I cannot see how the US is to blame for this. Our market is rushing around like henny penny looking at the sky falling in when it has not materially changed.
The dow is off some 7% in the past two days because the US economy is doing BETTER than expected. Job growth numbers are up and so are wage growth numbers. This is creating expectation that the Fed will increase interest rates. With interest rates at historically low levels the US market has taken advantage of the cheap money on offer to grow. This has been fed into by the recent tax cuts meaning there should be more money for jobs and wage growth. The indicators point to a growth in the US economy that is greater than expected, hence the need for an interest rate hike to keep the growth manageable and not spike inflation.
The US is not to blame for this per se. It is the lack of understanding of basic economics.
The cash flow to Altura will be in US dollars and our dollar will currently get you just under US 79c. This is less than it was a week ago as it looks like our dollar is overvalued. If (probably when) the US raises rates it will make the US more attractive for foreign investment and will strengthen their dollar. This is something the US does not really want as a stronger dollar makes them less competitive internationally.
But it is all interrelated. So, if our market was sophisticated enough (and it is not) we would see that the current situation in the US is likely to create a stronger US$ (possibly leading to around a US.75c conversion for our dollar. This will lead to a greater amount of $A being generated by companies contracting in US$. Whilst our costs may go up a little if we are buying US goods (and I really can't see us doing to much of that), the Forex gains look to be substantial.
The next big issue is the market for our products. With China being the major destination for our raw materials it is then where the batteries will go. Market analysts will look to where the profits will be generated and the implications of a change in currency strength. Given our current markets I don't see a big change.
So, whilst the market is having this conniption and I am solidly unhappy about it, I am not unhappy about where Altura is placed.
If I had more spare cash, I would buy. The price looks just way too tempting for a company that will be generating multi million dollar sales for a commodity that will be in demand.
GLTAH. Be brave and hold on tight. The market is again demonstrating how it moves money from the impatient to the patient.
AJM Price at posting:
29.5¢ Sentiment: Buy Disclosure: Held
