There is ample reason to watch your screens and portfolio tomorrow pre-US open when Alibaba post results.. Alibaba is up 5% vs China A-Shares minus 20% YTD
Theme: China leads Emerging markets lower(on deleveraging) but is SERIOUSLY activating fiscal- and monetary policy to support the economy, we expect China to start accelerating late 2018/early 2019 leaving a very vulnerable 4-6 month from now.
Our take: China is cheap, very cheap relative to the US which is slowing down from here (Peak in growth in Q2-2018 – plus Mid-term elections)
Below our valuation metrics courtesy of Steve Resnick of Hedge IQ
· CSI 300 Index vs SPX is 1 std. deviation cheap (look back to 2005) – all-time low 1.2!
· The spreads is a massive 3.7 std.deviations when looking back 24 months – (Equals EXTREME rare and cheap)
· Median PE of A-shares have collapsed from 44x to 22x
· RSI – Relative Strength (20 days) is @ 36 – close to oversold
· 13Week momentum is 3.1 standard deviations – ie. really sold, sold…
Overall we are "constructive" on value, unsure on timing, but we want to use next sell-off in China/EM to to buy – We think either Alibaba or other earnings or worsening of Trade WAR could create big opportunity.
We will keep you posted…
Our colleague Eleanor Creagh has written an excellent PRE-Earnings report..
The Chinese market is one of the worst performing this year:
Shanghai Composite Index…..
WSJ – Alibaba earnings: What to watch
https://www.wsj.com/articles/alibaba-earnings-what-to-watch-1534932435
Chinese e-commerce titan Alibaba Group Holding Ltd. BABA 0.92% will report fiscal first-quarter earnings before the U.S. market opens Thursday. Analysts say NYSE-listed Alibaba's core commerce revenues will show strong growth but that earnings will be hit as the company ramps up its investments in areas such as logistics and expands its presence in bricks-and-mortar retail. Buying the rights to stream the recent soccer World Cup on Youku, Alibaba's video-streaming channel, likely weighed on margins as well, they said.
Here is what you need to know:
EARNINGS FORECAST: Analysts polled by FactSet expect the company to report earnings of 6.0 billion yuan ($876 million), a 60% decrease over the 14.6 billion yuan earned during the same period last year.
REVENUE FORECAST: Alibaba's quarterly revenue is likely to have reached 81.4 billion yuan, up from 50.2 billion yuan a year earlier, the survey showed.
What to Watch
INVESTMENTS: Watch out for any guidance on future investments and how they may affect margins as Alibaba extends its spending spree this year. In July, the Hangzhou-based company invested $2.2 billion in Focus Media, a prominent Chinese outdoor advertiser, to strengthen advertising beyond its online platforms. That follows a move in May by Alibaba, its majority-owned logistics unit Cainiao Network and other investors to spend almost $1.4 billion for a 10% stake in express-delivery company ZTO Express Inc.
Med venlig hilsen | Best regards
Steen Jakobsen | Chief Investment Officer
Saxo Bank A/S | Philip Heymans Allé 15 | DK-2900 Hellerup
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Research: http://www.tradingfloor.com/traders/steen-jakobsen
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