Far East Capital Newsletter
A few home truths as we embark on 2024
13 Jan 2024

In This Issue

A few home truths as we embark on 2024

As usual at this time of the year, journalists ring around to build a story on what will be the best sectors in which to invest in the new year, and the best companies. The trouble is, 12 months is a long time in the stock market. Three months is about as far as my crystal ball can see, so perhaps those journalists should make a habit of running the story on a quarterly basis.

The general indices in the markets are up at near record highs but the resources market is only just coming of the bottom of a painful bear market. Movements are always exaggerated in the speculative end. Unless you were smart enough to exit the market at the top, you will be long and wrong in many stocks. Sure, most of them will improve as the cycle moves beyond the bear market, but it is too simplistic to expect the share prices to recover previous highs. There are too many stale bulls.

There is no shortage of graphite companies out there but there is shortage of success stories. How many times have we seen forecasts of huge increases in demand for graphite for battery anodes e.g. in Renascor's (RNU) AGM presentation last November, it says that demand for natural graphite will increase from 0.6 Mt in 2023, to 1.94 Mt in 2028, then 3.7 Mt in 2033; that is a 500% increase. Yet, the graphite price has fallen from about US$900 pt to less than US$700 pt in 2023. The Renascor share price has fallen from 35c late in 2022, to less than 10c last week. It doesn''t correlate with the demand forecasts. The stock market isn't buying the graphite narrative.

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