Financial Times


Thursday, June 21, 2018

Qualcomm among cornerstone investors for Xiaomi's $6.1 billion Hong Kong IPO

A pedestrian passes outside a Xiaomi Corp. store.
Christophe Morin | Bloomberg | Getty Images
A pedestrian passes outside a Xiaomi Corp. store.
Chinese smartphone maker Xiaomi has lined up $548 million from seven cornerstone investors including U.S. chipmaker Qualcomm for its Hong Kong IPO of up to $6.1 billion, according to a term sheet seen by Reuters.
Xiaomi, which also makes internet-connected devices, has set a price range of HK$17 to HK$22 ($2.17 to $2.80) each for its listing in the Asian financial hub, one of the biggest tech floats globally in recent years, showed the term sheet.
Other cornerstone investors include Chinese express delivery company SF Express, domestic telecom service provider China Mobile, state-backed investment firm CICFH Entertainment and state-run conglomerate China Merchants Group.
The seven will take up a combined 10 percent of the shares being offered in the IPO, and the company will open the book to institutional investors on Thursday, according to the term sheet.
Xiaomi and China Mobile declined to comment. China Merchants Group, CICFH Entertainment, Qualcomm and SF Express did not immediately respond to requests for comment.
The IPO values the Beijing-based, Cayman-domiciled company at $54.3 billion - or $70.3 billion after a 15 percent "greenshoe" or over-allotment option which can be sold if there is demand. If the greenshoe is exercised, Xiaomi's free float will be 9.99 percent of its enlarged share capital.
Xiaomi is selling about 2.18 billion shares in the IPO, 65 percent of which are primary, according to the term sheet. The selling shareholders are early investor Morningside, a Chinese venture capital firm, and Xiaomi managers Wong Kong Kat, Liu De, Heng Feng and Li Wanqiang.
Reuters reported on Tuesday that Xiaomi lowered its likely valuation to a range of $55 billion to $70 billion following its decision to delay its mainland share offering until after its Hong Kong IPO.
The delay was triggered by a dispute between the company and regulators over the valuation of its China depositary receipts (CDRs), sources said, casting doubt on Beijing's efforts to lure foreign-listed Chinese tech giants back home.
Xiaomi had been expected to raise up to $10 billion, split between its Hong Kong and mainland offerings. The delay to its CDRs is a blow for Chinese officials, who designed them as a means for China to compete globally for major tech listings and give mainland investors access to the country's tech champions.
Xiaomi's blockbuster Hong Kong offering on the other hand is set to be the first listing under new exchange rules designed to attract tech floats, as competition heats up between Hong Kong, New York and the Chinese mainland.
China's largest provider of on-demand online services, Meituan-Dianping, also plans to file for a Hong Kong IPO later this week, which would be the city's second multibillion-dollar tech float this year, said people familiar with the matter.
Meituan-Dianping declined to comment. The people declined to be identified as the information was not yet public.
Xiaomi was set up in 2010 and doubled its smartphone shipments in 2017 to become the world's fourth-largest maker, showed data from Counterpoint Research, defying a global
slowdown in smartphone sales.
CLSA, Goldman Sachs and Morgan Stanley are joint sponsors for Xiaomi's Hong Kong IPO.

Asian shares edge ahead, oil subdued before OPEC meeting

© Reuters. FILE PHOTO: The OPEC logo is seen at OPEC's headquarters in Vienna
By Wayne Cole
SYDNEY (Reuters) - Asian shares crept ahead on Thursday as a lull in the Sino-U.S. trade tussle and talk of more Chinese stimulus helped calm nerves, while tensions in the oil market grew ahead of an OPEC meeting that could expand the supply of crude.
MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) gained 0.4 percent, while Japan's Nikkei (N225) added 0.7 percent.
Australia's main index (AXJO) had another strong day, rising 1 percent on fund manager demand before the end of the local financial year next week.
Futures for the S&P 500 (ESc1) added 0.4 percent as investors waited for new developments on global trade. After a hesitant start, Chinese markets moved into positive territory as Shanghai blue chips rose 0.6 percent (CSI300).
The mere absence of new threats from President Donald Trump on tariffs was enough to stem recent selling, with investors clinging to the hope that all the bluster was a ploy which would stop short of an outright trade war.
"Many participants see the Trump Administration's hard line as part of the negotiating strategy," said Richard Grace, chief currency strategist at CBA.
Markets had also been encouraged by the People's Bank of China's move to set firm fixings for its yuan, along with the addition of extra liquidity.
There was also much speculation the central bank would cut bank reserve requirements, thus boosting lending power in the economy.
On Wall Street, resilience in tech stocks helped the Nasdaq to an all-time high, though the moves were modest. While the Dow Jones (DJI) fell 0.17 percent, the S&P 500 (SPX) gained 0.17 percent and the Nasdaq (IXIC) 0.72 percent.
Twenty-First Century Fox Inc (O:FOXA) climbed 7.5 percent after Walt Disney Co (N:DIS) sweetened its offer for some of the company's assets to $71.3 billion, looking to topple Comcast Corp's (O:CMCSA) bid.
Receding risk aversion softened safe-havens such as the yen, with the dollar adding 0.24 percent to 110.62 .
The dollar (DXY) also firmed 0.1 percent against a basket of currencies to 95.159, just off an 11-month top of 95.299. The euro (EUR=) was flat at $1.1571.
Sterling was pinned near seven-month lows at $1.3169 having made only a fleeting bounce after Prime Minister Theresa May won another crucial Brexit vote in parliament.
The Bank of England holds a policy meeting later in the session but not a single analyst polled by Reuters expects a rate hike, and some are getting cold feet about a rise in August given recent soft economic data.
While the European Central Bank has signaled an end to bond buying it also pledged to keep rates low past next summer, while the Bank of Japan shows no sign of winding back its stimulus.
"It feels like the yellow warning lights are flashing for the global economic system," noted analysts at Citi. "However, with the ECB and BoJ still pumping in liquidity and keeping rates lower for longer, the chances of a systemic event are low."
Oil prices eased a touch as nerves grew ahead of Friday's meeting between OPEC and other big producers, including Russia. [O/R]
Saudi Arabia is trying to convince fellow OPEC members of the need to raise oil output, according to sources familiar with the talks. Iran on Thursday signaled it could be won over to a small rise in output, potentially paving the way for a deal.
Brent crude futures (LCOc1) were down 8 cents at $74.66 a barrel, while U.S. crude (CLc1) was flat at $65.71.

Monday, June 18, 2018

Investors still love equities but ‘market fragility’ could be ahead in the second half of 2018

Women outpacing men in investing
As the second half of the year approaches, investors are looking at what might impact their investments.
From trade issues to political uncertainty and central bank policy, there are a number of factors to assess. Nonetheless, the consensus view suggests that a growth re-acceleration is underway, with profits to be made in the equity market.
"There are clear signs that economic growth is set to accelerate across major regions in the second half of 2018, creating a favorable climate for equities and certain commodities," Michael Strobaek, chief investment officer at Credit Suisse said in a note last week.
Karen Ward, chief market strategist for EMEA at J.P. Morgan Asset Management, expressed a similar opinion.
"Over the second half of the year, we expect some re-acceleration in growth," she said in a note.

Solid growth, better earnings

According to projections from the International Monetary Fund in April, the global economy is set grow 3.9 percent in 2018. In the second half of last year alone, global growth hit 4 percent.
The economic momentum seen mainly at the end of last year has carried into 2018, "translating into robust corporate earnings," Ward said.
By following certain rules, you can manage your portfolio to withstand potential negative impacts of volatility and take advantage of opportunities that volatility can afford.
Michael Nagle | Bloomberg | Getty Images
By following certain rules, you can manage your portfolio to withstand potential negative impacts of volatility and take advantage of opportunities that volatility can afford.
Data collected from the bank showed that earnings reports beat expectations in all the major markets — Europe, Japan and the U.S. — in the first quarter of 2018.
In theory, this suggests that companies have more money to pay back to investors, thus increasing the attractiveness of the equity market.

'The perfect recipe for systemic risks'

However, there are external factors that require attention when picking stocks. "Investors should remain alert to the potential impact of trade frictions and other political and policy risks," Strobaek, from Credit Suisse added.
Investors have been wary of changes to the status quo in trade following decisions from U.S. President Donald Trump to impose tariffs against allied countries. Europe, Canada and Japan are subject to a 25 percent tariff on steel and 10 percent on aluminium, as the U.S. tries to reduce its trade imbalance with other nations.
But Trump's move has caused jitters in those countries, which are due to impose retaliatory duties against the U.S. too. At the same time, the U.S. has also raised duties for Chinese products and authorities in the world's second-largest economy have responded with the same amount of tariffs.
Federal Reserve Board Chairman Jerome Powell reacts at his news conference after the two-day meeting of the Federal Open Market Committee (FOMC) on interest rate policy in Washington, U.S., June 13, 2018
Yuri Gripas | Reuters
Federal Reserve Board Chairman Jerome Powell reacts at his news conference after the two-day meeting of the Federal Open Market Committee (FOMC) on interest rate policy in Washington, U.S., June 13, 2018
Political turmoil has also caused market shocks in the first half of the year, mainly in Europe. Concerns that a populist government in Italy could come into place and prompt a break up from the euro zone sent Italian debt yields higher. This had some spill over effects to the rest of the euro zone.
There are also worries about potential market shocks coming from central bankers as they reduce stimulus.
"The combination of political, monetary, financial factors is more worrisome than any of them taken in isolation," Francesco Filia, fund manager at Fasanara Capital told CNBC via email Friday.
Nannette Hechler-Fayd'herbe, head of investment strategy at Credit Suisse, told CNBC via email Friday that given the several risk factors, "the key thing for investors is not to get derailed, by nervousness and political headlines."

Friday, June 8, 2018

Futures lower as Apple slips, investors eye G7 meeting

© Reuters. Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York
By Ankur Banerjee
(Reuters) - U.S. stock index futures dipped on Friday as Apple fell following a report that the iPhone maker warned suppliers of lower parts orders.
Apple Inc's (O:AAPL) shares were down 2 percent in premarket trading after the company asked its supply chain to manufacture about 20 percent fewer components for iPhones in the latter half of 2018, according to a Nikkei report.
The S&P 500 technology index (SPLRCT) looks set for its second straight day of losses after snapping a six-day rally on Thursday.
At 7:09 a.m. ET, Dow e-minis (1YMc1) were down 136 points, or 0.54 percent, S&P 500 e-minis (ESc1) were down 13.5 points, or 0.49 percent and Nasdaq 100 e-minis (NQc1) were down 71 points, or 0.99 percent.
Global markets were also lower on Friday as investors kept a wary eye on trade discussions at the G7 summit in Canada.
U.S. President Donald Trump's "America First" policies risk causing a global trade war and deep diplomatic schisms, with G7 leaders more divided than at any time in the group's 42-year history.
Investors are also cautious ahead of next week's U.S. Federal Reserve meeting on interest rates and an unprecedented U.S.-North Korea summit scheduled for June 12 in Singapore.
While the Fed is widely expected to raise interest rates for a second time next week, the focus is on whether it will hint at raising rates four times in 2018.
Among stocks, apart from Apple, other members of the so-called FAANG stocks — Facebook (O:FB), Amazon (O:AMZN), Netflix (O:NFLX) and Alphabet (O:GOOGL) were also lower.
U.S. chipmakers Advanced Micro Devices (O:AMD), Qualcomm (O:QCOM) and Intel (O:INTC) were also lower on the Nikkei report.
Stitch Fix's (O:SFIX) shares rose 9 percent in premarket trading as the online personal stylist reported quarterly revenue and profit that blew past Wall Street estimates.


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