Top Reads this Week (27 Sep)

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Rounding up top reads from around the web, including articles shared by fellow investors in the Financial Horse Facebook Group.


HSBC, Deutsche Bank Lead Bank Stock Sell-Off Following Money Laundering Allegations, Potential China Blacklist (Yahoo Finance)

On Sunday, BuzzFeed reported leaked Suspicious Activity Reports (SARs) filed with the United States Department of Treasury suggesting HSBC Holdings plc (NYSE: HSBC), JPMorgan Chase & Co (NYSE: JPM), Deutsche Bank AG (NYSE: DB), Standard Chartered Plc (OTC: SCBFF), and Bank of New York Mellon Corp (NYSE: BK) and other banks collectively processes more than $2 trillion in suspicious transactions from 1999 to 2017. Banks are required to file SARs within 60 days of detecting specific transactions.

Allianz chief economic advisor Mohamed El-Erian told CNBC banks are already facing a historically difficult environment given low interest rates, higher credit risk and less credit card activity. “Now put on top of that renewed concern about regulatory and supervisory issues and it literally is the perfect storm. That’s important because what has been helping banks so far has been wealth management and investment banking….If you put a question mark over wealth management, then it’s another headwind,” El-Erian said.

Bank of America analyst Richard Thomas downgraded some of HSBC’s debt and said the combination of money laundering allegations and a separate report by China’s Global Times that the bank may be listed as an “unreliable company” by China has created too much risk in the near-term.


7 of the biggest reasons why the stock market is having a dreadful September (Yahoo Finance)

Tech stocks such as Amazon, Apple, Netflix and Tesla had powerful gains in the summer and had to come back down to Earth. In short, Big Tech is now viewed a bigly overvalued. No new stimulus plan from a bickering set of lawmakers, means downside risk to consumers this holiday season. Political risk (see the latest fight over a Supreme Court nominee to replace Justice Ruth Bader Ginsburg) front and center ahead of the November presidential election. COVID-19 cases remain on the rise globally and could spike further in the winter as we all stay inside. And lastly, the entire market is overvalued in a world absent a COVID-19 vaccine.

1) Peak earnings sentiment

2) Institutional investors chilling out

3) Valuations matter

4) COVID-19 trends headed in the wrong direction

5) Here comes the election risk

6) Stocks overseas are lagging

7) Leaders start to lag


Sizzler, one of America’s first steakhouse chains, files for bankruptcy (CNN)

The 62-year-old company said it filed for Chapter 11 because of Covid-19, which forced it to temporarily close its restaurants’ dining rooms. Sizzler USA also had problems paying rent. The filing is only for Sizzler’s 14 company-owned restaurants — not its international locations or more than 90 franchised US restaurants. Sizzler explained in a press release that it’s using the bankruptcy process to reduce debt and renegotiate its leases.

HSBC shares fall to 25-year low as fears for China business grow (CNN)

HSBC’s shares plunged to historic lows on Monday as the bank was hit by new fears about its business in China and a report accusing it and other major lenders of failing to stop criminals from moving dirty money around the world.

This has already been a terrible year for HSBC’s shareholders as the bank grapples with a global recession, plunging profits, US-China tensions and a political firestorm in Hong Kong. But the bank was slapped with even more bad news this weekend, with Chinese state media suggesting that it could be included on a list of companies which could face restrictions on doing business in China.

More new stocks, please! Companies are rushing to IPO before the election (CNN)

The sizzling initial public offerings of cloud companies Snowflake and JFrog this week, as well as Friday’s debut of gaming tools developer Unity Software, illustrate the strong demand for new stocks.
 
Experts say the Federal Reserve’s decision to keep interest rates at zero for the foreseeable future has helped fuel demand for IPOs while boosting the overall stock market and high growth techs in particular. “IPOs are doing well and I guess that’s what happens when you have the Fed pumping money into the financial system,” said Troy Hooper, head of IPO content at Mergermarket. “The money has to go somewhere.”
 

More people allowed to return to workplace from Sept 28 as S’pore’s Covid-19 community cases remain low (Straits Times)

More employees will be allowed to return to the workplace, although safe management measures must be in place and employers are encouraged to implement measures such as flexible working hours and staggered reporting times. Employers must ensure that such employees continue to work from home for at least half their working time, and no more than half of such employees are at the workplace at any point in time.


Lawrence Wong: Govt to possibly announce plans for Phase 3 in few weeks’ time (Mothership)

At the press conference on Sep. 23, Wong, who is MTF co-chair and education minister, said the taskforce is “charting out the roadmap to Phase 3”. This progress means that the government might soon allow more people for visitations and dining-in at eateries, relaxing the current five-person rule. There will also be updates on rules around social activities, events in the community, and border measures.


Giant Singapore to slash prices of 650 products by 20% amid pandemic (Business Times)

GIANT Singapore is to lower the prices of some 650 products by about 20 per cent. It also hopes to scale up its recently launched house brand Meadows across its global network. The lower prices campaign comes amid growing financial anxiety as a result of the ongoing Covid. 


Singapore Reits set for broader recovery after Q1 Covid-19 hit (Straits Times)

There were plenty of questions raised about the future of Reits amid the mobility restrictions in the first half of the year, but the sector has performed surprisingly well in terms of share price and other valuations.

Retail, office and hospitality Reits did suffer more than those in the industrial and healthcare segments. Industrial Reits have been a particular bright spot, with the global tailwind from growing e-commerce penetration likely to underpin robust demand for logistics space.

The overall Reit sector took a steep plunge in the first quarter, with the FTSE ST Reit Index slipping 22.9 per cent. However, some of the losses were recouped in the second quarter when mobility curbs were relaxed. The Reit index rose 13.8 per cent in the April-June period but the gains were largely led by Covid-resistant industrial and healthcare Reits.


WeWork sells control of China business in US$200 million deal (Straits Times)

WeWork is selling a majority stake in its China business as the co-working giant continues to pare down its expenses, the company said on Wednesday (Sept 23). Trustbridge Partners, an existing investor in WeWork’s China subsidiary, has invested an additional US$200 million (S$274.7 million) and now owns more than half of the business, WeWork said. WeWork parent We Co is giving up operating control of the unit, but will continue to get an annual service fee in exchange for the use of the WeWork brand and services, the company said.


Eagle Hospitality Trust to scrap master leases (Straits Times)

Troubled Eagle Hospitality Trust (EHT) has issued termination notices to the master lessees of all its 18 properties, describing the current arrangement as unviable. The termination will occur 10 days after the delivery of the notices, said the stapled group’s managers yesterday. They cited a “multitude of defaults” by the master lessees, which are part of EHT’s sponsor Urban Commons. 

Eagle Hospitality Reit and the master lessors will continue to provide oversight of the hotels until longer-term replacement lessee solutions are found. This arrangement is necessary to facilitate the stapled group’s restructuring process, which involves seeking new investors to inject fresh capital into EHT, said the managers.


Malaysian glove maker picks banks for planned $330m IPO (Straits Times)

Smart Glove Corp, a disposable glove maker in Malaysia, has selected banks for its planned initial public offering (IPO) that could raise more than RM1 billion (S$330 million), according to people familiar with the matter. The company has picked Affin Hwang Investment Bank and RHB Bank for the potential share sale which could take place as soon as next year, said the people, who asked not to be named as the matter is private.

Smart Glove could join its peers, including Harps Holdings, in seeking listings in Malaysia, riding on investor enthusiasm for glove makers. Shares of Malaysia’s Top Glove Corp, the world’s largest glove manufacturer, have soared more than 400 per cent this year on the back of surging demand for medical protective gear amid the coronavirus pandemic. Meanwhile, the benchmark FTSE Bursa Malaysia KLCI Index has fallen about 5 per cent this year.


Jack Ma dethroned as China’s richest with ‘Lone Wolf’ Zhong Shanshan moving up (Straits Times)

A bottled-water and vaccine tycoon has become China’s wealthiest person in a day also marked by massive losses among the world’s tech elite. Mr Zhong Shanshan’s net worth reached US$58.7 billion (S$80.62 billion) on Wednesday (Sept 23), US$2 billion more than Mr Jack Ma’s, according to the Bloomberg Billionaires Index. Mr Zhong is now Asia’s second-richest person, behind India’s Mukesh Ambani, and is the 17th wealthiest person overall, ahead of Mr Charles Koch and Mr Phil Knight.

Nicknamed “Lone Wolf” for his eschewing of politics and clubby business groups. The initial public offering of bottled-water company Nongfu Spring Co – which turned out to be Hong Kong’s most popular among retail investors – propelled Mr Zhong to China’s top three richest earlier this month. That came after the April listing of vaccine-maker Beijing Wantai Biological Pharmacy Enterprise Co pushed his net worth to US$20 billion by early August.


Tesla sues U.S. government to overturn Trump administration tariffs on China (CNBC)

  • Tesla is suing the U.S. government and U.S. Trade Representative Robert Lighthizer over the Trump administration’s tariffs on parts Tesla imports from China to manufacture its electric cars.
  • The electric-car maker wants the court to declare two batches of Trump administration’s tariffs to be void, and refund Tesla the tariffs it paid with interest.
  • In 2019, U.S. trade officials rejected Tesla’s bid for relief on 25% tariffs on the Model 3′s car computer, citing that it uses technologies strategically important to Chinese national security programs.

 


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