Continuing our exploration on where to invest in 2012, we turn to the broadband sector — one of three sectors that should grow in 2012.
Earnings season is in full swing, so fundamentally driven traders have plenty of news to mull. And on the macro side, the currency wars seem likely to continue despite the G20.
RUSSIA: Gazprom (OGZPY, quote) as been a major underweight despite being one of the most important companies in the world. Could sentiment finally be turning around for this linchpin of the global energy sector? Comments on increasing gas demand from China, news of increase in Turkmen gas transit throught Russia coupled with short covering are creating a combined effect.
The underweight was just too uncomfortable and the lagging performance too easy for global players to decide now is the time to put some money in Russia — the big move up in gas prices in last month and coming winter are helping too. The stock has now moved up through the 200-day moving average, indicating a key technical support level.
INDIA: Sify Technologies(SIFY, quote) is only thinly covered by U.S. analysts, but in the past this Indian Internet service firm has bounced after releasing its quarterly earnings in the past.The next profit report comes out next Monday.
In the absence of analyst support, the problem is figuring out whether the markets will applaud any given number or retreat; in the meantime, expect this otherwise somewhat quiet ticker to get a little volatile as traders look for clues. Also, look for signs that the strong rupee hurt the company’s results. If so, this could hurt INFY (quote) and WIT (quote)
CHINA: China Mobile (CHL, quote) reported generally disappointing earnings of its own last week, but analysts in the Pacific Rim are still trying to figure out whether the company’s 3G subscriber numbers are good news or bad news going forward. The 3G smartphone customer growth number is critical for Chinese (and global) wireless carriers because this area is generally much more profitable to serve (and expensive to build out).
Nonetheless, CHL still only added 1.86 million 3G customers last month, bringing this giant phone network’s total data customer base to only 15 million — in the 1.3 billion Chinese market. This is one of the big boys that has caught the same disease as some of the U.S. tech titans: trying to reinvent itself every day means a cost base and expenditures that are highly questioned. Having said that, an entry level at $50.50 is not a bad base, given the company’s historic trading valuation.
ETFs in the Spotlight
AYT (quote): Of the eight Asian currencies this unique ETF tracks, only two — the rupee and the yuan — have specialized ETFs of their own. The rest, including the high-flying rupiah, baht and ringgit, give this fund its special flavor. AYT lets U.S. investors trade the above five currencies plus the Korean won, the Philippine peso and the Taiwanese dollar.
It is arguably too diversified a portfolio to make much strategic sense — these currencies compete with each other and so will tend to cancel out each other’s strongest advances — but the fund is up over 6% year to date.
PEK (quote): This fund is the first U.S. ETF to invest exclusively in the “A shares” that are restricted to citizens of mainland China. Previous China ETFs like FXI (quote) focused on the “H shares” that also trade in Hong Kong, and so missed out on the lion’s share of the action in Shanghai. In addition, funds like PEK may even trade at a premium compared to their Hong Kong-based peers, simply because (as yet) Chinese investors have few options beyond the A shares, and so are pouring the bulk of their money in these securities.
The Reserve Bank of India has ordered banks to put more of their cash in government bonds and decided to keep interest rates unchanged.
Exit the stimulus? It started with the Reserve Bank of Australia a few weeks ago with a surprise rate hike, followed by inflation signs in Brazil, and China stating they were concerned about inflation.
Brazil made it clear last week that they are in a panic over their currency. Federal Reserve Bank of Philadelphia President Charles Plosser got us going on Fed-speak related to rates going higher, and Norway is expected be the first European central bank to raise rates tomorrow.
Is India next?
India is doing what a lot of countries can do to soak up liquidity, using monetary tools like reverse repos or making banks buy bonds.
Indian banks are down 10 percent over the last few days in sympathy. If you believe this is a longer term trade, then you are selling banks throughout emerging and developed markets.
The market has moved, lower, the most in two months. Layer in terrible numbers by Tata Steel (2Q profit of 9.03 billion rupees vs. the street consensus of 9.74 billion)