Macro-Industry Strategy: Global Views Update
Continued weakness in global markets, combined with idiosyncratic dynamics continue to weigh on the performance of our Macro-Industry Strategy views this week, but we highlight that most of the views still remain in positive territory and continue to outperform their respective benchmark indices, despite giving back a portion of their gains. We are also currently looking at a potential new view that would take advantage of the US shale boom, and in particular, the Tuscaloosa Marine Shale play.
Two Infrastructure Views Are At Risk Of Further Weakness
We note that our two infrastructure views in Latin America are at risk, with both of them giving back all their gains in the past two weeks. In Colombia, our Bullish Colombian Materials view, which we are playing via Cementos Argos (Cemargos), is flat and we see some risk of a move lower, despite still-strong medium term fundamentals. Indeed, we believe that a contract dispute over cost overruns which has resulted in a winding down of work on the Panama canal expansion project could be weighing on Cemargos' share price in the short term given that it is the main supplier of cement to the project. It is hard for us to assess how the negotiations between the Panama Canal Authority (ACP) and contractors will pan out, however a lack of resolution will prolong a period of uncertainty over payment for sub-contractors and suppliers and thus, investors may shy away from Cemargos temporarily. Although we remain bullish, we continue to highlight our implied stop loss, which comes in around support at COP8,700, implying approximately 3.5% of potential downside from our original entry point.
|Cemargos Looking Weak|
|Colombia - Cementos Argos Equity, COP|