Should You Buy Australian Pharmaceutical Industries Ltd At This Share Price?

What to do with API shares?

Australian Pharmaceutical Industries Ltd [ASX:API] is an absolute outperformer this year!

Last week was the rebound week and this week the market was marginally lower.

We are still in the ‘go-no-where’ market condition that we have been in for many months. There are several shock events that can dampen investors’ portfolio value in the last month of 2015.

One is what the Fed will do in terms of rates. This event I argue can actually be perceived as a positive event from the market’s point of view. It depends on the data from within the US and globally. If data is good and the Fed raises rates, then the market is likely to rally. However, if data is not good enough and the market sees a potential threat from raising rates, then the market may go down.

The other risk right now is geopolitical, it is a double edged sword. It is generally bearish for European economies if geopolitical risk increases for the region. At the same time, if geopolitical risk involving oil producing nations in the Middle East goes up, it can push up oil, which is positive for the market.

The last piece of the puzzle is of course China. If China’s slowdown starts to bottom, then we will get a big boost to confidence. It will effectively mean the globe will gradually reflate because of higher commodity demand and commodity prices. At the same time, it will also mean the new ‘consumer economy’ of emerging markets will be ready to kick in.

Other factors such as a potential ECB easing can also help European markets, which is partially supportive to the Australian market.

In terms of API, the stock has already reached a cyclical ceiling. My model position has been very selective in when to get in and out of API. I was in API in three particular weeks in the last nine weeks, and my return was 24.8%.

I have had no position in API in the last two weeks and I will stay away in the coming week.

Ken Wangdong
Emerging Market Analyst, New Frontier Investor

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