David Fuller and Eoin Treacy's Comment of the Day
Category - General

    China's CATL Is Said to Pick Banks for $5 Billion Swiss GDR Sale

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    CATL accounts for the largest share of the global electric-vehicle battery market, according to data from Seoul-based SNE Research. It sold a total of 165.7 gigawatt-hours of batteries in the January-November 2022 period, almost three times as much as second-placed BYD Co., a Chinese automaker that also manufactures batteries.

    CATL’s market share was about 35% in the first 10 months of last year. The Fujian-based company supplies carmakers including Volkswagen AG, Geely Automobile Holdings Ltd., Nissan Motor Co. and Tesla Inc., which delivered fewer EVs than expected last quarter, despite offering some price cuts. 

    In 2017, CATL raised about $822 million in an initial public offering in Shenzhen. The company raised another 45 billion yuan ($6.7 billion) in a private share placement last year. China Securities was the lead sponsor, while CICC, Goldman Sachs and UBS were among the co-lead underwriters.

    Shares of CATL have fallen about 18% in the past year, valuing the company at about $172 billion.

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    Adani Stock Crash at $92 Billion as Collateral Worries Grow

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    The crisis of confidence plaguing Gautam Adani has taken a sudden turn for the worse, with a record 28% plunge in his flagship company’s stock raising questions over the extra collateral he needs to cover loans.

    Adani Enterprises Ltd. plummeted in afternoon trading in Mumbai after Bloomberg reported Credit Suisse Group AG has stopped accepting bonds of Adani Group’s firms as collateral for margin loans to its private banking clients. Banks including Barclays Plc had earlier asked for more shares to cover a $1 billion loan.

    With the rout in the group’s stocks triggered by short seller Hindenburg Research’s fraud allegations reaching $92 billion on Wednesday, the risk is that more financial institutions start to scrutinize their exposure to the indebted conglomerate. Without a dramatic upturn, investors who bought into a recently completed $2.5 billion stock sale by Adani Enterprises may be staring at deep losses.

    “The problem now is that the dynamics are becoming a self-reinforcing negative feedback loop and investors are now just dumping the shares and asking questions later,” said Peter Garnry, head of equity strategy at Saxo Bank A/S.

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    Email of the day on emerging market potential

    Hello Eoin, In today's Financial Times it is stated that the IMF is concerned about the risks of debt defaults by emerging market companies and states. How does this bring into question the flow of stock market investments in these countries in recent months?

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    Europe's 1 Trillion Euro Bond Frenzy Is Reaching New Heights

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    There’s a stampede in the European bond market to buy high-quality notes paying hefty yields.

    Investors have bid a total of €1 trillion ($1.08 trillion) on corporate and sovereign debt this month, fueling a ferocious comeback in markets battered by last year’s selloff. The intensity of demand is so high that the average order book is more than three times the size of what’s available to buy.

    That’s the second-highest ratio for any January of the past five years, according to data compiled by Bloomberg, and shows that investors are acting fast and early to fill their portfolios, especially with investment-grade debt. 

    “Investors are taking on risk and there is good appetite,” said Stephanie Besse, global head of debt capital markets for corporates at Natixis CIB. “We have seen strong demand at the long end of the curve, which is a sign of trust in credit markets.”

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    Email of the day on Credit Suisse

    As always thanks for your excellent service. I appreciate your comments on Volkswagon today, and am considering buying some, as I don't see how the German government would let VW go under. Can you also please comment on Credit Suisse. Do you think there is a serious risk that Credit Suisse will not survive. Thanks in advance. 

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    GM to help Lithium Americas develop Nevada's Thacker Pass mine

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    GM would supplant China's Ganfeng Lithium(002460.SZ) to become Lithium Americas' largest shareholder. GM has also agreed to buy all the lithium from Thacker Pass when it opens in 2026 - roughly 40,000 tonnes per year.

    Under the agreement, GM will buy $650 million of shares in Lithium Americas in two equal parts, with the first tranche coming only if Lithium Americas prevails in an ongoing court case. A U.S. judge earlier this month said she would rule "in the next couple of months" in the case, which centers on whether former U.S. President Donald Trump erred when he approved the mine just before leaving office in 2021.

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    Adani Debts Enter Spotlight as Dollar Bond Coupon Deadlines Loom

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    There has been no suggestion that the Adani entities would struggle to make these payments, and Adani has flagged interest coverage ratios that show it has the wherewithal to meet such obligations.

    But Hindenburg’s report last week alleging “accounting fraud” along with its short position in Adani’s US-traded bonds and non-Indian-traded derivatives has put the debt in the spotlight. Some of the notes have fallen to distressed levels below 70 cents on the dollar that generally show mounting concern about creditworthiness. The securities extended declines Monday after a rebuttal by the Indian conglomerate and as Hindenburg followed with its own response.

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