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Global View
Lucy Bell profile
Author status: Retired
Author country: Canada
Author company: Home consulting
Job title: Private Wealth Manager
Expert Area: Alternative Investments, Fixed Income, Portfolio Management, Private Wealth Management
Geografical Area: Africa, Asia, Eastern Europe, Middle East, North America, Western Europe
Economics Area: Developed, G10
Country
Australia (Real GDP)
- I like Australia's ability to maintain economy growth above 2% pa for nearly 25 years (since 1993) and I expect that Australia has cloudless perspectives to continue this tendency at least in near-term (1-2 years). Major factors that will support this growth are (1) strong domestic demand (wage growth and government expenditure), (2) commodity price growth and export growth (despite export growth is slowing, I expect that demand for minerals and LNG in China will be able to fuel export growth from Australia). Nevertheless, there are some concerns that should be noted: (1) slowing labor market (unemployment rate above average, slowdown in jobs growth), (2) increased household debt (as a result of low interest rates)
Company
Australia (Real GDP)
- I like Australia's ability to maintain economy growth above 2% pa for nearly 25 years (since 1993) and I expect that Australia has cloudless perspectives to continue this tendency at least in near-term (1-2 years). Major factors that will support this growth are (1) strong domestic demand (wage growth and government expenditure), (2) commodity price growth and export growth (despite export growth is slowing, I expect that demand for minerals and LNG in China will be able to fuel export growth from Australia). Nevertheless, there are some concerns that should be noted: (1) slowing labor market (unemployment rate above average, slowdown in jobs growth), (2) increased household debt (as a result of low interest rates)
Canadian Natural Resources Ltd
- I like Australia's ability to maintain economy growth above 2% pa for nearly 25 years (since 1993) and I expect that Australia has cloudless perspectives to continue this tendency at least in near-term (1-2 years). Major factors that will support this growth are (1) strong domestic demand (wage growth and government expenditure), (2) commodity price growth and export growth (despite export growth is slowing, I expect that demand for minerals and LNG in China will be able to fuel export growth from Australia). Nevertheless, there are some concerns that should be noted: (1) slowing labor market (unemployment rate above average, slowdown in jobs growth), (2) increased household debt (as a result of low interest rates)
- I expect that CNQ will continue to generate sustaining FCF yield due to favorable oil prices and low oil sands mining operating costs (breakeven <$40/bbl). As a result, company has enough cash to de-lever the balance sheet, to maintain organic growth, as well as to ensure investors return (through anounced dividend increasing and share buyback program).
Western Areas Ltd
- I like Australia's ability to maintain economy growth above 2% pa for nearly 25 years (since 1993) and I expect that Australia has cloudless perspectives to continue this tendency at least in near-term (1-2 years). Major factors that will support this growth are (1) strong domestic demand (wage growth and government expenditure), (2) commodity price growth and export growth (despite export growth is slowing, I expect that demand for minerals and LNG in China will be able to fuel export growth from Australia). Nevertheless, there are some concerns that should be noted: (1) slowing labor market (unemployment rate above average, slowdown in jobs growth), (2) increased household debt (as a result of low interest rates)
- I expect that CNQ will continue to generate sustaining FCF yield due to favorable oil prices and low oil sands mining operating costs (breakeven <$40/bbl). As a result, company has enough cash to de-lever the balance sheet, to maintain organic growth, as well as to ensure investors return (through anounced dividend increasing and share buyback program).
- I assume that WSA perspectives are generally in line with Nickel market perspectives (that mainly priced in). Additional upside potential is Cosmos Nickel Complex re-start (in case higher nickel prices & exploration upside)
Newcrest Mining Ltd
- I like Australia's ability to maintain economy growth above 2% pa for nearly 25 years (since 1993) and I expect that Australia has cloudless perspectives to continue this tendency at least in near-term (1-2 years). Major factors that will support this growth are (1) strong domestic demand (wage growth and government expenditure), (2) commodity price growth and export growth (despite export growth is slowing, I expect that demand for minerals and LNG in China will be able to fuel export growth from Australia). Nevertheless, there are some concerns that should be noted: (1) slowing labor market (unemployment rate above average, slowdown in jobs growth), (2) increased household debt (as a result of low interest rates)
- I expect that CNQ will continue to generate sustaining FCF yield due to favorable oil prices and low oil sands mining operating costs (breakeven <$40/bbl). As a result, company has enough cash to de-lever the balance sheet, to maintain organic growth, as well as to ensure investors return (through anounced dividend increasing and share buyback program).
- I assume that WSA perspectives are generally in line with Nickel market perspectives (that mainly priced in). Additional upside potential is Cosmos Nickel Complex re-start (in case higher nickel prices & exploration upside)
- NCM is one of the world's largest gold producers with world-class Cadia Valley Operations. However, I estimate that currently shares trade below peers, as a result I expect that shares will grow in near term. In long term I expect that gold price growth will further support NCM
Grupo Aval Acciones y Valores SA
- I like Australia's ability to maintain economy growth above 2% pa for nearly 25 years (since 1993) and I expect that Australia has cloudless perspectives to continue this tendency at least in near-term (1-2 years). Major factors that will support this growth are (1) strong domestic demand (wage growth and government expenditure), (2) commodity price growth and export growth (despite export growth is slowing, I expect that demand for minerals and LNG in China will be able to fuel export growth from Australia). Nevertheless, there are some concerns that should be noted: (1) slowing labor market (unemployment rate above average, slowdown in jobs growth), (2) increased household debt (as a result of low interest rates)
- I expect that CNQ will continue to generate sustaining FCF yield due to favorable oil prices and low oil sands mining operating costs (breakeven <$40/bbl). As a result, company has enough cash to de-lever the balance sheet, to maintain organic growth, as well as to ensure investors return (through anounced dividend increasing and share buyback program).
- I assume that WSA perspectives are generally in line with Nickel market perspectives (that mainly priced in). Additional upside potential is Cosmos Nickel Complex re-start (in case higher nickel prices & exploration upside)
- NCM is one of the world's largest gold producers with world-class Cadia Valley Operations. However, I estimate that currently shares trade below peers, as a result I expect that shares will grow in near term. In long term I expect that gold price growth will further support NCM
- I like Aval as it is one of the leading diversified company in Colombia. It has strong profitability especially compared to other reginal peers. However, I do not believe in its significant upside potential mainly due to macroeconomic imbalances in Colombia. I expect that its earnings will decline driven by a higher assumption of provisions, asset quality worsening, credit cost increasing.
Southwestern Energy Co
- I like Australia's ability to maintain economy growth above 2% pa for nearly 25 years (since 1993) and I expect that Australia has cloudless perspectives to continue this tendency at least in near-term (1-2 years). Major factors that will support this growth are (1) strong domestic demand (wage growth and government expenditure), (2) commodity price growth and export growth (despite export growth is slowing, I expect that demand for minerals and LNG in China will be able to fuel export growth from Australia). Nevertheless, there are some concerns that should be noted: (1) slowing labor market (unemployment rate above average, slowdown in jobs growth), (2) increased household debt (as a result of low interest rates)
- I expect that CNQ will continue to generate sustaining FCF yield due to favorable oil prices and low oil sands mining operating costs (breakeven <$40/bbl). As a result, company has enough cash to de-lever the balance sheet, to maintain organic growth, as well as to ensure investors return (through anounced dividend increasing and share buyback program).
- I assume that WSA perspectives are generally in line with Nickel market perspectives (that mainly priced in). Additional upside potential is Cosmos Nickel Complex re-start (in case higher nickel prices & exploration upside)
- NCM is one of the world's largest gold producers with world-class Cadia Valley Operations. However, I estimate that currently shares trade below peers, as a result I expect that shares will grow in near term. In long term I expect that gold price growth will further support NCM
- I like Aval as it is one of the leading diversified company in Colombia. It has strong profitability especially compared to other reginal peers. However, I do not believe in its significant upside potential mainly due to macroeconomic imbalances in Colombia. I expect that its earnings will decline driven by a higher assumption of provisions, asset quality worsening, credit cost increasing.
- I assume that key risk is macro: gas companies doubling proved resource despite a greater than 30% decline in benchmark pricing. Additionally, SWN's expected production growth for 3 years ~9% which is lower than E&P peers (25%) and Natural gas peers (11%).
Sociedad Minera Cerro Verde SAA
- I like Australia's ability to maintain economy growth above 2% pa for nearly 25 years (since 1993) and I expect that Australia has cloudless perspectives to continue this tendency at least in near-term (1-2 years). Major factors that will support this growth are (1) strong domestic demand (wage growth and government expenditure), (2) commodity price growth and export growth (despite export growth is slowing, I expect that demand for minerals and LNG in China will be able to fuel export growth from Australia). Nevertheless, there are some concerns that should be noted: (1) slowing labor market (unemployment rate above average, slowdown in jobs growth), (2) increased household debt (as a result of low interest rates)
- I expect that CNQ will continue to generate sustaining FCF yield due to favorable oil prices and low oil sands mining operating costs (breakeven <$40/bbl). As a result, company has enough cash to de-lever the balance sheet, to maintain organic growth, as well as to ensure investors return (through anounced dividend increasing and share buyback program).
- I assume that WSA perspectives are generally in line with Nickel market perspectives (that mainly priced in). Additional upside potential is Cosmos Nickel Complex re-start (in case higher nickel prices & exploration upside)
- NCM is one of the world's largest gold producers with world-class Cadia Valley Operations. However, I estimate that currently shares trade below peers, as a result I expect that shares will grow in near term. In long term I expect that gold price growth will further support NCM
- I like Aval as it is one of the leading diversified company in Colombia. It has strong profitability especially compared to other reginal peers. However, I do not believe in its significant upside potential mainly due to macroeconomic imbalances in Colombia. I expect that its earnings will decline driven by a higher assumption of provisions, asset quality worsening, credit cost increasing.
- I assume that key risk is macro: gas companies doubling proved resource despite a greater than 30% decline in benchmark pricing. Additionally, SWN's expected production growth for 3 years ~9% which is lower than E&P peers (25%) and Natural gas peers (11%).
- I have optimistic view on Cerro Verde due to (1) favorable macroeconomic environment, higher copper and molybdenum prices, (2) higher output (2017 was affected by rain and a strike), (3) management's attempts to reduce operating costs
Huaneng Renewables Corp Ltd
- I like Australia's ability to maintain economy growth above 2% pa for nearly 25 years (since 1993) and I expect that Australia has cloudless perspectives to continue this tendency at least in near-term (1-2 years). Major factors that will support this growth are (1) strong domestic demand (wage growth and government expenditure), (2) commodity price growth and export growth (despite export growth is slowing, I expect that demand for minerals and LNG in China will be able to fuel export growth from Australia). Nevertheless, there are some concerns that should be noted: (1) slowing labor market (unemployment rate above average, slowdown in jobs growth), (2) increased household debt (as a result of low interest rates)
- I expect that CNQ will continue to generate sustaining FCF yield due to favorable oil prices and low oil sands mining operating costs (breakeven <$40/bbl). As a result, company has enough cash to de-lever the balance sheet, to maintain organic growth, as well as to ensure investors return (through anounced dividend increasing and share buyback program).
- I assume that WSA perspectives are generally in line with Nickel market perspectives (that mainly priced in). Additional upside potential is Cosmos Nickel Complex re-start (in case higher nickel prices & exploration upside)
- NCM is one of the world's largest gold producers with world-class Cadia Valley Operations. However, I estimate that currently shares trade below peers, as a result I expect that shares will grow in near term. In long term I expect that gold price growth will further support NCM
- I like Aval as it is one of the leading diversified company in Colombia. It has strong profitability especially compared to other reginal peers. However, I do not believe in its significant upside potential mainly due to macroeconomic imbalances in Colombia. I expect that its earnings will decline driven by a higher assumption of provisions, asset quality worsening, credit cost increasing.
- I assume that key risk is macro: gas companies doubling proved resource despite a greater than 30% decline in benchmark pricing. Additionally, SWN's expected production growth for 3 years ~9% which is lower than E&P peers (25%) and Natural gas peers (11%).
- I have optimistic view on Cerro Verde due to (1) favorable macroeconomic environment, higher copper and molybdenum prices, (2) higher output (2017 was affected by rain and a strike), (3) management's attempts to reduce operating costs
- Huaneng Renewables is investment holding company principally engaged in wind power generation businesses. Due to announcement of China's renewable power quota (RPQ), which sets national and provincial standards for non-hydro renewable power generation, I expect positive prospects for the wind farm operators. Therefore I have positive outlook for Huaneng Renewables' shares.
Vivendi SA
- I like Australia's ability to maintain economy growth above 2% pa for nearly 25 years (since 1993) and I expect that Australia has cloudless perspectives to continue this tendency at least in near-term (1-2 years). Major factors that will support this growth are (1) strong domestic demand (wage growth and government expenditure), (2) commodity price growth and export growth (despite export growth is slowing, I expect that demand for minerals and LNG in China will be able to fuel export growth from Australia). Nevertheless, there are some concerns that should be noted: (1) slowing labor market (unemployment rate above average, slowdown in jobs growth), (2) increased household debt (as a result of low interest rates)
- I expect that CNQ will continue to generate sustaining FCF yield due to favorable oil prices and low oil sands mining operating costs (breakeven <$40/bbl). As a result, company has enough cash to de-lever the balance sheet, to maintain organic growth, as well as to ensure investors return (through anounced dividend increasing and share buyback program).
- I assume that WSA perspectives are generally in line with Nickel market perspectives (that mainly priced in). Additional upside potential is Cosmos Nickel Complex re-start (in case higher nickel prices & exploration upside)
- NCM is one of the world's largest gold producers with world-class Cadia Valley Operations. However, I estimate that currently shares trade below peers, as a result I expect that shares will grow in near term. In long term I expect that gold price growth will further support NCM
- I like Aval as it is one of the leading diversified company in Colombia. It has strong profitability especially compared to other reginal peers. However, I do not believe in its significant upside potential mainly due to macroeconomic imbalances in Colombia. I expect that its earnings will decline driven by a higher assumption of provisions, asset quality worsening, credit cost increasing.
- I assume that key risk is macro: gas companies doubling proved resource despite a greater than 30% decline in benchmark pricing. Additionally, SWN's expected production growth for 3 years ~9% which is lower than E&P peers (25%) and Natural gas peers (11%).
- I have optimistic view on Cerro Verde due to (1) favorable macroeconomic environment, higher copper and molybdenum prices, (2) higher output (2017 was affected by rain and a strike), (3) management's attempts to reduce operating costs
- Huaneng Renewables is investment holding company principally engaged in wind power generation businesses. Due to announcement of China's renewable power quota (RPQ), which sets national and provincial standards for non-hydro renewable power generation, I expect positive prospects for the wind farm operators. Therefore I have positive outlook for Huaneng Renewables' shares.
- Vivendi is a media conglomerate with two major operating assets: leading global music company UMG (50% of revenue) and leading French pay-TV operator Canal+ (50% of revenue). I believe the Company offers unique exposure to the structural growth of music streaming through UMG. Also I think the market underestimates the upside opportunities given by the Canal+ recovery growth and the merits of Vivendi's convergence strategy. Taking into account the confidence in significant streaming opportunity, I strongly recommend to buy Vivendi's stocks.
GVC Holdings PLC
- I like Australia's ability to maintain economy growth above 2% pa for nearly 25 years (since 1993) and I expect that Australia has cloudless perspectives to continue this tendency at least in near-term (1-2 years). Major factors that will support this growth are (1) strong domestic demand (wage growth and government expenditure), (2) commodity price growth and export growth (despite export growth is slowing, I expect that demand for minerals and LNG in China will be able to fuel export growth from Australia). Nevertheless, there are some concerns that should be noted: (1) slowing labor market (unemployment rate above average, slowdown in jobs growth), (2) increased household debt (as a result of low interest rates)
- I expect that CNQ will continue to generate sustaining FCF yield due to favorable oil prices and low oil sands mining operating costs (breakeven <$40/bbl). As a result, company has enough cash to de-lever the balance sheet, to maintain organic growth, as well as to ensure investors return (through anounced dividend increasing and share buyback program).
- I assume that WSA perspectives are generally in line with Nickel market perspectives (that mainly priced in). Additional upside potential is Cosmos Nickel Complex re-start (in case higher nickel prices & exploration upside)
- NCM is one of the world's largest gold producers with world-class Cadia Valley Operations. However, I estimate that currently shares trade below peers, as a result I expect that shares will grow in near term. In long term I expect that gold price growth will further support NCM
- I like Aval as it is one of the leading diversified company in Colombia. It has strong profitability especially compared to other reginal peers. However, I do not believe in its significant upside potential mainly due to macroeconomic imbalances in Colombia. I expect that its earnings will decline driven by a higher assumption of provisions, asset quality worsening, credit cost increasing.
- I assume that key risk is macro: gas companies doubling proved resource despite a greater than 30% decline in benchmark pricing. Additionally, SWN's expected production growth for 3 years ~9% which is lower than E&P peers (25%) and Natural gas peers (11%).
- I have optimistic view on Cerro Verde due to (1) favorable macroeconomic environment, higher copper and molybdenum prices, (2) higher output (2017 was affected by rain and a strike), (3) management's attempts to reduce operating costs
- Huaneng Renewables is investment holding company principally engaged in wind power generation businesses. Due to announcement of China's renewable power quota (RPQ), which sets national and provincial standards for non-hydro renewable power generation, I expect positive prospects for the wind farm operators. Therefore I have positive outlook for Huaneng Renewables' shares.
- Vivendi is a media conglomerate with two major operating assets: leading global music company UMG (50% of revenue) and leading French pay-TV operator Canal+ (50% of revenue). I believe the Company offers unique exposure to the structural growth of music streaming through UMG. Also I think the market underestimates the upside opportunities given by the Canal+ recovery growth and the merits of Vivendi's convergence strategy. Taking into account the confidence in significant streaming opportunity, I strongly recommend to buy Vivendi's stocks.
- GVC shows strong financials in its core segments, in both gambling and sport betting segments. However, I assume that major upside potential is acquisition of Ladbrokes Coral. Strong own brands, cross-selling opportunities and a diversified geographical profile creates opportunity for strong double-digits earnings growth in mid/long term.
Commodity
Corn, cents/bu
- It's expected that global ending stock will decrease by 3% at the end of 2019 and 2018/2019 stock-to-use will be at the level of 14.2% vs the 10-year average of 18.0%. At the same time it's projected that global consumption of corn will rise and production will be unchanged. So I expect deficit on the market, which will push corn prices up.
Aluminum, $/mt
- It's expected that global ending stock will decrease by 3% at the end of 2019 and 2018/2019 stock-to-use will be at the level of 14.2% vs the 10-year average of 18.0%. At the same time it's projected that global consumption of corn will rise and production will be unchanged. So I expect deficit on the market, which will push corn prices up.
- Aluminum prices have spiked after newsflow and official data confirming that Chinese illegal capacity cuts are real and happening (even the most persistent naysayers, like me, have had to accept this). However, I tend to the view that much of the upside has been now priced in, and stocks accumulated in advance should soften much of the blow when the new cuts begin. Moreover, I learn that a lot of smelters (outside China, or even in China) are trying to capitalize on the situation and increase production into the rally. I thus see prices rallying only a little beyond spot levels in the next few months, to $2,100-$2,200/t in 2018. After 2019 I expect downward trend in Aluminum price (up to $1,800-$1,900/t)
Exchange
British Pound | GBP/USD
- We saw a sharp drop in the value of GBP after the Brexit vote, which was subsequently resulted in the GBP constant dependence on the Brexit news flow and increasing in volatility and uncertainty about future value of the British pound. I expect continued GBP volatility and its weakening vs USD till 2020 against the backdrop of the Brexit negotiations and political instability. Also it's a big question for me - what will be the new UK-EU trade relationship after Brexit?
Chilean Peso | CLP/USD
- We saw a sharp drop in the value of GBP after the Brexit vote, which was subsequently resulted in the GBP constant dependence on the Brexit news flow and increasing in volatility and uncertainty about future value of the British pound. I expect continued GBP volatility and its weakening vs USD till 2020 against the backdrop of the Brexit negotiations and political instability. Also it's a big question for me - what will be the new UK-EU trade relationship after Brexit?
- Given by strong dependence of Chile's economy on copper prices, I have negative outlook for CLP. Because I expect that in Mid-term (1-2 years) there will be ongoing correction of copper price from current high due to persistently soft cathode market, well-behaved mines, total absence of copper-related supply-side reform measures in China. As a result, another couple of years of mild oversupply (220-270ktpa of surplus) are expected. In this scenario we will see CLP depreciation vs USD.
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