FX Strategist

Greg Gibbs

Fundamental analysis of topical themes in FX

Amplifying Global FX Capital

Amplifying Global FX Capital was founded in 2015 and is fully owned by Greg Gibbs. It is a registered company both in Australia and Colorado, USA and is a licensed in Australia to provide financial services.

We are producing a regular trading view orientated macroeconomic analysis of topical themes in global financial markets, with a particular focus on foreign exchange. We invite you to view an “executive summary” of these reports in “AmpGFX Reports” under our “Research” menu.

These reports are drawn from the analysis of Greg Gibbs and inform the capital management he undertakes on behalf of the company. The trading performance is posted periodically on our website. We aim to build our company into both a research and capital management business. We are currently in the planning phase for managing capital for wholesale customers.

Greg Gibbs has spent his working life of more than 26 years in financial markets, beginning in 1989 at the Reserve Bank of Australia, after completing a Bachelor of Economics Degree (Honours) at the Australian National University. He has been a CFA Charterholder since 2005. He has worked in Sydney, Singapore, New York and London for major global banks and presented on foreign exchange markets to major financial institutions and companies around the world, and maintained a high profile in the financial media.

Before Amplifying Global FX Capital, Greg was the Head of Asia Pacific Market Strategy at the Royal Bank of Scotland based Singapore. He now resides in Breckenridge Colorado.

Macroeconomics

More stability in oil prices, anticipated policy easing by the ECB, intensified efforts in China to control its currency, and a Fed that is keeping its policy options open and likely to delay policy tightening on recent ebbing trends in US growth and global market uncertainty are likely to combine to  support global equity markets and risk appetite.  We anticipate a lengthy consolidation in equities after a tough start to the year, and some recovery in commodity currencies, mostly against the EUR.  Weak Chinese economic growth and more volatile Chinese equities, indicative of domestic financial stress, pose the biggest threat to this more benign near term outlook.  However, a good deal of the negative outlook for Chinese commodity demand may be baked in the cake.

More stability in oil prices, anticipated policy easing by the ECB, intensified efforts in China to control its currency, and a Fed that is keeping its policy options open and likely to delay policy tightening on recent ebbing trends in US growth and global market uncertainty are likely to combine to  support global equity markets and risk appetite.  We anticipate a lengthy consolidation in equities after a tough start to the year, and some recovery in commodity currencies, mostly against the EUR.  Weak Chinese economic growth and more volatile Chinese equities, indicative of domestic financial stress, pose the biggest threat to this more benign near term outlook.  However, a good deal of the negative outlook for Chinese commodity demand may be baked in the cake.

AmpGFX - More Stable Oil and EUR to Underperform Commodity Currencies

Hao Wang, CFA

Thematic (Sector/Industry)

This is a very short note on my top 5 trade recommendations in 2016 after the close of 2015 based on my previous note of 2016 outlook (i.e. be aggressive in Q1 but defensive thereafter). The basis are higher commodities prices led by copper, crude and some bulk, and relatively weaker USD. <figure class="editor-figure"><img src="https://static-prod.smartkarma.com/images/media/000/004/820/original/Fig6.png?1451718588" class="editor-image img-responsive" data-smartkarma-image-id="4820"><figcaption class="figcaption">Top five macro trades in 2016Q1</figcaption></figure>In the above trade recommendations, you also have levels of profit target and stop loss. They are ranked by the ratio of reward/risk. Going forward I will keep updating levels…

This is a very short note on my top 5 trade recommendations in 2016 after the close of 2015 based on my previous note of 2016 outlook (i.e. be aggressive in Q1 but defensive thereafter). The basis are higher commodities prices led by copper, crude and some bulk, and relatively weaker USD. Top five macro trades in 2016Q1In the above trade recommendations, you also have levels of profit target and stop loss. They are ranked by the ratio of reward/risk. Going forward I will keep updating levels…

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

<ul><li class="p1">The outlook for copper prices is worse than most think. Battered copper mining stocks may now screen as cheap, but we see further downside.&nbsp;</li><li class="p2">Copper price declines of the past few months have caused many analysts to pare their near-term price forecasts. Yet longer term, most remain bullish, citing copper's geological scarcity and continued, albeit slower, Chinese demand growth.</li><li class="p2">Most analysts forecast an eventual recovery to $2.25-$3.00 per pound, an outlook that informs aggressive price targets on copper mining stocks.&nbsp;</li><li class="p2">We forecast a long-term price of $2.00 per pound and expect ebbing Chinese demand, which accounts for roughly half of the global total, to push prices below $2.00 in 2016 and 2017.</li><li class="p2">We expect China's copper needs to fall as real estate activity fades to a level more commensurate with underlying urbanization trends and power spending shifts away from copper-heavy distribution to copper-light transmission.</li><li class="p2">On the supply side, cost deflation, a flattening of the cost curve, and rising scrap supplies all threaten prices.</li><li class="p2">We see significant downside risk in copper mining stocks.</li></ul>Analysts: Jeffrey Stafford, CFA &amp; Daniel Rohr, CFA

The outlook for copper prices is worse than most think. Battered copper mining stocks may now screen as cheap, but we see further downside.&nbsp;Copper price declines of the past few months have caused many analysts to pare their near-term price forecasts. Yet longer term, most remain bullish, citing copper's geological scarcity and continued, albeit slower, Chinese demand growth.Most analysts forecast an eventual recovery to $2.25-$3.00 per pound, an outlook that informs aggressive price targets on copper mining stocks.&nbsp;We forecast a long-term price of $2.00 per pound and expect ebbing Chinese demand, which accounts for roughly half of the global total, to push prices below $2.00 in 2016 and 2017.We expect China's copper needs to fall as real estate activity fades to a level more commensurate with underlying urbanization trends and power spending shifts away from copper-heavy distribution to copper-light transmission.On the supply side, cost deflation, a flattening of the cost curve, and rising scrap supplies all threaten prices.We see significant downside risk in copper mining stocks.Analysts: Jeffrey Stafford, CFA &amp; Daniel Rohr, CFA

The Outlook for Copper Prices Is Worse than Most Think

Equity Bottom-Up

Like its peer BHP Billiton, Rio Tinto has ridden the commodity&nbsp;supercycle since the early 1990s. Rio Tinto's asset portfolio&nbsp;is less diversified, with iron ore and aluminium generating&nbsp;85% of its value. Unlike BHP Billiton, it lacks a petroleum&nbsp;division.Its metallurgical coal exposure is also&nbsp;comparatively smaller, and energy coal is more important.&nbsp;Copper generates just over 10% of our fair value estimate&nbsp;for the company.Aluminium should constitute a&nbsp;substantially larger share, given the USD 40 billion that Rio&nbsp;Tinto controversially paid for Alcan in 2007, but (alas) much&nbsp;of that investment is money gone to heaven.&nbsp;This large acquisition, made with BHP breathing&nbsp;heavily down Rio's neck, was the first in a number of&nbsp;serious capital missteps.Rio has the&nbsp;lowest operating costs of all the iron ore players, but despite&nbsp;this being the bulk of company earnings, excess returns have&nbsp;been destroyed through pro-cyclical over-investment during&nbsp;the China-driven boom.Analysts: Mathew Hodge &amp; Ravi Reddy

Like its peer BHP Billiton, Rio Tinto has ridden the commodity&nbsp;supercycle since the early 1990s. Rio Tinto's asset portfolio&nbsp;is less diversified, with iron ore and aluminium generating&nbsp;85% of its value. Unlike BHP Billiton, it lacks a petroleum&nbsp;division.Its metallurgical coal exposure is also&nbsp;comparatively smaller, and energy coal is more important.&nbsp;Copper generates just over 10% of our fair value estimate&nbsp;for the company.Aluminium should constitute a&nbsp;substantially larger share, given the USD 40 billion that Rio&nbsp;Tinto controversially paid for Alcan in 2007, but (alas) much&nbsp;of that investment is money gone to heaven.&nbsp;This large acquisition, made with BHP breathing&nbsp;heavily down Rio's neck, was the first in a number of&nbsp;serious capital missteps.Rio has the&nbsp;lowest operating costs of all the iron ore players, but despite&nbsp;this being the bulk of company earnings, excess returns have&nbsp;been destroyed through pro-cyclical over-investment during&nbsp;the China-driven boom.Analysts: Mathew Hodge &amp; Ravi Reddy

Lowering Long-Term Copper Forecast and Cutting Rio Tinto's Fair Value Estimate to A$38

<ul><li>BHP Billiton has a number of the world's largest mines.</li><li>Key mining commodities are iron ore, coking coal and copper. In addition, the company has meaningful oil exposure with large bets on U.S. onshore shale gas and oil made in the past few years, in addition to a portfolio of conventional and liquefied natural gas, or LNG, assets.</li><li>The iron ore mines in particular are at the low end of the industry cash cost curve, however over-investment during the peaks of the China boom, when capital costs were very high relative to historical standards, has rendered any operating cost advantage moot.</li><li>After adding back the not inconsiderable write-downs, BHP&rsquo;s invested capital base has nearly quadrupled in the decade ended 2015.</li><li>In the five years ended fiscal 2012, BHP Billiton's return on invested capital averaged 25%, but those heady days are gone reflecting the weaker external environment and balance sheet obesity from boom time spending.</li><li>Considerable investment during the boom, with no commensurate uplift in earnings, has significantly diluted returns to the point where we think excess returns are unlikely in future.</li></ul>Analyst: Mathew Hodge

BHP Billiton has a number of the world's largest mines.Key mining commodities are iron ore, coking coal and copper. In addition, the company has meaningful oil exposure with large bets on U.S. onshore shale gas and oil made in the past few years, in addition to a portfolio of conventional and liquefied natural gas, or LNG, assets.The iron ore mines in particular are at the low end of the industry cash cost curve, however over-investment during the peaks of the China boom, when capital costs were very high relative to historical standards, has rendered any operating cost advantage moot.After adding back the not inconsiderable write-downs, BHP&rsquo;s invested capital base has nearly quadrupled in the decade ended 2015.In the five years ended fiscal 2012, BHP Billiton's return on invested capital averaged 25%, but those heady days are gone reflecting the weaker external environment and balance sheet obesity from boom time spending.Considerable investment during the boom, with no commensurate uplift in earnings, has significantly diluted returns to the point where we think excess returns are unlikely in future.Analyst: Mathew Hodge

BHP Billiton's Heavy Investment Through the China Boom Has Diluted Returns and Destroyed the Moat.

Australia

BHP Billiton Limited is an international resources company.  The Company's principal business lines are mineral exploration and production, including coal, iron ore, gold, titanium, ferroalloys, nickel and copper concentrate, as well as petroleum exploration, production, and refining.  Dually-listed company with BLT LN.

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BHP Group Ltd (BHP US)

AmpGFX - More Stable Oil and EUR to Underperform Commodity Currencies

More stability in oil prices, anticipated policy easing by the ECB, intensified efforts in China to control its currency, and a Fed that is keeping...

Greg Gibbs

Top 5 Macro Trades in 2016Q1

This is a very short note on my top 5 trade recommendations in 2016 after the close of 2015 based on my previous note of 2016 outlook (i.e. be...

Hao Wang, CFA

The Outlook for Copper Prices Is Worse than Most Think

The outlook for copper prices is worse than most think. Battered copper mining stocks may now screen as cheap, but we see further...

Morningstar, Inc.

Lowering Long-Term Copper Forecast and Cutting Rio Tinto's Fair Value Estimate to A$38

Like its peer BHP Billiton, Rio Tinto has ridden the commodity supercycle since the early 1990s. Rio Tinto's asset portfolio is less diversified,...

Morningstar, Inc.

BHP Billiton's Heavy Investment Through the China Boom Has Diluted Returns and Destroyed the Moat.

BHP Billiton has a number of the world's largest mines. Key mining commodities are iron ore, coking coal and copper. In addition, the company has...

Morningstar, Inc.

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