Why Merrill Lynch call Chartered a “buy”
Chartered manufacturing is back to its old tricks again, asking for money. It has no competitive moat at all, in fact it is at a competitive disadvantage. It is just slowly bleeding to death. Temasek holdings is holding on to it due to strategic reasons like the jobs and its technologies. So, it has no choice but to inject more money through the rights offer.
However, Merrill Lynch has no strategic reasons for holding on to Chartered. Why is it calling it a “buy”? We have to go back to 2002, when Chartered had a rights offer and Merill Lynch has to absorb lots of not taken up rights, thus becoming a shareholder. It still owns some now, so to dispose its share, surely it needs to pump up the “animal spirits”. No wonder, they say, if you want to get advice on becoming poor, goto your broker.
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