CPU hits records high today on no news. I suspect this is for a good reason !
Its not obvious to much of the market but CPU is one of the biggest beneficiaries of higher interest rates. The market often reacts counter intuitively to both interest rate and currency fluctuations when it comes to CPU. The fact that it reports in USD can be confusing to AU investors.
Right now all the ducks are lined up. Continuing high interest rates well beyond predictions, continuing low AUD, and markets returning to more normal levels of activity. Its hard to see how they can't achieve record earnings for this year with their eyes closed. I suspect some are now onto it with price action in recent days.
The interest rates optimists have been wrong again. The predicted rate cuts haven't occurred and there is increasingly low expectations that they will happen soon in the key markets where CPUs margin income comes from. The MI projections for CPU now look very conservative and its starting to feel like guidance for this year and next need a serious update.
I get the feeling that the price is moving now on the expectation of upgraded guidance. Will they upgrade the guidance or shoot the lights out in August like they did last year?
CPU Price at posting:
$28.17 Sentiment: None Disclosure: Held
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