Far East Capital Newsletter
Graphite fundamentals improve strongly
4 Feb 2018

In This Issue

Graphite fundamentals improve strongly

The 2.54% slump in the Dow on Friday was not what anyone was expecting, in the light of the news flow that has been giving room for continued optimism. However, it is a salient reminder that the market always has the capacity to surprise on the downside just when everyone starts to feel comfortable. The first reaction is “what the… !”, and then you start to ask “why?”; but there is often no obvious answer.

The commentaries out of the US suggested that the selldown happened because of disappointing earnings figures. Perhaps they were disappointing, but share prices should adjust rather than collapse. The Dow kept falling all day as traders took advantage of the opportunity to sell into the fear. Now, in Australia, there will be heightened nervousness on Monday as our traders try to guess whether this is the start of something serious, or just an intra-trend volatile event. There is no way of telling at this juncture. As they say when a bushfire flares up, it is a case of “watch and act”. It is likely that we are entering a period of increased volatility, with that volatility bringing both risks and rewards.

The graphite price has also started to recover with the turnaround coinciding with China announcing a doubling of demand for anode material from 50,000 t to 100,000 t, in 2018. Thus graphite is starting to be a fundamental earnings story rather than a stock market play.

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