Angry CCP Equity Analysts, J&J, A Scrabble Superstar, and Pakistan
Aug 28, 2019 | Read time: 4 min | 766 words
Dongchen Zhao, the head of equity research at the state-owned Industrial and Commercial Bank of China released a report on Cathay Pacific Airlines with a STRONG SELL recommendation (also random knowledge nugget for the day – Cathay is an alternate, more romantic name for China, given to it by white people who had come to China to trade and met the Khaitans, more on that here). Titled “Less Deserved to Fly” (WTF is up with the title, btw), it assigns a target price of $6 to Cathay’s stock, down from the $10ish it’s trading at right now. I read his report, and while he’s given 5 reasons that make his thesis, those reasons can be combined into one – Cathay Pacific is an HK-based company, and Big Daddy Xi don’t like it. Seems to me that ICBC has basically turned into a mouthpiece of the Chinese government, and they’re trying to make Cathay pay for their “tolerance” to protesters. The report was released last week, and Cathay’s stock price is going strong still, so I don’t know what ICBC intended to achieve, really.
Johnson and Johnson got slapped with a US$572 million fine on Monday by a judge in Oklahoma for aiding the state’s opioid crisis. The judge said that J&J developed a misleading marketing campaign to convince people that the opioids it was manufacturing had very little addiction risk and so could be used to treat several ailments that caused chronic pain. Opioids refer to a class of drugs that are “like opium” – they reduce pain, make you sleepy, sometimes induce euphoria, etc. Now it doesn’t take a lot of intelligence to deduce that if you take something that does all of the above, you will want to take it again and again. What puzzles me is how did people become convinced that these drugs weren’t addictive? Anyway, that isn’t the important bit. The important bit is that this judgement might be unique only to Oklahoma, because the public nuisance laws under which J&J was tried work differently there as compared to other states. So those anticipating a flood of litigation and large fines might have to hold their horses, for this is just one case in one state.
Singapore might face bad debt problems – which means that our BRS team might hit the jackpot soon. The growth forecast for Singapore has been cut (the MTI expects Singapore to grow between “0.0 and 1.0 per cent”), and companies have a lot of loans outstanding ($12 billion in loans mature in 2020), and it may so happen that some companies might be unable to pay.
First, a definition. Floccinaucinihilipilification means that “trying to put a firm estimate on certain things is basically worthless”. Why is this important? Because a governor of the Reserve Bank of India used it in a Monetary Policy Committee meeting – “estimates of economic growth in India have unfortunately been subject to a fair degree of floccinaucinihilipilification. Notwithstanding this, growth is likely to pick up”. So in the first sentence, he basically he said that putting a number to Indian economic growth is pointless. In the second sentence, he says that growth will pick up again. So he can’t put a number to it, but he feels it’s gonna go up soon. Very Central Banker-y of him to say so. At least I know who I’m not gonna play scrabble with if I end up at the RBI.
Imran Khan, the faux-leader of Pakistan, aims to push Kashmir at the UN summit in New York next month. He is also expected to mention the fact that both Pakistan and India have nuclear weapons, and things could go horribly wrong if tensions increased. For those who don’t know much about Pakistan, let me explain to you how Pakistan works – where other countries have armies, Pakistan is an army with a country, and that’s an understatement. Since 1958, when the Pakistan Army (PA) carried out the first successful military coup, the PA has enjoyed a disproportionate amount of influence on the governance of the country, and this influence will begin to wane the day Kashmir ceases to be an issue, because that will mean that India and Pakistan will be at peace with each other, and so Pakistan won’t really require an Army as large as the one it has right now. So everything that Pakistan does must be viewed keeping in mind that the PA chief is the man in charge (and not the Prime Minister), and the PA chief will do what’s best for his Army, in the end.