Issue_1_3

ATIS Market Roundup:
Issue no.1 (20/10/15)

Hello and welcome traders, investors and
academics alike. This is the First addition of the
Market Round Up of the current Aston Trading
and Investing Society (ATIS).
We aim to look at major topics of interest that
has affected the economy and evaluate the
impact of these entities. The core agenda will be
to pick out a few of the contemporary topics and
analyse them.
Contents
Page. 2) Summary of the Global Economy,
are we due another recession?
Page. 3) Red Rock Resources, a stock not
to pick!
Page. 4) Oil, A brief look at what moves oil
prices.
Page. 6) M&A, a look at the beverage
industry’s biggest movers.
Page. 8) The end of VW? Or at least what’s
next.
Page. 9) China’s struggling or is it?
Page. 10) Gwyn’s Grid, an application tip.
Jack Whittaker- Trading Officer
Jack is currently an International Business and
Management second year student. He has been
trading for just over a year and specialises in high
risk liquid AIM stocks in Oil and gas as well as
Mineral exploration. He also has experience in
trading biomedical companies, as well as
holding long term equity investments and
government bonds.
Matthew Ingram- Market Roundup Editor
Matthew is a second year accounting for management
BSC student. He has experience trading shares on the
FTSE 100 and AIM indexes, but he is particularly
interested in trading Foreign exchange and
commodities futures in small time frames. His
strengths lie in Analytics and strategic thinking.
Amar Ballagun- Investment Officer
A Masters Student at Aston University and a buy and hold
investor, Amar is a proponent of Value and Growth investing
approaches. Having traded in stocks and forex, experienced
buying and selling in several timeshares, and familiarity of both
trading and investment principles, Amar brings a diverse outlook
having experimented in various markets and also running a retail
business since a young age.
1 1

Summarizing the Global
Economy
As previously discussed on our blog, China is in an unusual position, something
we have not seen before. China also has a lot to do with the current economic
conditions, being the second largest economy in the worlds, thus hugely
impactful. China’s current downfall may be a little overstated because of the
dramatic turnaround, however the World Economy finds itself in an all too
familiar surroundings. Economic Growth has been slow, to put it mildly, across
both the major developed and emerging economies.
A lot of attention is paid to the IMF World Economic Outlook Report. The
comprehensive report that is released every released quarterly gives us great
insight to where the economy stands on a global scale. Undesirably, the
outlook % has again been decreased. Global growth declined in the first half of
2015, reflecting a further slowdown in emerging markets and a weaker
recovery in advanced economies. In response the organisation has cut 2015
global growth view to 3.1% from its previous forecast of 3.3% (WSJ, 2015). The
2016 forecast is also slashed to 3.6% from 3.8%. The sharpest declines came
for emerging economies such as Brazil, Nigeria, South Africa and Russia (BBC,
2015). There is even whisperings of the world economy of being on the brink
of another recession. Largely because of China, and how it has spilled into the
US stock exchanges as well as around the world in general. Greece is still in a
turmoil and still a major issue for the Eurozone. Mass decrease in commodity
prices represents a picture of a developing world that has overinvested,
borrowed too excessively and fatigued its ability to expand without major
economic overhauls (WSJ, 2015). The foundation behind the economy is not
doing well is increasing financial risk. Let me explain. Many of the emerging
economies have as of now significant debts. To add to that their currencies
are sinking, their stocks are being dumped, and commodity exports are in
decline, as proven by China. To add to that, none of the significant markets
are showing significant growth expect India.
Projects are that rate hikes will take place in 2016, but some reports
have suggest even later this year is a possibility. There is a sentiment that
trusts that rising interest rates will boost the US economy. The other side, and
frankly the larger position, believes that it could cause more complexities in an
already sensitive marketplace. As clarified by Investopedia (2014), US is very
dependent on China and vice versa; “Two-way trade between China and the
United States has grown from $33 billion in 1992 to $590 billion in 2014. After
Mexico and Canada, China is the third-largest export market for U.S. goods,
accounting for $123 billion in U.S. exports. If the Fed increases the interest
rates, the Dollar will appreciate in value. The stronger dollar will encourage
global investors to invest in the U.S. than in emerging markets. The mass
amount of borrowing by emerging markets have left the countries vulnerable.
Due to a strong dollar, developing countries may force the emerging markets
to slow down even further, impacting their economic strength, as they will
find it harder to repay their debts (The Street, 2015). In short, Higher Yield on
Investment = More Attractive market for investors.
22 32
?

3 3
Shorting Red Rock Resources – A company
that does not add value!
Company name: Red Rock Resources (RRR)
Current Share Price: 0.0175
View: Strong Sell/Short
Introduction
Red Rock Resources currently trades on the FTSE AIM market and has seen its
stock decline from a high of 15.75 in 2011, to a meagre 0.0175 currently. As
many of our blogs on the ATIS website focus on good stocks to buy, this article
will discuss what went wrong with RRR and how both traders and investors
can avoid these dogs of the FTSE.
Company Overview
Initially started as a mineral exploration company with a gold mine in
Colombia and mineral exploration in Kenya and Greenland, RRR looked to be
on the road to success. However, crumbling gold prices and an increasing cash
burn forced the sale of its Colombian mine, with a small insubstantial royalty
being received from its continued production by new owners. This started the
death spiral that we see today. What makes things even worse for RRR was
that its Kenyan exploration licence was seized by the Kenyan government,
with an appeal preceding taking as long as five years in a Kenyan court system
dubbed as the ‘Tortoise Court’ due to its slow decision making. RRRs
Greenland operation has also seen its operations halted in 2012 due to a fall
in Iron Ore prices and a lack of cash to develop its assets further.So what can
investors learn from this? Firstly, that mineral exploration is certainly a tricky
business and the management team has to have enough funding and at least
one cash generating venture before it looks to balance out its portfolio with
higher risk projects. RRR has stacked its portfolio has seen its operations increase and its
profits grow, giving RRR something that it could sell if one of its exploration assets is deemed fit for
production and funds are needed to build a gold mine.
with a number of risky projects that have all stalled, while selling its only
production mine. Secondly, alarm bells should always be ringing when a
continued number of major stock splits are held. RRR has diluted shareholder
value massively with a massive 5,617.29m shares being in issue. Stock splits are
only common in small, underdeveloped companies as a source of project
finance. RRR is using its stock splits instead to match its huge £55,000 working
capital needs. This is not sustainable!
Why do investors buy this stock then?
Arguably the only currently successful acquisition is its 1.2% ownership (23
million shares) of Jupiter Mines Ltd, an independent mining company based in
Perth, Western Australia which is developing a portfolio of projects in the
Yilgarn region of Western Australia and the Kalahari Manganese Fields in the
Northern Cape of South Africa. Jupiter has seen its operations increase and its
profits grow, giving RRR something that it could sell if one of its exploration
assets is deemed fit for production and funds are needed to build a gold mine.
The (very ugly) technical
Here is a candlestick graph showing RRR share price performance during the
past five years. It is easy to identify the steep rate of decline as a result of the
constant dilution and lack of income. The graph is indeed a sad sight.
Conclusion
This company is a great example of what not to invest in for small cap traders
reading this article. Indeed there are plenty of gems out there on AIM, but as
this case shows, research has never been more important.

Oil, the debate
If asked a just a few months ago many fund managers would have said Oil was
back on the rise with WTI hitting about $60 per Barrel however over the past
month and particularly past week or two we have seen oil fall back to $47 per
barrel up just $10 dollars from its 5 year low. Goldman Sachs has made
headlines recently by publicly stating their analysts believe Oil will fall as low
as $20 per barrel, the debate was picked up by a UBS analyst just a few days
ago (12 October 15) who said $70 is just around the corner. So what do we
need to consider when we price Oil and who is right?
Fundamentals
Oil like all other markets reacts heavily to supply and demand. Low prices
have started to have their effect on the market, demand is rising, In July
demand was 3.5% higher year on year, undoubtedly a good sign for oil. US
production has hit its 12 month low, 9.01 million barrels per day, with the
number of oil rigs in the US reducing to its 5 year low of 605 rigs. Production is
not only the important factor when dealing with supply of Oil, we must also
consider Inventories of Oil and not only just Oil but the inventories petroleum
products namely Petrol. Crude Oil stocks in the US have been fluctuating
around a similar value of 460 million barrels since July, however importantly
inventories of Crude and Petrol currently stand at 1.3 billion barrels in the US
and this has been slowly rising since this time last year showing that despite a
lower
demand the supply has in fact not decreased and there is still a large
surplus in the Crude and Petrol markets. The Organisation of Petroleum
Exporting Countries (OPEC) aims to coordinate its member countries to help
safeguard them against unnecessary and harmful price fluctuations.
Once a Month publish their countries oil output, this is taken by the markets to
be an indication of the whole markets supply for that month. This month's
report shows a production level of 31.57 million barrels per day, the highest
44

level of monthly production since April 2012 and 1.57 million barrels over their
daily output target. It is accepted that at this time the global Oil market is over
supplied by around 1 million barrels per day.
So why doesn't OPEC just reduce production? The answer is OPEC has tried
that in the past, unfortunately for them other Oil producers
have used it as an opportunity to increase their market share and reduce
OPEC's. This has caused OPEC in recent months to not cut over production
when it occurs, this essentially drives down the price. OPEC has large cash
reserves and believes it can provide Oil cheaper than its competitors this has
forced a price war between suppliers. Many think the lowest Oil suppliers can
go is to break even on their total costs, unfortunately for Oil Bulls this is likely
to be incorrect. An accounting principle called Marginal costing states that a
firm should keep producing until the point its revenue is below its variable
cost. This means that the firms don't need to take into account how much the
rig or facility costs so long as they can sell a barrel of oil at more than it costs to
extract it, While this depends on the firm it is widely regarded to be between
$10-$20. This figure obviously goes to support Goldman Sachs view of oil
prices falling. So why has there been a rise in the past few months?
Politics and Transportation
Middle Eastern politics greatly impacts the price of Oil. Uncertainty in Syria
with Russia now getting involved has a wide range of implications, Firstly and
most easy to explain is that if full war breaks out in the middle east Oil supply
will fall, Saudi Arabia, Iran and Iraq have a combined reserve of just shy of 514
Billion barrels 20% of the total world’s Oil reserves. This alone means they have
a huge impact on markets pricing of Oil. Not only is where the Oil produced
important but also how it is transported. There are approximately 4000 Oil
tanker ships on the oceans continually moving Oil from Supplier to Customers.
This need for fast transport has meant smaller routes have to be used, these
areas are known as pinch points. In the diagram below its shows where the
point is and how many barrels of Oil are transported through these pinch points
daily (the figures are in thousands). The map of the Middle East will show you
where these points are in more depth, you will notice that the Suez Canal is in a
particularly unstable area, if a disruption was to occur there 4,500,000 barrels of
oil would not make it to market each day it was closed, with an oversupply of
just 1 million barrels per day this would make a huge impact. These are just two
reasons why if the violence in the Middle East is to continue or worse rise, you
can expect to see a rise in oil prices.
5 5

Big movements in the Beverage
Industry
We are witnessing the bigger beer merger in history. News have confirmed in
recent days that Anheuser - Busch InBev (AB InBev) has agreed to buy
SABMiller for a staggering £69 ($106) Billion. SABMiller reportedly turned
down at least 4 previous offers, before finally complying. The deal will be met
with Antitrust and other issues before we finally see the full extent of this mega
corporation. What we do know is that the deal between AB InBev and
SABMiller will constitute a company with a market capitalisation of over £162
billion (CityAM, 2015) and by far the most dominant entity in the industry.
Most of the detail surrounding the deal has been published by all the major
news outlets. We will today look at how this deal will impact the industry and
some of the complications that a deal of this magnitude will face.
What now for the industry and competition?
We as business students are all too familiar with the concept of economies of
scale. It’s a huge benefit for market leaders. Just having a stronghold in a
market in terms of market share or capital with give you great control in
marketing, production and distribution channels. This merger will create the
first true global brewer we have seen yet. When you look closer at the two
companies, they both have their key markets and together cover all major
countries around the world. The graph on the right encapsulates this and it’s
clear that when the deal concludes, AB InBev will have the key to all the
continents. For instance, Africa was a continent almost entirely commanded by
SABMiller. With this merger, AB InBev will get great amount of access in several
Africa countries though the success of SABMiller products. In addition, over 2/3
of SABMiller sales came from emerging economies (hl, 2015), meaning an entry
to markets where AB InBev can keep on growing their revenues.
This merger is the final straw in creating a real global force in the brewing
industry. AB InBev of course have a long history of acquiring competing brands
having done so in 2005 and again in 2008. Competition in any industry is
health, especially for the consumer and the supplier. It creates options,
competitive pricing, increased quality and inspires innovation. With fewer
companies that dictate the market, it really beg the question if the brewing
market is now monopolised. The second biggest company after the acquisition
is now Heineken, but the gap between them whether it’s; market share or
profits is enormous. Prior to the agreement AB InBev, SABMiller, Heineken, and
Carlsberg, the current 4 largest firms, controlled 47% of the world market
66

by volume in 2014 as well as 74% of its profits. What is even more worrying is
that as recently as 2004, 10 different brewers controlled 51 percent of the
global market by volume (The Week, 2015). The consolidation is real.
The complexities of the deal
The merger is big. It’s an industry changer and we are only seeing the surface
of it. However, the deal has several complex matter that are going to be real
hurdles to overcome in order to completely apply themselves. Some of these,
such as antitrust, comes with the territory. However, there is another 2 big
key points to really pay attention to; 1) the North American/ China Problem,
and 2) the Coca Cola predicament.
Starting with why Antitrust could be a major obstacle. When just looking at
hard facts, the disparity between the new joint organisation and their next
biggest rival in Heineken is huge. It is estimated that the 2 companies will as of
now have 58% of the $33 billion of the global industry profits (Business
Insider, 2015). You don’t have to look much further than the brands of each
company to figure out how popular they are; Budweiser, Corona, Stella Artois,
and Becks (All Anheuser Butch) and Fosters, Peroni, Miller, and Grolsch (all
SABMiller). By comparison, the next biggest company in terms of profits is
Heineken, with only 11.6% of the global profit pool, followed by Carlsberg
with a mere 4.6%. . At the time of the merger the companies collectively will
be producing 9 of the world's top 20 beers by volume (Bloomberg, 2015).
Simply put, Anheuser Butch and SABMiller are the 2 largest producers of beer
in the world, so understandably it stirred a discussion concerning laws.
6 67 7
Different countries have different laws and is a major hurdle faced by global
organisations. There is a long road ahead before this enterprise fully engrosses. In
particular, China and America, the 2 largest economies in the world, will be points
of interest in terms of how the company manages operations. The most
interesting dilemma may come in North America. The reason for this is that
which has been in use since 2008, to also make the firm relieve its stake in another
major beer. China’s best selling beer Snow is part owned by SABMiller, and in
order to keep competition healthy it might be subject of antitrust regulation.
Lastly, the Coca Cola problem. In short, SABMiller is a key Coca - Cola bottler
in Africa, whereas AB InBev bottles for Pepsi in Latin America. It’s a clear conflict of
interest. For now what this will mean is unclear. What we do know is that with
MillerCoors, Snow and the Coca- Cola issue, not to mention other antitrust
matters that the company is likely to face, the deal is far from concluded for AB
InBev.
SABMiller currently owns MillerCoors and
AB InBev owns Budweiser, two mainstays
in North America. This is likely to
complicate the merger process because AB
InBev will have to agree to a series of
divestitures to attain regulatory
authorisation, which will take some time.
It is probable that MillerCoors is the asset
be let go (hl, 2015). AB InBev is going to
face similar problems in be if China
enforces its anti-monopoly laws,

What’s next for Volkswagen?
The recent events in Volkswagen have been fascinating for investors to look at but also
awful if you are a Volkswagen shareholder, so here are five things that we should
expect to see from Volkswagen in the coming weeks and months:
1. A massive cost build up - Shareholders will not like the fact that 1.2 million cars
will have to be recalled in the UK alone. This will do nothing for its suffering share
price as we have already seen a massive drop from 170p to 100p per share as the
company have already set aside £4.7bn to cover costs. These recalls and mass-
maintenance work to improve fuel efficiency will see this deteriorating share
price drop further as costs increase with impending court hearings also taking its
toll.
2. Further resignations – Already we have seen CEO Martin Winterkorn resign
which means we should expect even further resignations on the senior managerial
board which may also trickle down to directors in the other branches of the Volkswagen
group such as Seat, Audi, Skoda and Porsche.
3. Shareholder unease – One of the things that VW will need to persuade its
shareholders is that it is still a trustworthy brand. Many Institutional Investors may not
want to be associated with the brand anymore meaning that it may be harder to attract
investment in the future. Investors may also be deterred as dividends could be cut in a
bid to cover costs.
4. Other car manufacturers being exposed – Already we have seen BMW and
Mercedes hit by rumours that it too is following these same unethical practices. Who
could be next?
5. Rebuilding of consumer confidence – As new models such as the Tiguan and the
Touran are released, will we see the same sales performance as on previous models?
It’s highly unlikely. VW will need to bring back its customer base by increasing
marketing and building trust again which could prove to be a slow and costly
procedure.
8 8

China is struggling. Or is it?
You have 2 seconds to decide. And Stop. Our answers, including mine, is likely
to be “Yes.” There is definite grounds that sway us to come to that conclusion.
You can visit business websites at present time and the outlook will be bleak. It
has been widespread coverage on how global growth has been decelerating,
including both major and emerging economies. The graph to the right taken
from Bloomberg on the 1st Oct 2015 represents 5 major manufacturing
economies and there is a clear downwards inclination. The fact of the matter is,
overall the global economy is not in its best phase. But looking at China
specifically, despite the tendency to say they are in the same ship, there is
another way to view its current status.
The momentum of China’s downfall as expected has been slowing down in
recent weeks. After a horrendous couple of months, where we saw a gigantic
downturn in the market, with massive sell offs and economic meltdown, it left
us with considerable amount of uncertainty in terms of “what now?” Really,
China is just in a transitionary period. It’s adapting to seeing less of their
formerly accustomed to, but completely unmaintainable, growth levels. It aided
them to ascending into a global mainstay, but in the manner that they achieved
it was highly unsustainable. 30 years of exponential growth is a long time. This
period of slowdown was always coming it’s just a fact of the matter that the
time is right now. Recently, FED MD Christine Lagarde projected that China is
not doing as bad as it seems. This sentiment was echoed by Jack Ma of AliBaba.
We should see some good improvements in both Chinese imports and exports
in 2016 as they slowly move towards adapting. In recent events, Chinas
Chinas import has slumped by 20% decrease and exports are down too. But,
China’s GDP is still higher than most develop countries such as the US and the
UK. It’s a fact that is often elapsed, largely because of all the extreme
movements that are taking place all the time.
We have all heard the expression “when it rains, it pours.” Amongst that rain
and mist things become unclear on where you may stand. Yes, China has had a
massive downturn. Yes, their GDP has suffered, their economic activity has
tanked and their stock exchanges are looking gloom. But, there is something
to be said in terms of how long this will go on. As mentioned earlier, imports
have been decreasing for 11 months now. Their GDP however is still higher
than most. In 2016, we should see China start to recuperate some of their
GDP Annual growth rate Comparisons:
China 7.00
US 2.70
UK 2.40
India 7.00
Brazil -2.60
(Trading Economics, 2015)
9 9

Gwyn's grid
To any of you (I would think that would be most of you reading this) who made
it to our first event of this academic year 'Gwyn Day' we hope you enjoyed it
and took a great deal from the event, for those of you who couldn’t make it,
and unfortunately we had a technical issue meaning we couldn’t record it I am
going to briefly explain one of Gwyn's tips to success in Job/Placement
applications and Interviews.
No matter what Job you go for you can guarantee at some point in the
application process you will be asked a competency question, this is usually in
the form ' tell us about a time when you showed, Teamwork, Responsibility,
Drive, Ect' . Firstly we need to know what the competencies employers want
and then how best to display them. Below is a list of key competencies;
 Teamwork
 Responsibility
 Commitment
 Commercial awareness (YOU SHOULD BE WORKING ON THIS ONE)
 Decisiveness
 Communication
 Leadership
 Drive/ Determination
 Adaptability
And I could do on. There really is no limit to what can be included, but the ones
mentioned above certainly are the more relevant. There will be many events,
even trivial ones that occur often in your lives that will show some of these
competencies. Below is an example of Gwyn Grid No.1, It requires 5 columns. In
the first you write all events, activities, and responsibilities since the age of 16
to present. To each of these you match two relevant competencies. The next
three columns are for Context, Action, and Result in that order.
Activity Competency Context Action Result
Writing a market
roundup.
No.1- Teamwork Monthly
issues of a
market
roundup are
produced by
three
members of
the ATIS
Committee
Researched
possible topics.
Wrote articles.
Collated into
final published
issue.
Produce a
market roundup
that covers the
main financial
topics of the
month.
No.2-
Communication
This is obviously a very rough example and you would need to go into more
detail for each of these points, it is best to stick to bullet points or short
prompts or you risk sounding robotic when sat in an interview.
Below contains a number of sources that have been used to write this issues
articles – Readers are encouraged to use these to research further:
http://www.wsj.com/articles/imf-downgrades-global-economic-outlook-again-1444140016
http://www.telegraph.co.uk/finance/economics/11914819/imf-global-growth-forecasts-downgrade-economy-crisis.html
http://www.bbc.co.uk/news/business-34455408
http://www.thestreet.com/story/13281085/1/a-fed-rate-hike-would-mean-good-bad-and-ugly-outcomes-all-at-once.html
http://uk.businessinsider.com/ab-inbev-and-sabmillers-global-footprints-compared-2015-10
http://uk.businessinsider.com/sabmiller-ab-inbev-would-dominate-the-beer-market-2015-9?r=US&IR=T
http://money.cnn.com/2015/10/13/investing/ab-inbev-sabmiller-beer-merger/
http://www.cityam.com/226411/mega-brewer-deal-sabmiller-and-ab-inbev-reach-an-agreement-in-principle-on-takeover-worth-44-a-share
http://www.hl.co.uk/shares/share-research/201510/sabmiller-and-ab-inbev-merger-offer-terms-agreed
http://www.businessinsider.com.au/jack-ma-chinas-economy-is-slowing-2015-10
http://www.investopedia.com/articles/investing/091515/chinas-economic-collapse-good-us.asp
http://www.bloomberg.com/news/articles/2015-10-01/we-just-got-the-perfect-snapshot-of-the-global-economy
http://www.ft.com/cms/s/0/0d3edce4-7339-11e5-bdb1-e6e4767162cc.html#axzz3opmvM8A8
http://www.economist.com/news/business/21674381-sabmiller-ab-inbevs-toughest-takeover-yet-it-may-not-be-its-last-beerhemoth
http://www.theguardian.com/business/2015/sep/30/volkswagen-emissions-scandal-which-uk-cars-are-affected
http://www.bloomberg.com/quote/VOW:GR
http://www.nytimes.com/interactive/2015/business/international/vw-diesel-emissions-scandal-
explained.html?_r=0
http://www.theguardian.com/business/2015/sep/21/volkswagen-emissions-scandal-sends-shares-in-global-
carmakers-reeling
The writers, editor and ATIS bears no responsibility for
losses or gains of any type that individuals incur on the
world financial markets as a result of this market
roundup and any of its content. These articles are for
educational purposes only and should never be used as
an investment tool.
1010

“The difference between playing the stock market and
the horses is that one of the horses must win.”
Joey Adams
To contact the editor responsible for the ATIS Market Roundup:
Matthew Ingram ingramm@aston.ac.uk

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