₪ David Pescod's Late Edition May 10, 2007
THE SHANGHAI COMPOSITE INDEX:
ZINC:
SELKIRK METALS (V-SLK) $1.18 +0.12
We’ve been taking a look at the chart that you see to the left for the last while and that’s why all of a sudden, we’ve seen something in our own personal stock accounts that we haven’t seen in years...it’s called ‘cash’.
The chart to the left is that of China’s stock market, the CSI 300 Index which looks like a rocket taking off over the last while. It’s the best performing amongst 90 different stock exchanges out there, up a amazing 82% this year.
On Bloomberg yesterday, you probably read that Goldman Sachs of the United States suggested there is probably a correction due in the Chinese markets... “As valuations have exceeded earnings prospects after the benchmark index almost tripled in the past year.”
Goldman Sachs pointed out that the Exchange is now trading at 42 times reported earnings, and remember, this is China, where accounting is well...still probably more a theory than what you would be used to as accounting in North America.
The other scary tidbit is that China is a land of very young capitalists, none of whom have memories of a market correction. If we had to come up with one reason that could affect stock markets around the world badly, it would be a grossly over-priced Chinese market taking one heck of a correction.
According to the Bloomberg article, even the Central Banks Governor Zhou Xiaochuan has expressed concern about the Chinese stock market rally. The big question for your crystal ball of course is how soon does this correction come and how brutal could it be? As we still don’t know how the Chinese investors will react to a first correction…
There was also other interesting news out of China on Bloomberg yesterday and that’s related to the zinc market.
China is the biggest producer and consumer of zinc and it looks like it may have to slash exports of this metal according to traders being quoted on Bloomberg. The suggestion is that “Net exports of refined zinc may drop as much as 45% to between 50,000 and 60,000 metric tons in the three months ending in June, as tax rebates may be scrapped.”
Needless to say, these numbers could be good for the zinc market, while one worries about what happens next for the Chinese market and its potential affect on global markets.
There are a couple of zinc producers to watch should this news develop such as Blue Note Mining (BN), which will start their Caribou Mine in New Brunswick shortly amongst lots of debate about how well their recovery systems will be and Selkirk Metals starting one of the most aggressive of all exploration programs in Canada, with $15 million being spent on their zinc/lead discovery in southern B.C.
Canaccord analyst Wendell Zerb also suggests Zincore (ZNC) Metals, upon a great last hole when it settles out, Pacifica (PAX) because of its size and Mantle Resources (MTS) for its geological land package. Keep watching!
CRYSTALLEX INTL. (T-KRY) $5.18 +0.32
This is one stock that we obviously cannot understand. Look at the huge volume of over 9 million shares on Toronto and Crystallex is up to $5.18.
Crystallex owns the Las Cristinas deposit and it’s probably one of the world’s biggest undeveloped gold projects...which is the good news.
The bad news is that it is in Venezuela. Just a few days ago, Venezuela’s mining ministry announced that they planned to finish drafting a new law within two months that will change existing mining deals in the mineral-rich country, according to Dow Jones and the new law will convert expired mining licenses into joint venture companies where the State will be the majority shareholders.
Also, in an April 16th interview, it was noted that new law will convert mining deals into joint ventures with the government in control.
According to the press release, the Canadian miner is waiting on an environmental permit to begin operations… (and it’s been waiting for ages).
We just wonder if the mining people have totally missed how the Venezuelan’s have basically expropriated much of the oil and gas assets in the country and has lately been trying to do the same with other public utilities from telecoms to you-name-it.
Yes, it has all appeal of investing in Russia or other wonky places and while Mother always said, “If you have nothing nice to say, shut up…” the urge to short rears its ugly head.
If you would like to receive the Late Edition, email Debbie at debbie_lewis@canaccord.com |
