The shorts have the macro in their favour. Interest rates have increased a little bit but the expectation is central banks will bump them up at least another 2%. The market rates are already rising regardless of central bank action, inflation is the topic of the day and credit is being withdrawn from markets (so called QT). All of this is bad for stock markets... it is the complete opposite of the easy money conditions which allowed record highs in markets for the last several years running.
As a general rule of thumb SP's will be under pressure across the board. These circumstances favour the shorting of stocks as a strategy. So the question is.... why should ASM be any different? If the market goes down and other stocks go down then why not ASM too?
Perhaps, regardless of the positive fundamentals of ASM it will continue drifting down. It is worth giving it serious thought if you intend to hold.
My take on things is there are balancing factors which mean ASM will be one of the rare exceptions.
* Plenty of people still will argue there is no such thing as Global warming, that it's some sort of a weird hoax... I have a couple of friends like that. My argument to them is it doesn't matter what they believe... the largest countries in the World are legislating new rules and they are pushing through the transition away from fossil fuels. To make that happen the REE's are indispensable... they can not be substituted out. Magnets in EV's is a growing demand... the turbines in wind farms take about 2 tonnes each of REE magnets and they are going to be everywhere. The alternative energy tech relies upon high strength permanent magnets.
* The political dislocation and the destruction of international cooperation is resulting in a massive duplication of supply chains. REE deposits that are as advanced in permitting and technical understanding as is ASM's Dubbo project are not "2 a penny".... there are other options around the World but mostly are several years away from commercialization. Dubbo is a premium option.
* The South Koreans clearly mean business. They have the necessary technical skills and the high tech companies to adapt to the alternative energy regime that's proposed. Their previous President made a personal visit to Australia solely to improve economic ties regarding securing raw material supply. ASM sat around the same table, ASM has received a cash grant from the SK government and they quickly found a patch of land for the metalisation plant which is built, permitted and in late stage commissioning. Doesn't matter what the central banks are doing in my opinion, this is a high priority project which is not going to be starved for lack of funding or support.
* ASM is not a high risk, speculative wannabe. The deposit was discovered decades ago... the technical flow sheets have all been worked out... the government red tape is done and dusted... there is a customer eager to get it happening... the project is in the final stages of design and costing... various avenues of funding have opened up and it's down to the pointy end of doing a deal.
The macro environment is negative but it's not decisive for ASM... imo. Credit markets might be tightening but the political imperatives are shrill and the economic incentive for SK to move on this is compelling. Developing Dubbo and utilizing ASM's metallisation tech is an investment with sound fundamentals. The short interest in the stock is just short term trading based on the sentiment of the day... a totally different mindset.
ASM Price at posting:
$6.41 Sentiment: Hold Disclosure: Held
(20min delay)