David Buik, senior market commentator for Panmure Gordon, joined Tip TV to discuss the commodity outlook, entwined with the current situations in the US and China.
Yellin delaying rate hike
Buik began by noting the lack of confidence in Yellen’s proposal of the September rate hike, and adds that when looking around everyone can see that the world is in turmoil. He believes this is the same as Carney and the UK rates, despite the UK being in a better position than the US to raise rates, he maintains that the UK will not act ahead of the US.
False market in China
Buik commented on the insane allowance of the 150% Chinese stock market rally, and expresses that he isn’t sure whether the storm is over. He believes that spivs and vagabonds have been pumping up prices because they’ve been relying on China as a result of the link between commodity prices and Chinese demand. Buik note that the market will not fall out of bed, and that a 30-35% natural correction is reasonable.
M&A to keep the FTSE 100 treading water
Buik believes that the mass merger and acquisition spree currently occurring in the US will keep the FTSE afloat, and may occur in the UK as well. Larger firms are struggling, whilst smaller stocks are achieving margins such as exciting AIM stocks. He continues by portraying the massive share buybacks and gigantic mergers as a cause of failing to deliver on shareholder value, compared to smaller firms with big plans ahead. To finish, Buik notes that some kind of rationalisation will occur in the next few years.
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