FT : Neil Shen plots global expansion for Sequoia’s China spin-off

Neil Shen plots global expansion for Sequoia’s China spin-off
Venture capital firm plots future outside China after split with Silicon Valley giant

Chinese venture capital giant HongShan, which announced its split from Sequoia Capital this year, is establishing a global footprint as a slowdown in the domestic economy pushes it overseas.

Neil Shen, the group’s founding partner, who led Sequoia’s China business for 18 years until it was forced to separate under political pressure in June, is seeking business opportunities and investments worldwide to benefit HongShan’s Chinese portfolio companies, according to seven people familiar with his plans.

According to three people who have spoken to Shen in recent weeks, the global expansion could see him invest in foreign companies targeting the Chinese market or those founded by overseas Chinese entrepreneurs.

“They have $9bn to deploy,” said a person who has held meetings with Shen in recent weeks. “You cannot do that in China right now. And you cannot just rely on south-east Asia. They have to be thinking globally, about Japan, Europe, etc”

“Neil is really pushing his companies to expand into overseas markets,” said another person close to Shen. “HongShan is still calling itself a Chinese firm, but the story now is about taking China globally.”

The move comes amid a slowdown in China’s economy that has damped sentiment for tech companies, while also forming part of an ambitious new era for HongShan as an independent group.

Shen reached out to HongShan’s limited partners to brief them on his plans ahead of a meeting next month with its key investors in Shanghai, according to three people with knowledge of the discussions.

One HongShan investor said, “Shen has been pretty open” about his global plans, adding: “the most obvious area is across Asia. He’s made no attempt to hide the ball on his ambition to do something similar in the US and Europe . . . I wouldn’t be surprised if he opens an office in the Bay Area. I don’t know if there are plans to open an office, but he wants to invest here.”

HongShan said: “We have no plan to open an office in the US or in Europe.”

However, HongShan did open a Singapore office earlier this year which already has two employees, according to three people with direct knowledge of the move. HongShan has applied for a capital markets services licence in the financial hub, but it is still pending approval, they added.

A person close to HongShan said the office was “set up to fulfil Singapore’s legal requirement that need us to register a company so as to operate legitimately in Singapore”.

HongShan is scouting out investment opportunities in Europe’s electrical vehicle and battery market where there are synergies with its Chinese portfolio companies, according to multiple people briefed on the plans.

Shen led a trip of Chinese EV founders around Europe this summer, according to two people with knowledge of the move. “We are open to review and consider opportunities in the EV and clean energy market, but first and foremost, this has to be tied in with the globalisation effort of our portfolio companies,” said one person close to HongShan.

Its former parent company, Sequoia Capital, has an office in London focused on European start-up investments.

HongShan, Sequoia Capital and Peak XV — the India and south-east Asia fund which also split from the Silicon Valley giant — do not have non-compete provisions that would prohibit competition between the entities following the separation, according to a person with knowledge of the situation. The deadline for the split is March 2024.

Sequoia Capital’s divorce was triggered by rising tensions between Washington and Beijing, which had made it increasingly difficult for the Silicon Valley-headquartered firm to invest in industries such as semiconductors and artificial intelligence in China. The split ended profit sharing agreements between the two businesses.

The move is part of a wave of global funds hiving off their China businesses as Washington and Beijing step up regulatory scrutiny of cross-border investment and data flows. San Francisco-based GGV Capital also split its US and Asia businesses last month.

In August, the Biden administration further targeted the venture capital industry by announcing a ban on some US investment in China’s quantum computing, advanced chips and artificial intelligence sectors, in an effort to stop the Chinese military from accessing American technology and capital.

While many sovereign wealth funds, American university endowments, and pension funds have paused Chinese investments, Shen has courted prominent US limited partners. According to PitchBook data, HongShan counts the California and Massachusetts pension funds among its investors.

Two longstanding US backers of Shen said they did not foresee that Biden’s restrictions on US investment into Chinese technology would prevent them from continuing to invest in HongShan.

HongShan is organising a trip for its limited partners next month to Shanghai — about half of its investment comes from the US — which for many will be the first trip to China since it ended zero-Covid restrictions last year, according to three people with knowledge of the move.

HongShan said: “We remain focused on partnering with Chinese founders and in support of their globalisation journeys.”

>>> Europe : Brokers Upgrades & Downgrades - 12th of October 2023 V2(+)

>>> Up
* Addtech Raised to Buy at ABG; PT 205 kronor
* Chevron Raised to Outperform at BNPP Exane; PT $190
* Clorox Raised to Market Perform at Bernstein
* Embellence Group Raised to Outperform at Handelsbanken (+)
* Ferrovial Raised to Buy at Citi; PT 34 euros
* First Quantum Minerals Raised to Equal-Weight at Morgan Stanley
* First Solar Raised to Overweight at Barclays; PT $224
* Hicl Infrastructure Raised to Buy at Stifel
* Husqvarna Raised to Outperform at Handelsbanken (+)
* Kimberly-Clark Raised to Market Perform at Bernstein
* NYAB Oyj Raised to Reduce at Inderes; PT 55 euro cents
* Royal Unibrew Raised to Market Perform at Handelsbanken (+)
* Schroder Japan Trust Raised to Overweight at JPMorgan
* Springfield Properties Raised to Add at Peel Hunt
* XXL Raised to Buy at DNB Markets; PT 1.30 kroner

>>> Down
* Asos Cut to Sell at Goldman
* Banca IFIS Cut to Neutral at Banca Akros (+)
* Boohoo Cut to Sell at Goldman
* Boohoo Cut to Sell at Stifel; PT 25 pence (+)
* E2open Cut to Neutral at Redburn Atlantic on Greater Challenges (+)
* Fondia Cut to Reduce at Inderes; PT 7.50 euros
* Foot Locker Cut to Sell at CFRA; PT $15
* Genmab Cut to Hold at Nordea
* Helvetia Cut to Sell at Berenberg; PT 105 Swiss francs
* ITM Power Cut to Underweight at Barclays (+)
* Johnson Matthey Cut to Hold at Berenberg; PT 1,650 pence
* McPhy Cut to Underweight at Barclays (+)
* Nel Cut to Equal-Weight at Barclays (+)

>>> Initiation
* Coats Rated New Buy at Redburn; PT 105 pence (+)
* Geberit Rated New Sell at Redburn; PT 340 Swiss francs (+)
* Gerresheimer Rated New Buy at DBS Bank; PT 120 euros
* Mandatum Rated New Buy at Inderes; PT 4.20 euros
* Marriott Vacations Reinstated Neutral at JPMorgan; PT $105
* Morgan Advanced Rated New Buy at Redburn; PT 325 pence (+)
* Reply Rated New Buy at SocGen; PT 105 euros
* Rotork Rated New Neutral at Redburn; PT 340 pence (+)
* Scana ASA Rated New Buy at Fearnley; PT 3 kroner (+)
* SwedenCare Cut to Hold at SEB Equities; PT 39 kronor
* TF Bank Rated New Buy at DNB Markets; PT 196 kronor
* Zegna Group Rated New Underperform at BNPP Exane; PT $11.60 (+)

>>> Call
* Asos, Boohoo Cut to Sell at Goldman on Market Underperformance (+)
* Carlsberg, Heineken Put on Positive Catalyst Watches at Citi
* Ferrovial Set for Good Traffic Growth, Raised to Buy at Citi
* Helvetia Cut at Berenberg on Weakening Underwriting Margins
* Helvetia Drops as Berenberg Cuts on Underwriting Margins (+)
* Johnson Matthey ‘No Longer Compelling,’ Cut to Hold at Berenberg

>>> Stoxx 600 Pre-Market Indications

  • Novo Nordisk (NOV TH) +2.6%
  • Ryanair (RY4C TH) +1.2%
  • Siemens Energy (ENR TH) +1.1%
  • Adyen (1N8 TH) +1.1%
  • EDP (EDP TH) +1%
    • EDP’s Cautious Payout Growth, Equity Boost Help Rein in Leverage
  • ASML (ASME TH) +0.9%
  • Enel (ENL TH) +0.9%
  • RWE (RWE TH) +0.9%
  • BAT (BMT TH) +0.8%
  • Norsk Hydro (NOH1 TH) -0.7%
    • Hydro’s Renewables Business Could Struggle to Achieve Top Dollar
  • Glencore (8GC TH) -0.8%
  • Just Eat Takeaway (T5W TH) -1%
  • Genmab (GE9 TH) -1.6%
    • Genmab Cut to Hold at Nordea
  • Nel (D7G TH) -3.3%
    • Nel Cut to Equal-Weight at Barclays

>>> TradeGate Pre-Market Indications

DAX:
  • Porsche AG (P911 TH) +1.1%
  • RWE (RWE TH) +0.9%
  • VW (VOW3 TH) +0.9%
  • Infineon (IFX TH) +0.9%
  • Zalando (ZAL TH) +0.9%
MDAX:
  • Nordex (NDX1 TH) +2.4%
    • Nordex Group 3Q Order Intake Over 2.2 Gigawatts
  • SMA Solar (S92 TH) +1.5%
  • Stabilus (STM TH) -0.4%
    • Stabilus to Buy Destaco for $680m From Dover Corp.
SDAX:
  • Suedzucker (SZU TH) +4.5%
    • Suedzucker Boosts FY Operating Profit Forecast, Beats Estimates
  • PVA TePla (TPE TH) +3.6%
  • Eckert & Ziegler (EUZ TH) +2.1%

>>> What to look at today - 12th of October 2023

Shares in Asia advanced before a report that’s expected to show a slowing in US inflation, which will help shape the outlook for the Federal Reserve’s next steps. A move by China’s sovereign wealth fund to buy shares of the country’s largest banks fueled further optimism. MSCI’s Asian equity index was on course for a sixth day of gains as stock benchmarks climbed around 1% in Japan and South Korea. The Hang Seng Index jumped as much as 2.2% after China’s state-owned Central Huijin Investment Ltd. increased its stake in the nation’s biggest banks for the first time since 2015. Oil fell for a third day, erasing all of the surge on Monday that followed Hamas’ attack on Israel.  Traders’ focus is now turning to Thursday’s US consumer price data, which economists are forecasting will show a further easing in inflation. Fed minutes published Wednesday showed officials agreed last month policy should remain restrictive for some time, while noting the risks of overtightening now had to be balanced against keeping inflation on a downward path. US CPI is forecast to have slowed to an annual rate of 3.6% in September from 3.7% the previous month, according to a Bloomberg survey. Data published Wednesday showed prices paid to producers rose by more than forecast in September, bolstered by higher energy costs. Futures for US stocks extended their climbs after the S&P 500 rose for a fourth day Wednesday, its longest winning streak since August on the back of the Fed officials’ comments. Fed officials are taking a more patient approach now that rates are at or near their peak, Boston Fed President Susan Collins said Wednesday. Her Atlanta counterpart Raphael Bostic said the central bank doesn’t need to keep tightening unless inflation’s descent starts to stall.  The dollar edged lower against most of its Group-of-10 peers, while the yen held near 149 to the greenback. Treasury 10-year yields were little changed at 4.57% after dropping to a two-week low of 4.54% Wednesday. West Texas Intermediate steadied at around $83 a barrel after slumping Wednesday following a New York Times report that Iran may have been surprised by the assault. Gold was little changed. Adani Ports & Special Economic Zone — part of Indian billionaire Gautam Adani’s conglomerate slammed by a US shortseller earlier this year —  is ending its offer to buy back its 2024 dollar bonds after receiving more bids than it targeted. The company received notes with a principal amount of $213 million as of its Oct. 11 initial deadline, according to a statement.  US After Hours Quiet session; VSCO +2.2% up on raised Q3 guidance; MSFT -0.6% ticking lower on $28.9 bln back-tax bill from IRS.

Nikkei +1.71% Hang Seng +2.05% CSI +0.81% Shanghai +0.80% Shenzen +0.56%

Eur$ 1.0632 CNH 7.2984 CNY 7.2996 JPY 149.12 GBP 1.2319 CHF 0.9004 RUB 98.3039 TRY 27.7446 WTI$ 83.17 -0.38% Gold 1,879 +0.26% BTC 26,790 +0.27% ETH 1,559 -0.27%

S&P +0.28% Nasdaq +0.27% EuroStoxx +0.35% FTSE +0.39% Dax +0.37% SMI +0.32%

Macro :
- EU’s Breton Warns Musk, Zuckerberg of Disinfo on Israel War
- Hollywood Studios, Striking Actors Walk Away From Talks
- China State Fund Buys Bank Shares, Fueling Rescue Hopes
- Ruble Surges as Russia Reimposes Some Exporter Capital Controls
- Israeli-War Gas Curbs Won't Affect EU Yet, But Supply Risk Looms
- U.S. Investor Bull-Bear Spread 3.5: AAII

Keep an eye on :
- ABN NA : ABN Amro, AXA Seek to Sell Life Insurer Neuflize Vie: Echos
- AGR AV : Agrana 2Q Ebit EU110.9M
- ALM SM : Almirall Reaches License Agreement with EpimAb Biotherapeutics
- MT NA : JSW Steel, ArcelorMittal Weigh Buying Some Vedanta Assets: BS
- ATRLJB SS : Atrium Ljungberg 3Q Rental Income Meets Estimates
- BIRK US : Birkenstock Billionaire Brothers Bank $3.5 Billion on Buyout Bet
- BIRK US : Birkenstock Falls Almost 13% as US Trading Debut Flops
- BOSN SW : Bossard FY Sales Forecast Misses Estimates
- IAG LN : British Airways Suspends Flights to Tel Aviv: Spokesperson
- CO FP ; Casino Extends Accession Date for Lock-Up Deal to Oct. 13
- DPH LN : Dechra Pharma FY Adjusted Pretax Profit Misses Estimates
- DEME BB : DEME Gets ‘Substantial’ Cable Contract for Polish Windfarm
- ENO SM : Celeo Approves Issuance of BRL350m in Local Notes
- ERICB SS : Ericsson Notes Nearly $3 Billion Impairment Charge on Vonage
- FAGR BB : Fagron 3Q Revenue EU191.4M Vs. EU173.0M Y/y
- FAST NA : Fastned 3Q Revenue Related to Charging EU15.2M
- GIGA NO : Gigante Salmon Offering of 27.8m Shares Prices
- GIVN SW : Givaudan 3Q Sales Meets Estimates
- HNSA SS : Hansa Biopharma Prelim 3Q Net Revenue Misses Estimates
- LSEG LN : Firms Can Grab Spotlight in London’s IPO Drought, LSEG Boss Says
- MC FP : Birkenstock Falls Almost 13% as US Trading Debut Flops
- MB IM : ISS Supports Mediobanca’s Slate for Board
- BWNG LN : N Brown 1H Adjusted Ebitda GBP17.5M
- NFLX US : Hollywood Studios, Striking Actors Walk Away From Talks
- NDX1 GY : Nordex Group 3Q Order Intake Over 2.2 Gigawatts
- ORP FP : Orpea 1H Ebitda EU321M Vs. EU415M Y/y
- OUT1V FH : Tesla Cybertruck to Use Outokumpu Steel for Blade Runner Finish
- PUB FP : Publicis Sees FY Organic Revenue +5.5% to +6%, Saw About +5%
- RYA ID : Ryanair Plans to Double Morocco Flights, Nation’s PM Says
- SESL FP : SES-Imagotag Expands Deal With LFL Group, Adds 130 Stores
- SZU GY : Suedzucker Boosts FY Operating Profit Forecast, Beats Estimates
- X UD : US Steel Shares Reverse Losses to Advance on Deal Speculation
- VAR NO : Var Energi Prelim 3Q Avg Production 209,700 BOE/D
- VACN SW : VAT 9M Net Sales CHF663.5M

>>> Europe : Brokers Upgrades & Downgrades - 12th of October 2023

>>> Up
* Addtech Raised to Buy at ABG; PT 205 kronor
* Chevron Raised to Outperform at BNPP Exane; PT $190
* Clorox Raised to Market Perform at Bernstein
* Ferrovial Raised to Buy at Citi; PT 34 euros
* First Quantum Minerals Raised to Equal-Weight at Morgan Stanley
* First Solar Raised to Overweight at Barclays; PT $224
* Kimberly-Clark Raised to Market Perform at Bernstein
* NYAB Oyj Raised to Reduce at Inderes; PT 55 euro cents
* Schroder Japan Trust Raised to Overweight at JPMorgan
* Springfield Properties Raised to Add at Peel Hunt
* XXL Raised to Buy at DNB Markets; PT 1.30 kroner

>>> Down
* Asos Cut to Sell at Goldman
* Boohoo Cut to Sell at Goldman
* Fondia Cut to Reduce at Inderes; PT 7.50 euros
* Foot Locker Cut to Sell at CFRA; PT $15
* Genmab Cut to Hold at Nordea
* Helvetia Cut to Sell at Berenberg; PT 105 Swiss francs
* Johnson Matthey Cut to Hold at Berenberg; PT 1,650 pence

>>> Initiation
* Gerresheimer Rated New Buy at DBS Bank; PT 120 euros
* Mandatum Rated New Buy at Inderes; PT 4.20 euros
* Marriott Vacations Reinstated Neutral at JPMorgan; PT $105
* Reply Rated New Buy at SocGen; PT 105 euros
* SwedenCare Cut to Hold at SEB Equities; PT 39 kronor
* TF Bank Rated New Buy at DNB Markets; PT 196 kronor

>>> Call
* Carlsberg, Heineken Put on Positive Catalyst Watches at Citi
* Ferrovial Set for Good Traffic Growth, Raised to Buy at Citi
* Helvetia Cut at Berenberg on Weakening Underwriting Margins
* Johnson Matthey ‘No Longer Compelling,’ Cut to Hold at Berenberg

WSJ : Publicis Raises Guidance Again After Organic Growth Beats Expectations

Publicis Raises Guidance Again After Organic Growth Beats Expectations

Publicis Groupe raised guidance for the second time this year after third-quarter organic revenue growth beat expectations, saying market-share gains allowed it to offset a challenging economic backdrop.

The Paris-based advertising group said Thursday that it now expects organic net revenue growth to be between 5.5% and 6% this year, against its previous projection of around 5%, which had already been upgraded in July. Organic growth refers to the change in net revenue excluding the impacts of acquisitions, asset sales and currency movements.

For the September quarter, the company reported organic net revenue growth of 5.3% and beat analysts’ expectations of a 3.6% rise, according to a consensus estimate provided by Publicis.

The company, which owns agencies including Saatchi & Saatchi, Leo Burnett and Zenith, said its revenue mix and tailwinds from recent new-business wins drove organic growth in the quarter and enabled it to gain market share.

“This gives us the confidence to further upgrade our 2023 guidance, even in a context of rising global socioeconomic tensions,” Publicis Chairman and Chief Executive Arthur Sadoun said.

Publicis has in recent quarters bucked a slowdown in the advertising market that hit most of its peers as marketers turned more cautious on spending in the face of uncertainty about the global economy.

>>> US After Hours Summary: Quiet session; VSCO +2.2% up on raised Q3 guidance;

After Hours Summary: Quiet session; VSCO +2.2% up on raised Q3 guidance; MSFT -0.6% ticking lower on $28.9 bln back-tax bill from IRS
After Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: RELL +2.3%, VSCO +2.2% (guidance)
Companies trading higher in after hours in reaction to news: ATXS +15.5% (exclusive license agreement with Ichnos), AZEK +2.8% (selling its Vycom business), GOOG +0.5% (Teamsters protest Waymo launch), ROST +0.3% (appoints new President of Operations), CERE +0.2% (files $400 mln stock offering), GS +0.2% (suing Malaysia over 1MDB scandal, according to Bloomberg)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: None
Companies trading lower in after hours in reaction to news: NGM -6.1% (to present data), ITOS -5.5% (being replaced in the S&P SmallCap 600), HRZN -0.6% (provides Q3 portfolio update), MSFT -0.6% (IRS seeking $28.9 bln in back taxes; OpenAI releasing cheaper application development update, according to Reuters), OMGA -0.5% (to present data)