imagine Asia as centred around the Himalayas and the China Tibet Plateau with aprons of vast coastal flood plains from Pakistan, around India, Bangladesh, Myanmar, Thailand, Malaysia, Indonesia, Vietnam and to China. This is of course idealised and not strictly true but it does give an idea of what we are really looking at. The northern aprons into Russia, Kazakhstan and Siberia are too cold to support any large population so we will exclude them here.
Most of Asia’s 3300 million people live along this coastal fringe and just think of the trade between every river entrance port. Almost every river has a river mouth power station ( usually diesel or fuel oil), port and shipping facilities, construction, engineering shops, clothing, food production (from dried fish to noodles, fruit etc) and so on.
This way it becomes easier to think about trade boosting GDP growth in ways that Western city dwellers can’t imagine.
So focus on these population numbers, then think of low but rapidly growing personal disposable incomes. Every year people are becoming marginally more wealthy.
3,300 million people, all improving their incomes and wealth with official data still indicating 6-8%pa growth. (IMF data presented here.)
Think of the energy demand and just note that oil consumption in China grew by 7.3% in June Half 2105. The aggregates start to look very interesting as this BP data shows. Who is running and winning this race? Certainly isn’t old Western economies.
Non OECD is now 58% of total global energy consumption and with the higher growth in Non OECD it is clear that total global energy demand is therefore accelerating!
I hope I have made this clear enough.
It is incredibly important to understand the medium and longer term implications for energy (coal, oil, gas and nuclear) and especially for the global LNG trade and Australia’s massive onshore shale gas potential.
Bringing the two together says energy consumption is now accelerating. And note this updated graphic below:-
- Coal still king in Asia with 66% in China and 56% in India
- Oil consumption is still growing globally
- Gas growth potential is still massive in China and India
- Nuclear small everywhere but growing rapidly in Asia
When I first published these Energy Consumption by Fuel Type charts about ten years ago China had 70% of its energy from coal and just 2% from gas while global averages were around 28% and 22% respectively. The massive opportunity in gas was obvious and it is now 6% of a total figure 97% higher so that is an increase of 375%. Coal in China has been reduced to just 66% so it has only increased 100% in oil equivalent terms. Hydro is higher but oil’s share has actually fallen.
China wants to go more into nuclear and gas.
The issues in the Middle East with ISIS and Saudi Arabia are not going away and the oil market place might just be telling us that US$40/bbl for WTI is going to be low enough to be the end of the decline. As noted, oil plays a big role in the CRB Index and that is certainly suggesting a low is forming
Now also think of steel.
China’s steel production is still looking for as much as 2014’s 813mt even though over 100mt will be exported but India will be higher and ASEAN still needs to import over 60mtpa for its rapidly growing >80mtpa requirements.
Iron ore is still a matter of >300mtpa of high cost Chinese domestic magnetite production and the level of inventories. It is far more complex than just the new supply from Australia and Brazil.
And for industrial metals it is again look at China. It typically takes about 50% of most metals so China demand growing at 1% still adds 0.5% to global demand whilst 5% is 2.5%. For copper, 2.5% is almost equal to half of a 0.9mpta Escondida in additional capacity.
The key points made in my presentation (The Australian Resources Sector Presentation ) were these ;_
- Capital flows determine sector asset prices
- The Resources Sector is underweight in all portfolios
- Producers have low debt and high cash
- Scores of stocks with market cap <5% NPV
- Many sub sectors for opportunities
- Exploration potential in Australia is not understood
- Major sub-cover State geophysical data programmes underway
- Gold Sector – cashed up and paying dividends
- Onshore shale oil and gas in NT, Qld, SA and WA
- Numerous industrial metals projects worth reviewing
- Fertilizer development projects have great potential
- Technology metals & graphite are gaining strength
- Mineral exploration activity might have fewer dollars spent but the quality is high:-
-
- Strlezlecki Shear WA
- Broken Hill Type deposits in SA, NSW and Qld
- New VMS concepts are developing throughout Australia
- Tennant Ck copper gold province looks interesting
- Macarthur River Basin opportunities abound
-
Barry Dawes
Executive Chairman
BSc F AusIMM MSAA MSEGFollow me on Twitter @DawesPoints
I own ABU, NST, TBR, BLK,CGN, SBM, MLX, STO, S32
Edition #40 Key Points
- A$ gold prices holding around A$1500/oz
- Paradigm Gold Stock Universe on FY16 PER <6x
- Universe gold production up 14% FY15 and forecasts of +17% FY16 and +17%FY17
- Universe cash position is >A$1,800m
- Dividend yield on 50% payout gives >9% FY16 and 18% FY17
- Paradigm December Gold Stock portfolio still up 44%
- ASX Gold Index volume picking up
- Recommended stocks are NST, TBR, SBM, RSG, EVN, DRM, BLK, CGN, GOR, DCN, MLX
Macro issues
- US gold index level back to 15 year lows when gold was just US$250/oz!
- Resources market sentiment providing supercycle lows
- Global bond markets have peaked
- Capital now flowing from bonds, cash, bank shares (down~20% from 2015 highs)
- Global economic expansion still on track
- US FED rate hike to benefit most things we like
- Are we there yet? Gold prices must now be close to final US$ bottom.
- And I think I may have found the ANSWER to our 7 years of misery!!
Investors should know that prices of stocks are supposed to be all about earnings, dividends and NPVs of cashflows so rising numbers here should support much higher stock prices ahead.
The PUGS stocks are now showing particularly attractive EPS, dividend yields and NPVs. And mine life extensions through recent resource increases. What is there not to like about the better gold stocks on ASX?
Of course Dawes Points has been saying this for some time and the November 2014 lows will probably prove to be the bottom in the bear market for gold stocks here on ASX. But this bottoming process will be anything but clear and understandable for a few months yet because of market crosscurrents and universal pessimism.
Have a close look at this PUGS matrix. Lots to like. Low PERs, cash building and production growth. And growing dividends.
Look at the global figures in the PUGS for the various price levels.
Look at the global figures in the PUGS for the various price levels.
The market place remains very volatile but the Paradigm Dec 2014 portfolio (17 stocks from PUGS) is still up 34.7% for the unweighted portfolio and 44.4% for the weighted portfolio against the XGD which is up 23.5%.
Have a look at the performance of ASX gold stocks. The low was in November last year.
Look at where we have been. A real rollercoaster but there is a strong pattern here that suggests new highs are coming.
Don’t forget that gold stocks fell 80% against the A$ gold price from the April 2011 highs to the bottom in Nov 2014. And so now they are cheaper than when gold was US$250/oz in 1999-2001.
Market share of gross turnover is also bottoming for gold stocks. PERs and dividend yields are changing this. The numbers for some gold stocks are now far superior to most bank stocks (which we don’t own and which have also fallen almost 20% from their 2015 highs).
The operational aspects are coming together again and Australian gold production growth is resuming.
Source:BREE Paradigm Sec
I was on CNBC recently talking about why the recent fall in gold prices have offered a buying opportunity for investors.
The bear market in gold stocks in North America however has continued and the indices there have made new lows in 2015 below those of 2008’s GFC despite the gold price being 55% higher in US$ terms and now the latest sell off has taken them down to 2001 levels when gold was just US$250/oz. Go figure! Of course higher costs from new low grade projects and too much debt there hasn’t helped.
But this weakness is Ringing the Bell to buy gold stocks in this quarter! Buy this extraordinary value!! Can you believe this sentiment indicator? Zero percent bullish for market sentiment in gold stocks!!
As bad as in the 2008 GFC and the thump in April 2013. Everyone has sold. Value is created, bulls have capitulated and sold out and the short sellers need to buy back. It can only go one way from here and that is up. Note the misery can extend for a few months before turning up again so it might not turn immediately. So just add to those positions in our favourites over the next month.
US Gold Miners Bullish % Index
North America has certainly ended any love affair with gold stocks.
The market sentiment is poor here in Australia but it must be just awful there. Bullish gold Investment participants are almost non-existent and the short positions in gold futures taken up by small speculators and hedge funds has been at near-record levels.
EFT gold holdings have barely changed at around 680-700t in the past year so it is not these investors adding to selling pressure.
And then we had that 700,000oz of gold that just had to be sold in 30 seconds. It certainly knocked the market but then a very large fund or central bank would find a US$billion or so just chump change and had no fiduciary duty to get the best price (or even the daily VWAP!!) for the client. Yeah, right.
The negative commentary is still being unceasingly pumped out so the signalling of a massive short covering is quite near.
This last fall in the US gold indices is almost final capitulation but the fall has been so sharp towards the 2000 lows that there may need to be even more panic and bloodletting there before the short covering begins.
Can you believe that this index is down so much despite so much new capacity added and even the royalty companies Royal Gold and Franco Nevada have been beaten down. Have costs risen and debt expanded so much that this index has lost US$800/oz operating margin?
And the Unhedged Gold Index without copper producer Freeport has held up better. Expect the 100 level to be the spring board for a long term bull market.
And the GDX large cap gold stock ETF is bottoming on massive volume. Look closely.
Looking at the poor performances of the North American indices the conclusion is that the weakness is now assuming a parabolic decline that must soon end and should finally provide the low in this 4 year diabolical bear market.
Nevertheless it is a bottoming process underway out there and I am sure the upturn is now only a short time away but there is still sure to be a rocky road still in between.
Who knows, but buying when everyone is panic selling ensures value is at its best.
The underlying fundamentals of strong physical demand from India and China in that now well established flow of gold from West to East underpins everything so that much higher gold prices are certainly coming.
Asian demand with India and China the prime movers is very obvious from the available data and the combined demand vastly exceeds mine production.
And only modest mine supply growth is expected.
The weaknesses in Nth American gold stocks have been the most puzzling aspect and the reasons for this have eluded Dawes Points for some time but some answers are now becoming clearer to me.
Look at this. The weakness of gold stocks against gold (down 85% since 2007) is just bizarre. 
And against general equities, well, since 2011 it has been just diabolical.
Sure, Apple, Facebook and Google have done brilliantly but I had never thought of markets as selling gold and gold stocks to buy these companies. Maybe they just have.
But I think I have finally found the ANSWER to this bizarre behaviour!!!
I am fully aware that, despite the strong currency related surge in PUGS and other resources stocks since the November 2014 lows, Dawes Points has clearly been on the `wrong side of the market’ in the Bull Case for commodities.
In Edition # 37 on 6 June I reviewed what had gone right and what had gone wrong.
The economies had done far better than the Bears had forecast, as had commodities, but resources stock price performances were awful.
Gold was very disappointing despite the China and India demand and physical metal strength.
Clearly the market was thinking of something else.
We all shouted ` Manipulation’ as the sharp falls in 2013 and even the very recent last 700,000oz and US$2.8bn 30 second sell off showed.
The Banksters and the scamsters and whatever else were to blame. Of course!
But what if the Gold Bugs were right about everything but the rest of the market just didn't care?
Gold has a sort of hedge against inflation status. We would all agree there. I would say it is a currency protection asset mostly but that is splitting hairs.
So if the world’s wealthiest economy doesn’t have any apparent inflation then you have much of the active market against you. If this big market isn’t bullish and there is no inflation then gold is a BIG short sale opportunity. `Let’s just fill in all those gold bug cult loonies with COMEX paper futures because we can’t lose!’ And so they have and they have been winning. The short sellers probably can’t believe their luck in such an easy market.
The ANSWER to our misjudgement might just be here.
Have look at these graphics. You have all heard of the John Williams Shadow Statistics that take the US CPI inputs from the 1980s and 1990s and apply them to today. The graphics below show the US CPI is much higher than the official figures. For the 1980s basis it is 7% today vs the reported 0%.
The cumulative of about 5%pa for over 20 years is horrific.
Now the real impact is seen in official CPI numbers affecting COLAS (cost of living adjustments). Low inflation means government entitlement schemes and pensions have lower outlays.
Low inflation means low government interest rates.
Social democrat governments believe they can run deficits forever and the bond markets will give them all that free money at miserly interest rates.
And of course this is fine until you `run out of Other People’s Money’ as Lady Thatcher so clearly described it.
And so here is the ANSWER and the basis of the BIG CON.
Global bond markets have recently peaked after more than 30 years of Bull Market.
US 10 Year bonds peaked in July 2012 but the 30 Year T Bond peaked in 2015. European, UK and Japanese bonds peaked with insane ultra low yields in the June Half of 2015. Dawes Points has highlighted these moves over the past six months.
How could such low rates have been achieved? Because the markets believed there was no inflation.
Why do we still have 2.1% yields on 10 Year US T Notes and 2.8% on 30 Year US T Bonds?
Because the big players believe there is no inflation.
How can the US Fed have 0% Fed Funds rate?
Because the big players believe there is no inflation.
Why are gold shares and gold being beaten up in Nth America?
Because the big players believe there is no inflation.
So we can point out all the pro gold facts and figures but the general market and the big players believe there is no inflation.
Dawes Points had failed to grasp this and has clearly been on the `wrong side of the market’.
So being on the wrong side of the market is a sentiment issue.
But what does misreported inflation really mean?
Economists have shown that technology has boosted productivity immensely and that declining TV and computer prices at a time of rapidly improving functionality and processing speed has cut the cost of living substantially. Never mind that road use tolls are rising at 4-6%pa, medical bills are rising, rents and housing are up and bananas are costing more this year. Most stock markets are up.
The qualitative gains in motor vehicles’ many technologies, HD TV and super fast computers unfortunately are only used by the same bodies, the same pair of eyeballs and the same typing hands. For a highly productive individual this can be wonderful but for many a 9-5 clockwatcher keeping up to date with complex systems and manuals diffuses the gains.
The cost reductions in the CPI are probably illusory even if they are not politically motivated. How can you really measure the true value of cost reduction when the operator’s wages are flat or rising?
So sometime soon the questions are going to be asked, when bond prices are really falling, about what is the actual true inflation rate. Answers are likely to be unconvincing and it will likely accelerate bond price weakness in skittish markets.
Again, what does misreported inflation really mean?
Firstly, impoverishment of pensioners and most workers as rising taxes everywhere and rising true costs cut disposable income and purchasing power.
Secondly, vast misallocation of resources into public sector bureaucracies and services that are funded by mispriced borrowings. Most programmes would never have been funded if borrowing costs were 2% over Shadow Stats’ 7% current CPI.
Thirdly, consumer activity is subdued because real net wages are too low to boost consumption and new capacity investment by companies is discouraged. Wages relative to corporate profits have been squeezed.
It has been a GREAT BIG CON that politicians have flaunted as expenditures have soared and as government debts have ballooned.
The peaking of the global bond markets now will help to show that the party is now over.
So coming back to gold and commodities.
The `Right side of the market’ has been to sell gold because there has been no apparent inflation.
The peaking of the global bond markets is heralding a change to which side is going to be the `Right Side’.
The facts are clearly there. The sentiment just needs to change.
- Global government deficits and the global mountain of government debt are clearly there.
- The global mountain of cash in vulnerable low real interest bank deposits is clearly there.
- The demand for gold out of India and China that exceeds global mine production is clearly there.
- The short positions in the futures markets for gold and silver are clearly there
- That global bond markets have peaked is obvious and clearly there
Why would this be happening?
Because the big players believe there is no inflation.
All the conventional wisdom spiel says slowing world growth. China slowing yet oil consumption was up 7.3% yoy in June Half 2015. China Personal Disposable Income is up 11%pa. India is accelerating to >10%pa. ASEAN is growing better than forecast. Just sentiment.
This graphic is perhaps the kernel of the whole matter. June 2015 had the second highest ever figure for crude steel production in China. How many times have you heard China is slowing/has crashed/is dying and that steel production is falling and raw material demand has dropped? Iron ore imports surges 13.8% in 2014 when we were told demand had fallen. Imports will be over 900mt in 2015 and probably a new record. Steel output growth should still see 900mtpa in the next few years. Laughable really.
The Baltic Freight Index has been used as a pawn in recent years but I think vessel supply/demand is coming closer to balance again for dry cargoes.
Crude oil storage pushed up the prices for VLCCs but with the Iran blockade ending those rates should fall again as vessels are freed up.
The entire global picture is also showing inflation in stock and property prices.
Now look at US Housing Starts. They are not falling over and they need to pick up to at least 1.5m units pa to match population growth plus a back log. The Philadelphia Housing Stocks Index says the same thing. Property prices are rising.
But the CPI is not reflecting this.
I have also been intrigued by this graph for quite a few years. Velocity of circulation of M2 money supply. This has been downtrending for almost 20 years despite all the QE activity.
My assessment has been that the FED had provided liquidity to the major US money centre banks who just sold off some bad loans back to the FED and put the rest into US treasury bonds. No funds were lent out at all. With the US economy looking better we might see more capital being lent and then this indicator might turn upwards.
The rate of change has been negative since 2010 but the rate has been reducing. Maybe it will turn positive in the next year. Of course, a higher FED Funds Rate would provide higher bank margins and encourage bank lending. I can’t see the US economy turning down given all this data.
Dawes Points has often highlighted the resources sector highs of 2007 and the now 8 years of bear market following. The April 2011 gold equity sector highs have clearly now been shown to be a false breakout and one that that did not even provide new highs when the US$ gold bullion price later peaked at US$1923 in September 2011.
Market sentiment has just been poor.
As I review all the equity, commodity and bond markets that I know I keep coming back to the conclusion that
- The global bull market in equities remains in place
- Global economic activity is still firm
- China is still expanding
- China steel production is just below record highs
- India is moving to double digit GDP growth
- Commodity supply/demand is nowhere as bad as prices indicate
- Global bonds markets are completing a 30 year bull market
- It isn't over yet for the A$
And finally the A$ tends to follow gold and gold stocks.
Barry Dawes
I own ABU, NST, TBR, BLK,CGN, SBM, MLX
9 August 2015
Edition #39 
Barry Dawes, head of resources at Paradigm Securities, appeared on CNBC on Wednesday 5th August to explain why the recent fall in gold prices have offered a buying opportunity for investors now.
- DFM.ASX is a most remarkable consumer staples company
- Grows and harvests citrus and camellia fruit produce
- Have you ever seen better financials and outlook than for this company?
- Calendar 2014 earnings A$57m gave 525% return on paid-up capital
- Earnings were 33% on shareholder funds (net assets)
- Four year pre IPO CAGR EPS growth was 39%pa
- ALL WITHOUT ANY DEBT
- This is not a start up
- DFM.ASX is a market leader with just 1.1% market share in a highly fragmented industry
- DFM.ASX wants to grow much bigger - grow with it!
- Market of 1400m people can’t get enough of its products
- IPO minimum A$39m subscription met – just needs you to add to spread and liquidity
- DFM.ASX activities show the real China
- Download and fill in the application form or contact me bdawes@psec.com.au
Iron ore has seen a 50-60mt global stock drawdown while crude steel output has remained firm. Port stocks have fallen back to 80mt after reaching 110mt earlier in 2015 and steel mills’ stocks are well down. Some restocking is coming.
Then we look at some other simple data like Qtly annualised GDP growth and Indexed GDP. No economic collapse here.
Source: China National Statistics
And then something even simpler as average annual personal disposable income in China. At <5 RMB :A$ this is ~A$6,000pa in the cities and just ~A$2,000 in the country.
Source: Dongfang Prospectus
China is growing and its citizens are becoming wealthier.
Diets are changing. More protein. More fruit and nuts. And less cereals.
Source: Dongfang Prospectus
So demand for higher quality, unadulterated, clean healthy food is rising. So are prices - as demand can’t match supply and flows into imports.
Source: Dongfang Prospectus
You are all familiar with the 100m people moving from rural areas to the cities. Well you might like to imagine that farm food output suffered somewhat and led to rising food prices. The PRC government, eyeing their remaining 800m farmer supporters, reacted as true agrarian socialists by exempting agricultural food production from Enterprise Income Tax and personal income tax and VAT. At least until 2025.
So now you have a major market of 1400million people that just wants more and better food.
Having 800 million individual farmers means a lot of individual farms. Try about 10 million!
So lots of little inefficient farms. Fragmented industries I think is the term.
Now how to play it.
Here we come to Dongfang Modern Agricultural Company.
Could it get any better?
This company was set up in 2005 and in 2008 the current Chairman injected about US$6m to acquire an 89% holding.
This was the last capital injection to the company. No more equity and no debt at all.
The plan was to acquire as many plantations as possible and by 2012 it was 9 plantations over 4500 hectares and by end 2015 it will be 19 plantations over 9,000 hectares.
In calendar 2014 DMF earned RMB 315m ( ~A$56m) and in 2015 this should be over RMB 370m (~A$75m but over A$80m at the current exchange rate). How many Australian companies make this amount of earnings? And at a 43% margin? Without any debt?
The company acquires uncapitalised plantations from village cooperatives and manages them professionally. It then takes the products that were generally suitable only for local town markets and sells them in high volume premium markets in supermarkets and hotels for double the price.
Margins are over 40%. And no tax.
The villagers are happy. They get to sell or lease out their plantations and still get to work as harvesters.
The PRC government is very happy because plantation productivity is significantly better and output is rising. Food quality is improved. Food adulteration risks are lowered. Imports reduced.
Shareholders are very happy because the returns are strong and the risk and volatilities are low.
The returns on paid up capital of just ~US$10m are huge while the returns on shareholder funds which includes RMB 1,000m in retained earnings (~A$180m) are over 30%.
Can you find a better company track record anywhere? In any industry?
Taking the next step, DFM is the second biggest producer by revenue of citrus in China. Produces over 200,000t with just over half being tangerines (mandarins to us) - which is more than Australia’s total of mandarins.
It has about 1.1% market share in these very fragmented industries. Aims to have a much bigger share over the next few years. Wants to be the market leader.
So there. Market leader in the world’s largest and rapidly growing consumer market producing a consumer staple that is in rising demand.
High margins, PRC Govt support in almost everything it does, no debt, and 10-15 years of growth ahead.
What more do you want?
The replacement DFM prospectus can be downloaded here
Please down load the DFM Application form here, if you have already read the prospectus and just need an application form
DFM IPO presentation Final 5 July 2015
DFM term sheet (PDM) finalParadigm 7 July 2015
Now the Chinese Stock Market.
I sent out a commentary recently on the China hysteria and suggested it was just hysteria. Now look at this again. The Shanghai Stock Exchange Composite Index (` SSEC’) peaked in 2007. China’s GDP grew almost 100% over the period that the SSEC fell 65% into the 2013 lows before surging after mid 2014. Did a spectacular +150% in about 10 months. Has had a sharp pull back but didn’t get anywhere near the previous highs. Keep in mind too that in my presentations to finance sector investors in China over 2013-14 I called for a strong Shanghai stock market (see Dawes Points over this period!) but was laughed at by most. People hated shares! So this first run up would not have had a big support base. Much more to come yet!
The Shanghai and Shenzhen markets are volatile but have a look at some more sedate alternatives. These ETFs might give you a better idea of listed stocks in China. Not overextended.
| Code | Entity |
Size US$m |
PERx |
Yield % |
|---|---|---|---|---|
| FXI | FT 25 Major stocks |
8,000 |
11 |
1.6 |
| CHIX | Global X China Financials |
108 |
9 |
0.9 |
| CHII | Global X China Industrials |
8 |
16 |
0.6 |
| CHIX | Global X China Consumer |
108 |
18 |
1.8 |
I can only conclude that those who gave us warning of the US Greater Depression in 2009 and the Collapse of the European Banking System (over 2009-2015) are just as accurate on the Collapse of China (2010-2015) and that over the next 12 months all those in the market places now sitting on vast hoards of cash (A$17.17bn here in Australia, >RMB 100Trillion (US$18tn) in China and so on all around the world) will be in buying all these stocks.
Stock markets have been climbing a wall of worry for years now and many investors are out.
Many funds are loaded up with ridiculously overpriced and very dangerous bonds or are sitting on mountains of cash.
Meanwhile, so many indices around the world are at or very near all time highs while the bears keep calling the next Crash.
And just think. Half the world is already sitting cautiously in these highly defensive investment positions and 10% has been (we in the Resources Sector)thumped by falling commodity prices. 40%, especially in Asia, is just having a great time. Corporations also have mountains of cash too.
And just like Sydney property sellers are finding, the supply is just not there to quickly get back into the market.
So think about China just beginning to hit its straps as hundreds of millions of increasingly wealthy consumers demand more and higher quality products. And as industry and commerce utilise all of China’s amazing new infrastructure that is assisting with the consolidation of its many internal markets. We are seeing the rise of hundreds of well positioned growing companies who are just totally unaffected by what Janet Yellen thinks.
Dongfang Modern is one that the ASX is lucky to get and I am sure there will be many more quality Chinese companies offering ASX investors an eye and a dividend link into China.
So don’t delay. Fill in that application form or contact me - bdawes@psec.com.au
Even ask your broker to access ASX Bookbuild DFMXBB. Closing soon.
And also, I have a special note coming soon on gold so don’t get too bearish now.
Barry Dawes
2 August 2015