Market’s been on a sideways downtrend since the peak in mid-June…and what can change this?

3Q #’s are unlikely to be inspiring, given that this economy is driven by tourism and exports where the first one is reliant about domestic travelers which is perhaps ~20-30% of total spending compared to international travelers to the country and exports which are -20% this year excl gold.

So what can change? I still have these viewpoints:

  1. Commodities will have a great 2021…mainly due to supply destruction
  2. Listed companies have cut costs like mad..and even if revenues only achieve 80% of what they were in 2019, due to a low cost base, profits have a high probability of matching 2019 levels by 2H21.
  3. Listed co’s are the ones with access to capital (both equity and debt)
  4. Positive momentum is building from the awful low during March-April 2020.
  5. What about all this massive debt out there? Interest rates are going to stay silly low for 5-10 years with central banks trying to inflate away the problem. (see 1)
  6. What about the unemployment issue and SME closures? Yes, you’ll see bad debt go through the roof – banks will write off/sell off a ridiculous amount – or we go into a Japanification mode. Yes, demand will be lower, hence the -20% in revenues. SME closures lead to larger market shares for the listed co’s that have the balance sheet and access to capital that SMEs don’t. I.e. Your 2nd favourite non-chain restaurant will be gone (not the #1 favourite because customers will still flock there), and that location will be taken up by a chain (i.e. a listed co).

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