Asian stocks were mixed Wednesday as traders awaited the Federal Reserve’s roadmap for reducing stimulus and any hints on when interest rates may go up. Crude oil declined.
A Hong Kong gauge of Chinese technology stocks fell, while an iron-ore rebound bolstered commodity-reliant Australia. Japan was shut for a holiday. S&P 500, Nasdaq 100 and European futures wavered following fresh peaks for U.S. shares. Wall Street has been buoyed by the resilience of company profits to rising costs from pandemic-era supply chain and labor disruptions. In China, Premier Li Keqiang said the economy is facing new downward pressure. Investors are monitoring a coronavirus outbreak in the world’s second-largest economy that has already sparked mobility curbs. The debt challenges in the nation’s property sector also rumble on.
The gyrations in short-term yields extend a period of heightened bond-market volatility as investors try to anticipate how hawkish central banks may become to quell inflationary pressures. The Fed is expected to announce after a policy meeting that it will start tapering its massive bond purchases, but economists are divided on whether a rate liftoff will be next year or in early 2023.
Elsewhere, oil fell as the U.S. increased pressure on OPEC+ to boost supplies. Bitcoin was around $63,000 amid a rally in cryptocurrencies.
US After Hours BBBY jumps +78% as it will redefine business model and launches collaboration with Kroger; ZG down -8.7% on earnings miss and its exit of Zillow Offers; SMCI +14.7%, CDLX +12.9%, LYFT +12.3% higher on earnings
Nikkei -0.43% Hang Seng -0.63% CSI -0.30% Shanghai -0.13% Shenzen +0.06%
Eur$ 1.1583 CNH 6.3990 CNY 6.3994 JPY 113.85 GBP 1.3630 CHF 0.9137 RUB 71.6753 TRY 9.6091 WTI$ 82.73 -1.41% Gold 1,781.90-0.30% BTC 63,150 -0.05% EtH 4,566 +1.37%
S&P -0.12% Nasdaq -0.04% EuroStoxx -0.07% FTSE -0.13% Dax -0.05% SMI -0.05%
Macro :
- Strategists Keep Faith in Stocks, View Fed-Hike Bets as Overdone
- China’s Economy Faces New Downward Pressure, Premier Li Says
- China’s Latest Covid Outbreak Most Widespread Since Wuhan
- China’s Economy Faces New Downward Pressure, Premier Li Says
- China’s Latest Covid Outbreak Most Widespread Since Wuhan
- Eric Adams Wins in NYC, Capping Ascent From Cop to Mayor-Elect
Keep an eye on :
- ADKO AV : Addiko 9M Profit After Tax EU9.6M Vs. Loss EU6.40M Y/y
- ATIC US : Activision's Culture Turmoil, Delays May Hurt 2022 Sales: React
- BCP PL : Banco Comercial Completes Sale of Banque Privee BCP Unit to UBP
- BMW GY : BMW 3Q Ebit Beats Estimates
- BMW GY : BMW Profit Beats Expectations on Firm New, Used Car Prices
- BNTX US : *PFIZER SHOT FOR KIDS AGES 5-11 GETS SIGN OFF FROM CDC DIRECTOR
- BP/ LN : *REP. MALONEY SUBPOENAS OIL COMPANIES FOR DOCUMENTS ON CLIMATE
- CNE LN : Cairn Energy Completes Stake Sale in Catcher, Kraken Fields
- CNHI IM : CNH Industrial Agrees to Licensing Deal With U.S.-based Monarch
- DARK LN : Darktrace Holder Vitruvian Offers 11m Shares
- DARK LN : Darktrace Holder Vitruvian Offers 11m Shares
- DTE GY : T-Mobile Misses Wall Street Subscriber Estimates as Rivals Surge
- DIE BB : Belgian Oct. Car Registrations Sink 35%; D’Ieteren Has 20.9%
- DIE BB : Belgian Oct. Car Registrations Sink 35%; D’Ieteren Has 20.9%
- EUCAR FP : *AVIS BUDGET GAINS 108% TO RECORD CLOSING HIGH OF $357.17
- GEBN SW : Geberit Sees FY Ebitda Margin 30% to 31%
- GSF NO ; Grieg Seafood 3Q Ebit Beats Estimates
- HEIJM NA : Heijmans Sees FY Underlying Ebitda at Least EU100M on Comp. Rev.
- HSBA LN : U.K. Banks to Commit to Coal Financing Phase-Out by 2030: Sky
- NK FP : Imerys 3Q Organic Revenue +18.6%
- KCO GY : Kloeckner 3Q Adjusted Ebitda Beats Estimates
- LNZ AV : Lenzing 9M Net Income EU113.4M Vs. Loss EU23.3M Y/y
- LOOMIS SS : Loomis to Continue Buyback of Own Shares for up to SEK200m
- LHA GY : *LUFTHANSA 3Q ADJ EBIT EU17M, EST. LOSS EU169.3M
- LHA GY : Lufthansa Assumes Possible to at Least Halve FY Adj. Ebit Loss
- NEX FP : Nexans 3Q Organic Revenue +0.4%
- SAVE SS : Nordnet Shares Hit Record High After Monthly Growth Update
- NOEJ GY : Norma 3Q Revenue Misses Estimates
- NOVOB DC : Novo Nordisk 3Q Ebit DKK15.25B; Expands Share Buyback
- OERL SW : Oerlikon 3Q Sales Meet Estimates
- PNDORA DC : Pandora 3Q Net Income DKK635M Vs. DKK343M Y/y
- RAA GY : Rational 3Q Net Income Beats Estimates
- RBI AV : Raiffeisen Cuts FY Cost Of Risk Forecast, 3Q Net Beats Est. (1)
- SODER SS : Soder Sportfiske Offers SEK41m Shares via Avanza, Offering of Shares Prices at SEK64.3/Share
- O2D GY : Telefonica Deutschland 3Q Adjusted Oibda Beats Estimates
- TSLA US : Tesla Buying Surge Driven by Institutions, JPMorgan Says
- UBI FP : Netflix Launches Into Video Games With Titles for Android
- UNI SM : Unicaja 9M Net Interest Income EU793M
- VLA FP : Valneva Offering at $39.42/ADS, EU17/Share Proceeds About $102M
- VRLA FP : Horizon Investment to Sell Its Remaining 16.3% Stake in Verallia
- VONN SW : Vontobel Total Client Assets CHF292.9B Vs. CHF303.3B Q/q
- WIIT IM : Wiit Completes Acquisition of Boreus GmbH, Gecko
- ZAL GY : Zalando Maintains FY Adj Ebit High End Of EU400M to EU475M
>>> Up
* ABB Raised to Hold at Jefferies; PT 29 Swiss francs
* Adecco Raised to Hold at Jefferies; PT 47 Swiss francs
* Beiersdorf Raised to Market Perform at Bernstein; PT 93 euros
* Beiersdorf Raised to Market Perform at Bernstein; PT 93 euros
* Danone Raised to Market Perform at Bernstein; PT 54 euros
* DuPont de Nemours Raised to Buy at Fermium Research; PT $87
* DuPont de Nemours Raised to Buy at Vertical Research; PT $95
* Under Armour Raised to Outperform at William Blair
* Unilever Raised to Market Perform at Bernstein
* WPP Raised to Market Perform at Bernstein; PT 990 pence
* WPP ADRs Raised to Market Perform at Bernstein; PT $67.60
* XXL Raised to Neutral at SpareBank; PT 15 kroner
>>> Down
>>> Down
* Activision Blizzard Cut to Equal-Weight at Morgan Stanley
* Aareal Bank Cut to Hold at HSBC; PT 29 euros
* Elkem Cut to Neutral at SpareBank; PT 36 kroner
* Enersense Cut to Reduce at Inderes; PT 8 euros
* Erste Cut to Accumulate at Concorde; PT 43 euros
* Erste Cut to Accumulate at Concorde; PT 43 euros
* Webstep Cut to Hold at Arctic Securities; PT 37 kroner
>>> Initiation
>>> Initiation
* Adyen Rated New Outperform at SMBC Nikko; PT 3,194.34 euros
* ANTIN FP Rated New Equal-Weight at Morgan Stanley
* Cary Group Rated New Hold at Jefferies; PT 117 kronor
* Majorel Rated New Neutral at Goldman; PT 37 euros
* Majorel Rated New Overweight at JPMorgan; PT 38.50 euros
* Montana Aerospace Rated New Outperform at Oddo BHF
* Oxurion Rated New Buy at HC Wainwright; PT 5 euros
* Square Rated New Outperform at SMBC Nikko; PT $300
* Tencent ADRs Rated New Overweight at Barclays; PT $84
>>> Call
* Tencent ADRs Rated New Overweight at Barclays; PT $84
>>> Call
* ABB Raised to Hold at Jefferies With Valuation Now Balanced
* Anglo American Raised at Liberum as Only Pro-Growth Mining Major
* Europe Staffing Estimates Raised at Jefferies, Adecco Upgraded
* Antin Infrastructure Partners Rated New Buy at Citi
* Tesla Buying Surge Driven by Institutions, JPMorgan Says
* Tesla Buying Surge Driven by Institutions, JPMorgan Says
UK crypto derivatives ban fails to protect retail investors
Regulators need to take a more flexible approach
The valuation of cryptocurrencies has increased dramatically in the past 12 months, as has their adoption by investors around the world — individuals as well as institutions.
Until a few years ago, most retail investors would have required the use of a broker or investment professional to handle their investments. Today, consumers flock to apps and platforms that enable them to make direct investments on their own, without an intermediary, both in traditional financial assets — and increasingly in crypto.
In a sign of how accessible digital assets have become even to retail buyers, US regulators last month authorised the country’s first crypto derivative ETF, for bitcoin, the most popular digital currency. In giving permission, officials followed their counterparts in jurisdictions as diverse as Canada, Germany, Dubai and Brazil.
And where is the UK in all this? Lagging behind is the answer. Far from preparing to join the global drive in giving retail investors good access to crypto products under the safety umbrella of strong regulation, the Financial Conduct Authority is sticking to a ban it introduced last January, prohibiting the sale of crypto derivatives to retail customers.
This must change. The restrictions do not really work because investors can still buy such derivatives abroad, or through roundabout ways outside the regulators’ control. Far from enhancing investor protection, the measures risk compromising it.
Instead of boosting Britain’s position as a global financial centre, an unduly cautious approach to crypto limits the UK’s ability to develop a share of this fast-growing revolutionary market.
Certainly, the FCA is right to focus on investor protection and to be concerned that such a rapidly-developing market poses dangers to investors. But it needs to adapt its heavy-handed approach to a more flexible policy that can still offer investors the required level of safety.
Post-Brexit, the UK is strategically positioned to take a proactive stance on retail crypto adoption, but has instead taken a “wait and see” approach and consistently raised concerns about consumer protection, which at times has been inconsistent with its own research.
The UK’s Financial Conduct Authority (FCA) published a survey this year noting that the majority of crypto asset owners are generally knowledgeable about the product, aware of the lack of regulatory protection and understand the risk of price volatility.
However, when the FCA in January announced its ban on the sale of crypto derivatives to retail clients it said that “retail consumers can’t reliably assess the value and risks of derivatives like contracts for differences (CFDs), futures, options and exchange traded notes (ETNs) that reference certain cryptoassets”. The FCA’s reasons included concerns that consumers did not have a “reliable basis for valuation” and that retail customers had an “inadequate understanding and a lack of clear investment need”.
There is an obvious contradiction here between this statement and the FCA’s own survey.
The regulator’s decision was largely viewed by the industry — which advocated a more balanced approach involving protective measures such as placing a ceiling on leverage — as unnecessarily cautious. It’s difficult to understand who this decision protected, given that UK customers are still able to open offshore accounts which offer derivatives trading with up to 100 times leverage.
I believe most do so with their eyes open. Retail investors entering the complex world of crypto and digital assets are required to “do their research”. And many are doing so.
The FCA derivatives ban seems strangely misaligned with the UK’s historical successes as a fintech hub and the government’s commitment to be a competitive and innovative jurisdiction for financial services. Even in the EU, often seen in Britain as a bureaucratic monster slow to keep up with financial pioneering, there are no similar bans. Nor in the US or most of Asia.
Last week’s move by the US authorities only emphasises how isolated Britain risks becoming. In fact, the US Commodity Futures Trading Commission, has been overseeing regulated crypto derivatives markets for nearly three years with products that offer a reliable basis for valuation. These markets are accessible to retail as well as professional investors.
In a welcome development, the UK government has consulted on proposals to bring the promotion of certain types of crypto assets within the scope of existing rules — in an apparent effort to increase information flows and transparency.
The regulator also recently launched a new “InvestSmart” campaign, aimed at helping consumers make better informed investment decisions, and to create risk awareness, especially for younger crypto investors.
The FCA is also researching the possible inclusion of crypto assets in the “High Risk Investment” category available to wealthier and properly advised investors. This includes other such assets as non‑readily realisable securities, peer‑to‑peer agreements and speculative illiquid securities.
CryptoUK works closely with the FCA and supports initiatives designed to educate consumers in evaluating risk and highlighting crypto-specific investment nuances.
However, there is a fine balance in protecting the vulnerable while acknowledging the growing demand for regulated crypto products from well-informed retail investors.
Even with regulatory barriers, UK retail customers’ appetite for crypto continues to grow. The FCA estimates that the number of consumers holding cryptocurrency has risen to 2.3m in the 12 months to June 2021 — from 3.9 per cent to 4.4 per cent of adults in the UK.
We should strike a regulatory balance for crypto investing that mitigates risk adequately, but does not stifle the many societal benefits crypto can bring to retail investors, not least the opportunity to create considerable wealth.
After Hours Summary: BBBY jumps +78% as it will redefine business model and launches collaboration with Kroger; ZG down -8.7% on earnings miss and its exit of Zillow Offers; SMCI +14.7%, CDLX +12.9%, LYFT +12.3% higher on earningsAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: SMCI +14.7%, CDLX +12.9%, LYFT +12.3%, SGRY +9.6%, SPT +8.5% (also announces it will be bringing WhatsApp messaging into its product suite), TCS +7.6%, TVTY +7.2%, SKY +6.2%, CWH +5.7%, PACB +5.3%, RAMP +5%, PKI +4%, CHK +4%, DVN +3.6% (also authorizes $1 bln share repurchase program; increases fixed-plus-variable dividend), FMC +3.1%, EGHT +2.9%, LPSN +2.7%, LPI +2.7%, TMUS +2.6%, INSP +2.3%, MDLZ +2.3%, DENN +2.2%, VRTX +2.2%, WEYS +1.9%, FNF +1.5% (also increases dividend), TSLX +1.4%, HLF +1.4%, HALO +1.3%, AFG +1.2% (also declares $4/sh special dividend), AYX +1.2%, WTI +1.2%, AMCR +1%, HRB +1%, GNW +0.9%, DOX +0.8% (also announces that AT&T has selected its CES platform; also extends partnership with Globe Telecom; also announces deal with True Corp), PAA +0.5%, BFAM +0.4%, JRVR +0.4%, PUMP +0.3%, GPOR +0.3% (also approves $100 mln stock repurchase program), BTG +0.2%, PRO +0.2%, HURN +0.1%, KAI +0.1%, VECO +0.1%
Companies trading higher in after hours in reaction to news: BBBY +77.6% (to redefine business model; launches collaboration with Kroger; expects to complete $1 bln repurchase plan by end of FY21), FXLV +3.4% (announces commercial partnership with RCL), CUBE +2.2% (increases dividend), KR +1.4% (launches collaboration with BBBY), ABCL +1.1% (highlights recent announcement of additional purchase by US govt of bamlanivimab with etesevimab from LLY), RTPY +1.1% (receives shareholder approval for combination with Aurora), BNTX +0.9% (vaccine recommended for kids 5-11 by CDC advisory panel), PFE +0.8% (vaccine recommended for kids 5-11 by CDC advisory panel), RRD +0.6% (provides update on acquisition offer), KAMN +0.1% (announces deal to sell two K-MAX helicopters), JBT +0.1% (acquires Urtasun Tecnología)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: RCKY -16.2%, DEI -14.7%, FRSH -13.7%, ATVI -10%, ZG -8.7% (also to exit Zillow Offers business; to reduce headcount by 25%), XPO -7.8%, DCP -7.1%, EXAS -6.9%, MRCY -6.7%, EXEL -6.3%, PAYC -6.3%, APPS -6.2%, BGFV -6.1%, PRTS -6%, UIS -5.5% (also COO stepping down; CFO to become COO), AMED -4.9%, SEDG -4.8%, LSCC -4%, RRR -4%, CDK -3.5%, WU -3.4%, MTCH -3.2%, HCC -3.1%, EIX -3%, MANT -2.9%, TX -2.9%, AWK -2.8%, COUR -2.4%, UNM -2.2%, OSPN -2.1%, KAR -2%, PRU -1.9%, NSA -1.7%, CZR -1.6%, AMGN -1.5%, AIZ -1.1%, AKAM -1.1%, ICHR -1.1%, ES -0.8%, DHT -0.6%, QUAD -0.5%, LSI -0.2%
Companies trading lower in after hours in reaction to news: XM -4.6% (stock offering), NN -3.3% (stock offering), CRK -2.9% (announces partnership with MiQ to certify nat gas production), MIR -0.3% (acquries CHP Dosimetry), JPM -0.3% (will restrict trading in US cannabis cos, according to Reuters), MARA -0.2% (announces bitcoin updates for October), CMP -0.1% (announces a $45 mln equity investment in FORTRESS North America)
Evergrande: the bond and interest payment deadlines to watch
Chinese developer narrowly averted default but is under pressure to meet obligations into next year
Evergrande faces rising repayment pressure on its dollar-denominated bonds in the coming months, despite making several last-minute transfers in October that allowed the heavily indebted Chinese property company to narrowly avoid a default.
Investors and global markets will be watching for clues as to the eventual fate of the world’s most indebted property developer, which faces $8.1bn in interest and principal payments on its offshore bonds before the end of 2022 and has hundreds of projects across China.
Evergrande has not provided an official statement on its missed bond interest payments, several of which triggered 30-day grace periods for payment in September. Two of the payments were then made before the grace periods expired, including one late last week, according to people familiar with the matter.
Evergrande does not have any offshore bonds maturing this year but the company faces large principal repayments in March and April, both of which present a much greater challenge than the interest payments it has grappled with in recent weeks.
The repayment demands compare to cash and cash equivalents of $13.6bn at the company at the end of June, according to the latest available data. But the company was subsequently engulfed by a liquidity crisis that put pressure on its vast obligations within mainland China, ranging from wealth management products to money it owes to contractors, and cast uncertainty over its financial position.
Work on some of its projects was suspended over payment delays but has recently restarted at several locations in China.
The Chinese government has also played down the severity of the situation, without indicating the role it is playing in its resolution.
The Evergrande crisis, which could result in one of China’s biggest ever restructuring processes, has spread to more of the country’s property developers over the past two months. The sector makes up a large bulk of debt on the overall Asian high-yield bond market, where borrowing costs have soared. Yields on an ICE index that tracks riskier Chinese borrowers were at 23.5 per cent on Monday.
Developers including Sinic, Fantasia and China Modern Land all defaulted in October. On Monday, Yango, another property company, proposed a debt swap with investors that would delay its repayment of several bonds. It said in an exchange filing that the offers were intended to improve liquidity and “avoid payment default”.
In the absence of a clear explanation from the company, observers and market participants have had to speculate as to why it made last-minute transfers after missing interest payments in September. Some have suggested that Evergrande is seeking to buy time to sell assets offshore, while others say the government is involved behind the scenes.
Beijing is likely to be concerned about the completion of Evergrande’s Chinese developments, where many customers have bought houses before they have been built. At one site on the edge of Beijing, contractors said they stopped working in July but returned last month and had been told the government had taken over the project.
South Korea’s biggest mobile payment app doubles on delayed IPO
Kakao Pay lists two months later than planned amid regulatory concerns about frothy valuations
Shares in Kakao Pay, South Korea’s most popular mobile payments app, more than doubled on Wednesday as the company made its delayed stock market debut.
Backed by Ant Group, Jack Ma’s financial technology company, Kakao Pay had planned to go public in August but its IPO was delayed after regulators asked the company to revise its prospectus amid wider concerns about frothy valuations.
Shares in the company rose sharply from their initial public offering price of Won90,000 ($76.50) to trade as high as Won230,000 before falling back to Won182,000, according to data from Refinitiv, giving the company a stock market capitalisation of about Won21.2tn.
Kakao Pay had raised Won1.53tn ahead of the start of trading giving it a valuation of Won11.7tn.
The company intends to use the money raised from the IPO on mergers and acquisitions and to seek partnerships with global fintech companies to spur a push into overseas markets.
Kakao Pay was spun off from Kakao Corp, its parent company, in 2017 and offers mobile payment, remittance, insurance and loan services. The app has benefited from rising investor and consumer interest in mobile payments during the pandemic.
But South Korean regulators have intensified scrutiny of big IPOs in recent months over worries that overly high valuations could lead to a bubble.
Krafton, the gaming company backed by Chinese internet group Tencent, was forced in July to lower its IPO price by more than 10 per cent and cut the deal size by almost a quarter after regulators asked for more information on its calculations. Krafton’s shares fell as much as 20 per cent on their first day of trading.
Kakao Pay’s IPO was stalled after new legislation came into force requiring apps that provide financial services to be licensed by regulators. The revised Financial Consumer Act Protection Act is expected to be part of a wider push for fintech companies to be subjected to regulations similar to those that are applied to traditional financial institutions.
Hwang Sei-woon, a senior research fellow at the Korea Capital Markets Institute, said trading in Kakao Pay’s stock would probably be turbulent in the coming days.
“It was a little bit surprising to see the share price double, because I thought even the offering price of Won90,000 was quite high given that financial regulators appear concerned about Kakao Pay’s business model,” he said. “I would expect high price volatility for the next few trading days.”