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Swiss stocks see $150B wipeout
The Big Story 💥
A $150B wipeout turns swiss stocks into this month's worst performing index.
The Swiss Market Index is down 6.3% in September, poised for its worst pandemic-era showing and the biggest decline among Europe’s main equity gauges, as mounting risks from a surge in bond yields and China Evergrande Group’s woes drive investors away from the country’s highly valued stocks.
That helped to ease the gauge’s valuation to 17 times projected earnings, from a record 18.7 times in mid-August. Among the biggest losers are cement maker Holcim Ltd. with a drop of 13% and computer-accessories maker Logitech International SA with an 11% retreat.
The selloff in SMI was broad-based, suggesting investors see the whole market as too expensive in an era of slowing growth and firmer yields. It comes amid a global aversion for pricey equities as traders position for a tapering of central-bank stimulus.
Swiss stocks enjoyed a strong rally, even during the summer. These are quality names, but with lofty valuations. Rising interest rates pose a risk to future earnings and make hefty equity valuations harder to justify.
Switzerland, which enjoys one of the highest valuations in Europe, has become an early victim of this shift, after the benchmark rallied 13% in the four months through August. The SMI’s rebound from pandemic lows has limited space for more expansion but plenty of chances to disappoint on lower margins and higher yields.
There are other challenges too, such as supply shortages and increased regulatory risk in the all-important China market, which hit luxury stocks such as Cartier owner Richemont. China Evergrande Group’s debt crisis also sparked concerns that some building projects won’t go through, impacting the likes of Geberit AG, a maker of sanitary installations, and construction materials group Sika AG.
For some, the easing of Swiss equity valuations may soon create buying opportunities. Underlying this bet is the continued increase in analysts’ earnings expectations.
Overnight Action 😴☕
Asian stocks were mixed Thursday as investors assessed the impact of skyrocketing energy costs on inflation and the pandemic recovery. Treasuries edged up and the dollar pared an advance.
Japanese shares slipped as the ruling party’s new leader, who is set to become the next prime minister, is seen by investors as maintaining stability. Australia and China rose, while Hong Kong fell. U.S. futures climbed.
The Nasdaq 100 notched its third straight day of losses after a technology rally petered out. Dip buyers helped push the S&P 500 higher. The dollar traded near the highest since November as investors opted for safe havens.
Treasury yields remained around the highest since June. Federal Reserve Chair Jerome Powell and his counterparts in Japan, Europe and the U.K. voiced cautious optimism that supply-chain disruptions lifting inflation rates around the world would ultimately prove temporary.
In China, investors continue to monitor the situation at China Evergrande Group. Two holders of a dollar bond with a coupon due Wednesday said they hadn’t received payment. The central bank has been injecting liquidity into the financial system to ensure there’s sufficient liquidity ahead of a week-long holiday.
Investors are finishing the third quarter concerned about global growth amid inflationary pressures, a looming energy crisis, supply chain bottlenecks and regulatory risks emanating from China. A majority harbor fears of persistently high inflation, with a 20% pullback in stocks seen as more likely than a 20% rally, according to a Citigroup Inc. survey of clients.
Meanwhile, China’s factory activity contracted in September for the first time since the pandemic began last year, a sign of the damage a widespread electricity crunch is having on an already slowing economy.
Elsewhere, oil was little changed after declining and Bitcoin jumped to around $43,000.
Top 5 Moves 🆕📰
1. Global bond market set for worst month
Bond markets have been jolted by central bank signals that interest rate rises are drawing closer, sparking the steepest price declines since a global debt slide at the start of the year. Investors have dumped government bonds in the wake of the latest policy meetings at the US Federal Reserve and the Bank of England last week, at which both indicated a willingness to respond to growing inflationary pressures by lifting short-term borrowing costs. In Europe, the debt sell-of has been driven partly by a rise in expectations for long-term inflation.
2. Japan to sell $8.9 billion postal giant stake next month
The Japanese government plans to sell about 1 trillion yen ($8.9 billion) shares in Japan Post Holdings Co. as soon as next month, marking the state’s ongoing privatization of the postal and financial-services giant six years after its initial public offering. Government officials told bankers on Wednesday that it will announce the third round of the share sale on Oct. 6 and aims to complete the offering that month, according to people with knowledge of the matter who asked not to identified because the matter is private.
3. Private equity trio team up to buy Medline
The private equity groups Blackstone, Carlyle and Hellman & Friedman are set to raise almost $15bn of debt on Thursday across bond and loan markets as they close in on financing the largest leveraged buyout since the 2008 crash. The hefty debt issuance will go towards the buyout groups’ $34bn acquisition of a majority stake in family-owned Medline, one of the largest medical supply manufacturers in the US.
4. Eyewear maker Warby Parker's listing ends 36% up
Eyewear maker Warby Parker Inc. is worth roughly $6.8 billion after going public on Wednesday, finishing its first trading day with a valuation twice what it was in a private funding round last year. Warby Parker sold shares via a direct listing, rather than a traditional public offering. The shares closed at $54.49 Wednesday, ending 36% above the New York Stock Exchange’s $40 reference price for its debut. Warby Parker, which is unprofitable, is on track for $535 million in revenue this year.
5. China manufacturing unexpectedly shrinks
The official NBS Manufacturing PMI for China unexpectedly was at 49.6 in September 2021, compared with market expectations and August's figure of 50.1. This was the first contraction in factory activity since February 2020, with output, new orders, and export sales all declining, amid the Delta variant of COVID-19 outbreaks, higher material cost, production bottlenecks, and more recently, electricity rationing. However, non-manufacturing PMI rose.
Crypto Outlet 🐳
NFTs outside of Ethereum? That's wants to do, launching Metaplex Studios, a new tool that will let artists grow the existing NFT marketplace on Solana. The tool lets artists and developers customize how their NFT collection is displayed and auctioned.
Ripple joins the NFT boom with the launch of $250 million creater fund, betting onm XRP Ledger's sustainability and lower transaction costs to diversify the NFT space.
Bitcoin to $200k ? That's one of its oldest investors, Bobby Lee, is planning on. Lee believes that Bitcoin has been due for its next rally for a long time. What's more, he believes that the $100k mark will be reached before 2021.
The world’s largest coin slumped for a second day and is down roughly 12% this month, on track for its worst monthly performance since May, when it experienced a swoon that knocked it off its steady upward momentum. It’s also its fifth consecutive negative September and its worst since 2019.
Surprise surprise, blockchain is not only about going all in on Dogecoin for a 500% profit or loosing all your life savings to CryptoKitties. There is more to it, far more to it.
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