There now is an abundance of theories about why the stock market fall occurred. My Swiss National Bank thesis has not been picked up by other analysts but many are blaming higher bond rates for having triggered the stock market fall. While the fall in bond prices as yield go up (because they move inversely to each other), the coordination of stock falls to bond market ones was slow getting going. It was more the likelihood of further rate hikes rather than their actual rises that started to stock selloff.

The impact on stock prices of the collapse in reverse-volatility plays (derivatives long on low volatility like XIV, the reverse of the VIX) is a technical factor being blamed for the continued share price weakness. It is probably being overstated. Whenever there is a crash in the stock market, pundits like to blame a technical factor. Among the culprits past are portfolio insurance; over-leveraged mortgage market losses; options strategies (put-buys or call-sells); and Wall Street bankruptcies ( in 2008-9's correction: IndyMacCIT; WaMu, Lehman Brothers, AIA, Merrill Lynch, etc.)

Blaming it on a technical factor absolves the market from having to blame itself for plummeting stocks. “It wasn't me”.

Or to blame the economic outlook for the bear market, which means it is a real danger.

Or for the US to blame the White House or Congress, for example for the looming rise in US government deficits and their pro-cyclical tax “reform”. Or the inexperienced new Fed Chair.

My own secret theory is that everyone knew it couldn't continue so they were trigger happy after the DJIA and the S&P 500 ran up the longer series of gains last year since the 1950's.

It is another day overladen with results, so enough chatter. We have results from Panama, Mauritius, Canada, and Japan, plus more news from other places. And a new stock pick in China which reported yesterday (our writer was waiting to be sure.)

Solar electric ute Azure Power of India (HQ'd in Mauritius), NYSE:AZRE, reported on its FY Q3 which ended Dec. 31. Operating revenue rose 83% to INR 1.7399 billion, $27.3 million thanks to new projects. However, costs rose faster, by 90% to INR 158.4 million or $2.5 million (for plant maintenance and new projects) and SG&A doubled to INR354.5 million and moreover a government reclassification of one of the new sites resulted in a one-time charge of INR 86.3 million ($1.3 million). Then depreciation and amortization also rose by a quarter to INR 474.9 million ($7.4 million) for financing new solar plants. Interest expense rose 130% to INR 639.4 million ($17.7 million) and the rupee moreover fell 2% against the greenback (currency of borrowing) in the quarter and it had to pay more taxes (despite being HQ's in an offshore haven).

You can see where this is going. Despite or indeed because it got more business AZRE lost lots of rupees. Its net loss for Q3 was up tenfold from the prior year Q3 at INR 136.1 million or $2.1 million despite higher cash flow.

Since AZRE is in business to earn profits, it expects to get the government to pay faster, stop fiddling the sites, and otherwise become less Indian. If all this occurs, AZRE expects to post revenues of $143-151 million in the current FY. It closed 2017 with a 57% increase in the number of megawatts of power it produces, at 805 MW. In the half year the rise in MW topped 100%. It is not like India can afford to zap Azure. Its stock is off 2%.

Banco Latino-Americano de Comercio, the Panama-based multilateral trade finance bank, reported surprisingly low 2018 earnings nipped by higher operating expenses and lower profitability ratios, at $82 million, down 23%. Full year eps was $2.09, down from $2.23, because of lower return on equity and lower interest margins and spread. Q4 profit however was up at $20.6 million, up 54%, a herald of better times coming, thanks to lower loan loss provisions and increased fees. The bank is cutting its size and personnel levels according to retiring CEO Rubens V. Amaral. It will issue a quarterly dividend this year of 38.5¢ to reflect its lower overheads, payable this month. The share is off ~2%.

*Simulator-maker CAE of Canada reported Q3 revenues of $704.4 million up from prior Q3 level of $682.7 million, and net profits of $117.9 million, more than double prior Q3 level of $67.6 mn. EPS hit 44 cents vs 25¢ (28¢ leaving out the impact of the US tax reform recovery of money and a gain from revaluing its Singapore training center. Operating profit as a percentage of revenues came to 16% this year vs 13.7% in the prior Q3.

However, the backlog fell to $7.368 billion from prior Q3's level of $7.53 bn. Civil aviation revenues were flat in the quarter and produced lower operating income and margins, but soared to over $1 billion in backlog. Defense training revenue rose 8% y/y but didn't produce a backlog. Healthcare remains marginal at 5% of sales. It stock is up 0.6% today.

*Cameco beat consensus on both earnings and revenues, with EPS at 46 loony cents (vs 35) and revenues at C$809.9 million (vs $781 million), although off by 8.8% from prior year. Full year revenue was down 15% to C$2.157 billion, and loss hit 52 loony cents/sh, up from 16 cents in 2016.

CCJ cut its dividend which took the share down although it had signaled its plan to do so back in November. CEO Tim Gitzel said that it had met its outlook targets set after its Q3 result, which included a net loss under GAAP of C$205 million in 2017.

Adjustments turned that into a C$59 million profit by leaving out inventory write-downs last year. CCJ cut costs and capex by shutting in some sites, like Rabbit Lake, and McArthur River. These cut uranium output from 2016, which also was no surprise. So far they are being kept shut in this year as well. It also reduced its stake in the Inkal jv which no longer will have to be consolidated in results, being under 40%.

Uranium prices fell despite this, except for its contract sales which were made at 66% over the spot price. One potential contract purchase, Tokyo Electric Power Co (TEPCO) refused to purchase and is being sued by CCJ. Paradigm Research cut its price target C$2 to 12.5. Since none of the negatives is news, the stock fall of 4.31% is an over-reaction.

Japan's Toray Industries reported 9-mo profits of ¥123.36 bn, up 7% from prior 9 mo. It sales rose 14% to ¥1.649 trillion and operating income was up 8.5% to 123.4 bn. EPS rose by 10% to ¥48.48/sh

It forecast that it will close the current FY with revenues of ¥2.22 trillion on which its net profit will come to ¥100 billion, or ¥62.52/sh. Its dividend will remain flat at ¥7. Its ADR is up 2.5%+ but finding the news is tough.

Here is our new stock, Hollysys Automation Technology, a Chinese maker of automation systems, which reported blow-out numbers yesterday, FY H1 non-GAAP net of $58.3 million, up 72%; revenues of $272.9 million, up 35%; diluted eps of 96¢, up 71%--all compared to the prior year which had 203 days in the half vs only 166 in 2017. Its Q2 figures were even better: non-GAAP net of $36.3 million, up 229%; revenues of $157.4 million, up 59%; diluted eps of 60¢, up 233%. Its industrial automation revenues rose 26% in the last quarter, to $57.6 million. It works automating factories in chemicals, salt, petrochemicals, offshore oil drilling, recycling, white goods (appliances), food and beverages; and electric and mechanical installations for power plants. However its main business is automation of train and public transport lines and signalling. It is nice to see a company whose growth is so fast.

Over to Harry Geisel on HOLI-Q:

Hollysys has over 10,000 customers in China, Malaysia, Singapore, India, and Dubai for systems to boost productivity and safety. One of their most important lines is Automatic Train Protection whose lack has caused several recent US railway accidents.

Its excellent results should not lead us to ignore the fact that most of the systems it sells are expensive, making revenues lumpy. Despite this, it projects that H2 of its FY 2018 will see growth similar to the Dec. 31 half year.

HOLI has a pristine balance sheet with long term debt accounting for a mere 3% of capitalization and common stock for 97%. It is not unknowing, having been written up in Barron's. About 2/3 of its stock is held by institutions. In my opinion, even if economies get jittery, its products should be appealing.

Vivian adds: My tech pick, Fanuc Corp. of Japan, which also is in factory automation, making robots, is down 2.9% today. FANUY. HOLI was up 2.32% so far today. I paid $25.07/sh.

Tomra Systems, TMRAY, a Norwegian play on some automation, is up 0.2%.

Follow-Ups

Teva confounds analysts who by now have all read its data from yesterday. Its debt was downgraded to BB by Standard & Poor's. TEVA stock was downgraded to underweight from neutral by Piper Jaffray which called it “investable: with an $11 price target (down 40% from yesterday's close.) It was downgraded from buy to hold by Gabelli & Co. UBS worries that its R&D cuts will hurt future sales growth.But Royal Bank of Canada raised it to sector perform from underperform. Leerink Swaan kept it at underperform.

Teva today announced that it would launch a generic of Valeant's Syprine Wilson Disease drug. This is a gene flaw which raises the level of copper in the liver and other organs. More on copper below.

Eduardo Garcia from Mexico City thinks I have been too hard on Cemex and Mexichem. He writes that the Netafim drip irrigation system MXCHF bought is a game changer and the stock price, which is up only 1% in pesos since the deal was announced last August, undervalues the likely synergies. It was not the only company in the running. He credits Mexichem with buying cheaply and accepts that its future p/e ratio will rise to more than 14x, as predicted my management.

Eduardo also says I overstated the “oligarchic” role of the Del Valle clan who just named the new CEO, because they only own 42% of Mexichem and may buy more. They also are only minority shareholders in the Infosel agency which works out Mexican analyst stock consensus.

On CX, Eduardo writes that Infosel analysts expected 6.6% better results for its Q4 operating profits which were down 5%, but that the cement firm managed to boost its sales 8% over the prior year and 1.9% over the consensus, thanks to higher prices more than offsetting lower volumes in the US, Mexico, and Europe. The troubled markets, Colombia, Egypt, and the Philippines, and higher energy costs, are being monitored closely, according Fernando Gonzalez Olivieri, general mgr of CX. The move into the red was because of other costs rising to $271 million, up 3240% y/o/y, in part because of anti-monopoly fines in Colombia.

It cut its debt not only in the last quarter by over $200 million; it cut its debt in the last 13 months. Eduardo quotes analyst José Espitia of Banorte as his reason for raising its forecast. However Cecilia Jimenez at Santander thinks CX is properly valued. The stock fell 4.6% yesterday in Mexico City.

[Eduardo edits sentidocomun.co.mx from which the last two notes were extracted. He has been busy dealing with macro-economic horrors and as a result neglected some micro. Apologies for having rushed to put a sell on MXCHF. I have now removed it.]

Material Girl

*Antofogasta which trades in London, a copper miner from Chile, is up 0.8% today. I picked ANFGF as a play on “Dr Copper” before the stock market crashed.

*Vale which mines iron ore in Brazil is up 2.35%,.

*However gold-miner Barrick is off 3%. ABX.

I bought more SPDR Gold yesterday at $124.985/sh. GLD is off today.

Deals

Banco Santander is down because of a lawsuit being brought by former shareholders of Banco Popular who feel their stock (purchased for 1 euro by SAN last year) was underpriced. SAN upped its dividend in part because of this sweetheart deal.

Tencent and Netease will exchange 99% of their exclusive music rights as part of a plot by TCEHY to list its music arm later this year, when markets return to normal. TCEHY is up 0.2% and its 1/3 owner Naspers of South Africa is up 2.25% on the hope of a deal by Jacob Zuma to step down.

Autoliv, which wants to spin out its electronics side from the seat belts, is up 2% today