Global X Lithium ETF: Is The 20 Drop Warranted-GSL ENERGY-img

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Global X Lithium ETF: Is The 20% Drop Warranted?

by:GSL ENERGY     2020-06-11
Global X lithium ETF (NYSEARCA: Lithium) by lithium miners and lithium-
Ion battery manufacturers have always been a favorite among investors looking to reach electric cars and energy storage.
After a 2017 rise, the ETF has already pulled back some of its previous gains.
Groupon fell 20% from its high in early January.
Is this a sign that the electric car story takes longer than expected?
Or is the ETF component not the right choice to play the story?
In this article, we believe that other factors are at work and that the fundamentals of FAC remain healthy.
In order to get a better understanding of the recent price action of the ETF, let\'s give an overview of the ETF and its components.
Tracker tracks the Solactive Global Lithium Index, which is a market value-
Weighted Index for lithium miners and battery manufacturers.
The top 10 holdings of the fund are (Source: Global X fund), which account for nearly 78% of the net assets of the fund, showing a high concentration of ETF practices.
Some of these names are groups selected according to the battery/energy storage department.
For the sake of simplicity, we can divide the shareholding into upstream and downstream.
In the index, the upstream (lithium miners) accounted for about 55%, and the downstream (lithium users) accounted for about 45%.
Finally, let\'s take a quick look at the geographic footprint of the components of Oasis.
In this article, a new battery metal ETF is compared to the advanced battery metal and material ETF (NYSEARCA: BATT) of Amplify ), SA contributor Jane Edmunson shows the following national breakdown of the ASU: (source: EQM index) it is clear from this chart that the weight of Asian stocks is significant, asia is home to most battery manufacturers.
Given the above features, let\'s see why ETFs have dropped significantly in recent months.
The 2017 mark is China, India and several EU countries that support electric vehicles, as well as lithium-
Ion batteries are the dominant technology for such vehicles.
These developments have helped lithium miners to attract a lot of interest, which is also a driver of the second semester lithium price increase (especially the lithium carbonate price increase.
However, as Morgan Stanley warned that the lithium glut was coming, the bullish sentiment on lithium in February 2018 was hit.
Morgan Stanley\'s report has had a huge impact on market psychology.
Capacity increases are beginning to be seen as a positive impact on the company\'s increased production rather than a negative impact on the industry as a whole.
The agreement between the Chilean social Bank and the Chilean government agency Corfo (NYSE: SQM) is like this, which may result in the company\'s output quadrupling in the next few years.
Initially considered a positive factor in the square meter, after the Morgan Stanley report, it was a drag on the industry as a whole.
Shares of major lithium producers have been hit: As we saw earlier, these three names account for 42% of Groupon\'s net assets, and thus have a significant impact.
Other miners have experienced similar declines.
Negative emotions seem a bit overdone.
Morgan Stanley\'s report is very conservative in terms of demand.
This is in contrast to the sales data of electric vehicles and the rising news from the announcement form issued by car manufacturers.
As Matt Bohlsen mentioned in this monthly report, YTD Sales for electric vehicles increased by 71% at the end of 2017 and sold nearly 600,000 vehicles
63% is electric.
China\'s growth is amazing.
Some analysts are beginning to realize this, and Goldman Sachs released a report in July saying the negative impact on the lithium name was excessive:
In addition, the growth potential of lithium producers is huge.
Once the market is aware that the adoption of electric vehicles is beginning to have a real impact, the top 3 producers should recover.
At the same time, progress is being made by primary miners.
Galaxy Resources (OTCPK: GALXF), for example, recently reached an agreement that would help fund the Sal de Vida project, which could lead to a 50% appreciation in share prices.
Like lithium producers, shares of many of ETF\'s battery makers have fallen a lot since January.
But unlike lithium producers,
The perception of the industry has not changed.
These names were only found in sales.
Asian stocks and currencies fell.
The region\'s stock market has been hit hard by trade war rhetoric and a slowdown in global economic growth that has upset investors. The sell-
Not only the emerging markets, but also exports-
Trade-oriented economies such as Japan and South Korea seem vulnerable to the trade war.
LG Chem (OTCPK: LGCLF), Panasonic (OTCPK: PCRFY) and GS Yuasa (OTCPK: GYUAF) have a lot to do with the weakness of their respective national indices: of course, these Asian battery manufacturers are not purely participants and some of their other business units are indeed likely to be affected by a lower level of global economic support.
But from the perspective of their battery sector, there seems to be no pricing in the market.
The field of fierce competition
Include names that have not yet become part of the Oasis index, such as China\'s CATL-
But demand will grow exponentially.
Some lighting products such as Samsung SDI (OTC: SSDIY) performed better because their operational strength offset the unfavorable factors in the stock market.
With the release of earnings for the next few quarters, more names should benefit from reordering.
There seems to be no reason for the Global x etf price to fall by 20%.
This is due to a change in confidence in lithium producers and a general weakness in the Asian stock market where most battery manufacturers are listed.
This is in sharp contrast to the fundamentals that have been pointing to the bright future of lithium
Ion battery ecosystem
The recovery of Groupon prices may take some time, as the slump in commodity prices and the weakness in the Asian financial market may continue to drag down lithium producers and battery manufacturers.
But for those who focus on the macro trend of electric vehicles and think that lithium-
Ion batteries are still the preferred technology and look attractive at the current level.
Disclosure: I/we have been illuminated for a long time.
This article was written by myself and expressed my views.
I have not received compensation (except for Seeking Alpha ).
I have no business relationship with any stock company mentioned in this article.
Supplementary disclosure: the opinions and opinions expressed in this article are for reference only and should not be used or interpreted as solicitation of offer for sale, offer for purchase, or to buy, sell or hold advice from any securities, investment strategy or market department.
Editor\'s note: This article discusses one or more securities that are not traded on major US securitiesS. exchange.
Please note the risks associated with these stocks.
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