KMX had a thumping downgrade overnight, down 25%. This is the big US auto company.

Clearly bodes well for local auto and auto-related companies, such as APE, BAP, and GUD.

Downgrades appear to be stepping up now. Many tech companies have put on a hiring freeze; others are cutting staff. Inflation, consumer sentiment, and rates are all affecting consumer demand, particularly at the pointy end of the market (consumer discretionary and housing). The sell-off in tech is, I think, a bit more subtle and is to do with the enormous de-rate in valuations for tech companies linked to the sell-off in rates.

If techy stuff is now harder to fund (less cash thrown at the sector), more blue-sky/green-field tech projects get canned, or paused, side-lined, etc.

And that’s why we are seeing project deferrals, IT spend coming off, and hence the lay-offs. We think, to a degree, IRE was caught up in this issue, downgrading yesterday, see our note here.

It also bodes ill for XRO and several other growth-exposed local tech companies.

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