I am just sharing my view on some of the recent issues about A2M price action. I n this, I will try to focus on mostly positives as almost everyone seems very negative.
Positives
Increased China demand: Chinese Govt. have taken initiative to increase birth rate to replace their ageing workforce and even thinking about subsidies so that averages households can afford more kids. More baby more IF sell and A2M can be benefited.
Increased sell forecast: 70 % increase.
NZ statistical data: Powdered milk (including IF) export increased significantly in last quarter.
MSCI inclusion: Nothing special at this stage. Recognition. But we already have that. Need some money flow. However, may come with time. Global hedge fund managers will eventually study all the new boys included and chose their favourite. It must await n see game.
And there is many more, I just don’t want to lengthen the list and provide the links. Those who are following already read them.
Negatives:
UBS shorting A2M: This is as bullshit as it could be. UBS is not shorting A2. They are hedging their position. They hold 5.03% A2 share (
36742523 worth $353095646 at last closing price). When they have 350 million invested in a company, they have to hedge. So hedge against what. Sudden price fall. And they use leverage to do so. It is that simple. Normally, to hedge such a big position it is not possible for them to short sell even 100 million of share so THEY GO FOR “SHORT CALL OPTION”.
So! How it works. I am sure everyone in this forum know about that. But just double checking. Short call simply works like a contract. Suppose, saying I am buying far out of money short call for A2. Suppose I am the guy in the UBS looking after the A2M folder. I am sheet scared after watching the unjustifiable movement in the market. Like almost 30% jump in February and another 30% fall in recent couple of weeks. So what I want to do hedge my position. I then go for an arrangement saying if A2 fell below $9 every cent it went down my contract will cover it. For instance, if A2 go to $5 (please don’t get me wrong, just kidding) they will be able to save their ass from get burn due to these hedge. Actually, every big institutions have to do that. The best thing about these options are if you buy “far out of the money” then you can leverage a huge position with very limited amount of money. In case of UBS they might just have to spend several millions to hedge their 350 mil position size.
So at the end of the day the bullshit of UBS shorting A2 is as nonsense as it can get.
Please come forward if anyone think I am kidding.
CLSA: CLSA is just another broker bro. When Out of 8, 7 brokers have buy and positive recommendation on A2M some people in this forum seems like overly concerned about CLSA’s recent recommendation. However, I can’t blame them as the price reacted on the direction they anticipated.
%
Ignorable part
Nothing important, just for these people looking for some optimism. Major global dairy players were struggling a bit last week and bounced back hard on their last session. As though, 1% is pretty small comparing with A2 which love to jump/fell 3-10% a day, it is pretty big moves for these giants.
https://www.google.com.au/search?q=nestle stock&rlz=1C1GCEA_enAU786AU786&source=lnms&tbm=fin&sa=X&ved=0ahUKEwjf8P3q7bTbAhWIyrwKHRqBBv4Q_AUICigB&biw=1280&bih=588&dpr=1.5#scso=uid_QH0SW6SBBoyb8wWokq-QBQ_5:0
https://www.google.com.au/search?q=danone stock&rlz=1C1GCEA_enAU786AU786&source=lnms&tbm=fin&sa=X&ved=0ahUKEwjCzfbv7bTbAhUBv7wKHUpJD98Q_AUICigB&biw=1280&bih=588#scso=uid_OH0SW-TIBIWZ8gXY95noCA_5:0
(20min delay)