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‘Crypto and Black Gold – Higher the Risk, Higher the Reward’
By Arjun Thakkar and Alan Green
Bitcoin worth more than $200bn was wiped off the crypto market on 12th of May. The crash in the BTC price accompanied a generally volatile and uncertain stock market that has seen the Dow Jones and FTSE100 down by 12.7% and 3.7% respectively from the start of the year. The core principle of the markets has always been higher the risk, higher the reward, but the current downward spiral seems to be driven by a perfect storm of events. Is this therefore the end of a bullish run for assets and the risk is too high now for any reward, or are we just seeing a major correction?
The key uncertainty spooking the markets are the high inflation rates. These are being driven by a number of factors, including supply chain problems from China, the Russia-Ukraine war and consequential 25% hike in the price of wheat. Interest rate hikes from the Fed and BoE are pushing borrowing costs higher and driving a sell-off in markets and crypto.
In these uncertain markets investors look for safe investments and the increase in interest rates in 2022 by 0.5% and 0.75% by the BoE and Fed respectively have made cash savings more attractive, leading to a massive sell off in stocks. Added to this, the hitherto stellar performances from crypto assets such as BTC and ETH have prompted well-heeled crypto investors to take their money off the table, further driving the down turn in crypto market valuations.
Supply chain issues continue to act as a drag. China accounts for around 13% of the global trade, and China’s zero tolerance approach towards Covid has led to a lockdown in the country, which has partly resulted in huge levels of shipping congestion near the Chinese ports. Companies such as Tesla have lost about a month of work because of the Shanghai lockdown, and some other companies claim that an “abnormally high” level of inventory was in transit, unavailable or held at ports, sending the stock market into a frenzy. (Bloomberg, 2022)
Image: World Bank
Along with the supply chain crisis, the Russia-Ukraine war has played a significant part in the fortunes of both stock and crypto markets. Russia previously supplied the European continent with 40% of its natural gas and 25% of its oil. The subsequent sanctions and ban on Russian imports sent the price of oil soaring to $109/barrel, driving inflation, and while some of the oil majors and smaller listed oilco’s are now trading at multi year highs, the uncertainty has weighed heavily on the markets.
The impact of higher oil prices has also impacted positively on companies at the junior end of the market. Echo Energy (AIM: ECHO) which has a license portfolio of 12 producing oil and gas fields with infrastructure in Santa Cruz Sur region of Argentina, found itself in the midst of this global demand for oil. Since the start of the Russia-Ukraine war (24th February 2022), Echo Energy shares have risen by 13.1% and at one point (22nd April) had returned its investors a 47% share price increase since the start of the war.
Source: Echo Energy
Whatever phrase you might use to describe it – end of bull run or correction – bitcoin has fallen to its lowest levels in years – $29,000. A number of factors can be attributed, but one key driver has been the collapse of so called stable coin terraUSD (UST), which as a supposedly stable asset, fell from a high of $118 (£96) to $0.4, rocking the crypto currency markets and having a knock-on effect on other stablecoins. The companies behind stablecoins try to ensure they remain in parity with assets such as the US dollar, so one token will equal $1. The collapse of a stablecoin has fundamentally weakened crypto assets for the present, but despite this, after touching $29,000, BTC rocketed 7.6% to $31,200 in one day, demonstrating that there is a chance for brave traders to turn a profit during these volatile times.
This volatility also boosted cryptocurrency transaction volumes on platforms like Binance and Hotcoin Global, which on 11th May 2022 saw 24hr trading volumes of $27.44bn and $10.27bn respectively, generating spectacular platform commission in the process.
There has also been a consequential read over for listed blockchain and crypto companies such as dual listed Coinsilium (AQX: COIN, OTCQB: CINGF), which is a blockchain, open finance, and crypto finance venture builder. Coinsilium shares fell to $0.025 on May 12th, but the next day shares rocketed to $0.039, providing a 24hr return of 56%. The drop in price for # Coinsilium can be attributed to systematic (market) risk and macro-economic factors such as inflation and the collapse in stable coin terraUSD.
While cryptocurrency continues to fluctuate, of course share price performance can be driven by stock specific issues in addition to macro factors. In the case of Coinsilium, in addition to a substantial amount of cash reserves held in crypto currency, the company is growing through its strong fundamentals and most recently a positive response to its recent seed investment in Yellow Network, the first broker clearing network for cryptocurrency exchanges, brokers and trading institutions. Yellow Network assists and develops mesh networks of crypto brokers and traders to execute ultra-high speed trading via decentralised exchanges. With such high volatility and huge transaction volumes in the crypto markets, Coinsilium’s Yellow Network investment could see it benefit from substantial, volume based commission revenues in the future.
What both Echo Energy and Coinsilium fundamentals demonstrate here, is that despite the market turmoil and highly uncertain outlook, they both depict the core principle of the markets – ‘higher the risk, higher the reward.
Statista: The Countries Importing the World’s Plastic Waste – The Impact of China’s decision to stop importing plastic waste
Article by Martin Armstrong, Statista
Last year, China announced it will no longer be importing plastic waste into the country and as new analysis shows, that’s a huge problem for the rest of the world. From 1988 to 2016, China imported 171 million metric tons of this surprisingly valuable commodity. With a total trade value of $81 billion, that’s 72% of all imported plastic waste over this time period.
Despite a big push recently from some governments to reduce consumption, the scale of the world’s plastic waste is huge and will remain so for some time. Until this changes, a lot of countries will have to make new plans for their disposal or, alternatively, make plans to fill the massive void in the market that’s been left by China.
PowerHouse Energy #PHE CEO on The Future of Plastic
Keith Allaun, the Chief Executive Officer of PowerHouse Energy Group plc (AIM: PHE), the UK technology company pioneering hydrogen production from waste plastic and used tyres, was invited to contribute to a special edition insert in the most recent New Scientist Magazine. The insert, titled “The Future Of Plastic” was headlined by Sir David Attenborough and brought together thought-leaders in policy and industry to articulate how we might address the current challenges plastic is presenting to our planet, and specifically, our oceans.
The issue was released in conjunction with World Oceans Day on June 8th, 2018.
The potential for the Company’s DMG© System to harness the energy contained in plastic waste by converting it to clean hydrogen was highlighted in the article as a mechanism to reduce the impact of plastics on our oceans. PowerHouse plants are small, modular, and economical, and can be located where plastics are collected.
The decision by China in early 2018 to stop accepting recyclable plastics from the UK, coupled with the challenges faced in recycling soiled or mixed plastics economically, has left tonnes of plastics piling up around the country. Allaun believes that PowerHouse can be an integral part of the system that helps eliminate plastic waste, and helps revive our oceans, in an environmentally responsible, and economically efficient, manner.
“Waste and non-recyclable plastics need not be wasted or pollute our planet,” said Allaun. “Our DMG© process extracts a clean source of energy from waste plastics – hydrogen. The use of hydrogen, in lieu of fossil fuels, will eliminate a substantial CO2 burden to our oceans and our atmosphere.”
“A single lorry of waste plastic can generate enough hydrogen to provide over 60,000 miles of emission-free motoring, and concurrently power 1500 homes. PowerHouse makes a friend of waste plastic, not an enemy.”
The Future of Plastics can be seen in the June 8th 2018 edition of New Scientist Magazine or viewed on the web at the following URL:
The Company’s article can be viewed at:
For more information, contact:
PowerHouse Energy Group plc
Tel: +44 (0) 203 368 6399
About PowerHouse Energy
PowerHouse Energy Group plc is the developer of DMG©, the Distributed Modular, Gasification System which allows for the distributed eradication of waste, the generation of distributed electricity, and the production of distributed hydrogen with the world’s first small, modular, hydrogen from waste process (HfW).
The Company is focused on technologies to enable efficient energy recovery from municipal and industrial waste streams that would otherwise be directed to landfills and incinerators; or from renewable and alternative fuels such as biomass, tyres, and plastics for power generation, or the production of high-quality hydrogen as a fuel for transport. DMG© allows for easy, economical, deployment and scaling of an environmentally sound solution to the growing challenges of waste eradication, landfill diversion, electrical demand, and distributed hydrogen production.
PowerHouse is quoted on the London Stock Exchange’s AIM Market under the ticker symbol: PHE. The Company is incorporated in the United Kingdom.
For more information see www.powerhouseenergy.net
Ken Baksh – Buying when sentiment bad – A Trump in a China shop!
JP Morgan Chinese Investment Trust plc-ISIN-GB0003435012-JMC
The trust aims to provide long term capital growth by investment in companies which are quoted on the stock exchanges of Hong Kong, China and Taiwan or which derive a substantial part of their revenues or profits from these territories. In January 2016, the fund’s benchmark was changed from the MSCI Golden Dragon to the more widely used MSCI China. The company can use borrowing to gear the portfolio within the range of 10% net cash to 20% geared in normal market condition.
The long term economic growth story for China is very much still in place with per capita income expected to increase by over 60% over the next ten years to around $12900, significantly crossing the high-income threshold. Alongside this growth, China will need to move up the value chain shutting down capacities in old industries and developing more activities in high end manufacturing, healthcare, education and environmental services. The percentage share of consumption to GDP will rise to more developed country averages.
In the short term, there are also several reasons while I fell it is currently appropriate to supplement existing Chinese exposure.
- Macro factors remain supportive (e.g. GDP growth, money supply, bank liquidity)
- Exports are returning to growth and the consumer remains buoyant
- “Bubbles” in certain real estate areas are being addressed
- Positive trends for corporate earnings revisions
- Attractive valuations, especially on PE and PEG ratios
- Market under owned by emerging and global equity funds
- Gradually increasing Chinese weightings by major benchmark providers e.g. MSCI will lead to significant inflows by passive and some active funds over time
- Risks could include DEBT, government interference and less than ideal accounting, more relevant to smaller companies. It should also be noted that the shares have a higher than average volatility
The recommended investment trust portfolio (JMC) is concentrated with top ten holdings accounting for 44.3% at the end of March 2018.
- The fund is overweighed in sectors exposed to “New China” with greater emphasis on services rather than manufacturing. Information technology (mainly Tencent and Alibaba) represents over 31% of total assets while other leading sectors (all over 10% of portfolio) include consumer goods, financials and health care. “Old China” industries such as Telecoms and Energy are underweighted. This sector bias also goes some way to explain why the trust has significantly outperformed the MSCI China ETF (FXC) over one year and five years.
- The fund has also outperformed its peer group over the last one three and five years
- Future fund focuses include areas of consumption, healthcare, environmental protection and technology/internet.
- The current trust discount, near 13%, at a price of 318p, does not seem to reflect the longer-term market potential and is currently near the lower end of the 12-month range. See Hargreaves graph below.
- Fund recommended for purchase as part of an emerging market allocation.
Sources: Trustnet,Numis,London Stock Exchange,Hargreaves,Winterflood,own research.
Ken has over 35 years of investment management experience, working for two major City institutions between 1976 and 2002.
Since then he has been engaged as a self-employed investment consultant. He has worked with investment trusts, unit trusts, pension funds, charities, Life Fund,hedge fund and private clients. Individual asset managed have included direct equities and bonds pooled vehicles currencies, derivatives and commodities.
Projects undertaken in a number of areas including asset allocation, risk control, performance measurement, marketing, individual company research, legacy portfolios and portfolio construction. He has a BSc(Mathematics/Statistics) and is a Fellow Member of the UK Society of Investment Professionals.
All stock recommendations and comments are the opinion of writer.
Investors should be cautious about all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal ownership, may influence or factor into a stock analysis or opinion.
All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is not indicative of future price action.
You should be aware of the risks involved in stock investing, and you use the material contained herein at your own risk
The author may have historic or prospective positions in securities mentioned in the report.
The material on this website are provided for information purpose only.
Please contact Ken, (email@example.com) for further information
China Slumps Into Growth At Mad Hatters Tea Party
That, dear reader, is what the media, the high flying economists, the serious, oh so serious, news anchormen on Bloomberg and Alice in Wondervision, would have you believe. The Chinese economy is in decline, it is crumbling and look what the decline is doing to the prices of commodities. They are in free fall, have been in free fall and are going to continue free falling until the Chinese economy starts growing again.
The Chinese economy in 2015 has grown at a rate which every European and American leader would regard as justification for a national celebration.
The facts are that Chinese growth in fixed investment has fallen to a 15 year low and is expected to come in at 4.5% for 2015. In November credit growth in the Chinese economy fell to 11.8%, close to an all time low – this growth the pundits said caused copper to fall to its lowest since 2009.. Also in November fixed asset investment data was described as damaging, with growth of 10.2%, the lowest for 15 years. As for that bell weather as to the strength of a country’s economy, Chinese passenger car sales, rose by 13% in October.
But the world is now being brain washed to accept that China is to be blamed for the slump in commodities and all the other evils which beset western economies.
The geniuses of the financial columns deliberately ignore the truth because either lies make a better story or there is a huge western conspiracy to cover up the truth. And what is being covered up – it appears to be the fact that nobody has a clue why western economies are in such a mess and commodities are plunging to levels not seen for decades so lets blame the Chinese.
In November amidst all this good news from China, Anglo American (AAL) fell to its lowest since 1999 and fears grew that it would have to cancel its dividend, hedge funds dumped 368 tonnes of gold in 3 weeks, BHP Billiton (BLT) fell to a 7 year low after falling 5.64% in one day. Iron ore fell to a new low of $40 per tonne and then on the 7th December dropped into fantasy land with a further fall to $38.90 compared to $190 per tonne in 2011. Coal became virtually unmarketable as Maggie Thatchers wisdom in decimating the British coal Industry decades ago, became clear for all to see and Moody’s forecast that in 2016 diamond miners would be forced to cut prices even further.
The latest undisputed data from China is that 3rd quarter growth came in at 6.9%, its lowest since 2009 and retail sales in the first 9 months rose by 10.9%. Mouth watering figures by western standards.
The pundits try to make us believe that the main cause of the commodities meltdown is a non existent economic slowdown in China. That can not be true but I wonder what the real cause is.
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Growth = Slowdown; Latest OECD Shambles
In 2017 growth in China’s GDP is expected to “cool” to 6.2%. The Chief economist at the OECD says that this years slowdown in trade, particularly with China, will lead to lower economic global growth. She blames China”s economic slowdown as being at the heart of this.
The only problem with this view is that this years growth in the Chinese economy will come in at 6.9%. Since when, one may ask, has growth of 6.9% amounted to a slowdown in any economy. It may not have been expanding at its previous hectic rate but a rise of 6.9% can hardly be called a slowdown.
Germany, the UK, Japan and the USA would not believe their luck, if they could produce annual growth of even half the Chinese level. Indeed were they to do so half the financial journalists and even more of the worlds economists, led by the Chief one at the OECD, would no doubt be screaming about the dangers of overheating economies and the risks of rampant inflation.
Who are these jobsworthies who delight in making fools of themselves with inane and illogical comments. Well they are the people who have most influence on economic policies all over the world.
The UK with meagre growth of 2.4% is already threatening higher interest rates next month in order to reduce demand and avoid the creation of too many new jobs leading to too much inflation. It should not make sense for the OECD to blame Chinas 6.9% growth for the worlds problems but unfortunately for you and me, it is blind to everything but the location of the next gravy train.
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Feedback (FDBK) – First sale of TexRAD in China
Feedback plc (FDBK), the medical imaging software company, is pleased to announce the first sale for research purposes of Feedback’s TexRAD texture analysis software in China. Peking Union Medical College Hospital, Beijing, China (‘PUMCH’), has recently purchased the TexRAD software to undertake research studies in cancer and other diseases. This has been made possible via logistical support from GE Healthcare.
PUMCH is one of the most renowned hospitals in the People’s Republic of China. It was founded in 1921 by the China Medical Board in New York under the Rockefeller Foundation and is located in the centre of modern Beijing. PUMCH is committed to delivering state-of-the-art clinical care, innovative scientific research and rigorous medical education and it enjoys a high reputation for its full range of disciplines, leading medical practitioners and cutting-edge technologies. It is also a national referral centre for the diagnosis and therapeutic care of complex and rare disorders.
Dr. Huadan (Danna) Xue, Assistant Professor in the Department of Radiology, PUMCH commented, “We are very excited with the prospects of using the TexRAD imaging research software platform in conjunction with the research and clinical support from GE towards PUMCH, further reinforcing our vision and reputation of being early adopters of new technologies, particularly in the fascinating area of quantitative imaging and its applications in cancer care and other diseases.”
TexRAD research software will extract key heterogeneity information via a novel quantitative texture analysis approach from PUMCH’s cancer imaging datasets. TexRAD has already established itself as a leading and innovative texture analysis software product, currently employed as a research tool in a number of prestigious imaging centres and university hospitals in the western world and recently in other large Asian markets such as South Korea and Japan. Similarly at PUMCH, TexRAD will be assisting to enhance the research output in cancer and other non-cancer imaging applications and helping to identify potential clinical applications to improve care management of patients in the future.
Dr. Balaji Ganeshan, Chief Scientist and New Business Officer at the Company’s subsidiaries TexRAD Ltd and Cambridge Computed Imaging Ltd, commented, “We are delighted to receive this order, working with a leading original equipment manufacturer on the sale and entering the huge Chinese market. We are especially privileged to be supplying PUMCH which is recognized to be the leading hospital in China and working with the Department of Radiology, headed by the internationally renowned Dr Zheng-Yu Jin. We believe this will open up new avenues and opportunities for Feedback in establishing itself and fulfilling its vision as an innovative multi-modality medical imaging software company.”
For further information contact:
Tel: 01954 718072
Simon Barrell / Trevor Brown / Tom Charlton
Sanlam Securities UK (Nominated Adviser and Joint Broker)
Tel: 020 7628 2200
Simon Clements / Virginia Bull
Peterhouse Corporate Finance Ltd (Joint Broker)
Tel: 020 7469 0936
Lucy Williams / Duncan Vasey
XAAR – Defying China
XAAR (XAR) specialises in inkjet printing technology and is a world leader in industrial inkjet print heads.
In September 2013 its shares reached an all time high of 1150p and then collapsed to 220p., losing 80% of their value in the 12 months to September 2014. The company took immediate action to overcome the challenges which it faced. The share price began to recover and had nearly doubled by the 26th August 2015 when they touched 450p.
Despite the turbulence which has hit world stock markets since 26th August, especially for companies which had anything to do with China, the shares have continued to rise instead of crashing back with all the others and have steadily risen by 16% over the past week, to 518p . As of yesterday, they were still rising despite the fact that profit before tax for the first half of 2015 fell to 3.7m. compared to 15.3m for the first half of 2014 and 7.8m in the second half. As a sign of confidence in the future Xaar increased its interim dividend to 3.15p
Xaar’s problems were caused by the slowing Chinese property and construction markets – its print heads are used, amongst other things, for putting patterns on ceramic tiles. In 2014 revenue fell by 19% and profit before tax nearly halved, falling from 41.4m to 24.6m. Xaar responded by making a savage attack on costs. 20% of its global headcount went and new products were announced.. The result is that as per plan, the trading position has now been stabilised and a return to growth is expected in 2016.
The shares are in recovery mode and it will be interesting to see if they can continue to defy the China syndrome.
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