Investors weigh new stock leadership as broader market wobbles

Investors weigh new stock leadership as broader market wobbles
Moves this week further spurred a shift that has seen months-long outperformance for energy, financial and other shares expected to benefit from an economic recovery. (File/AFP)
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Updated 27 February 2021

Investors weigh new stock leadership as broader market wobbles

Investors weigh new stock leadership as broader market wobbles
  • Tech and momentum stocks helped drive returns in 2020 “when everyone was locked down and all they had was their computer”

NEW YORK: A shakeup in stocks accelerated by the past week’s surge in Treasury yields has investors weighing how far a recent leadership rotation in the US equity market can run, and its implications for the broader S&P 500 index.
Moves this week further spurred a shift that has seen months-long outperformance for energy, financial and other shares expected to benefit from an economic recovery, while a climb in Treasury yields weighed on the technology stocks that have led markets higher for years.
The two-track market left the benchmark S&P 500 down for the week, and sparked questions about whether it could sustain gains going forward if the tech and growth stocks that account for the biggest weights in the index struggle.
So far this year, the S&P 500, which gives more influence to stocks with larger market values, is up 1.5 percent, while a version of the index that weights stocks equally is up 5 percent.
“That just tells us the gains are less narrow, more companies are participating, and I think that’s healthy,” said James Ragan, director of wealth management research at D.A. Davidson.
The focus on market leadership comes as investors are weighing whether the S&P 500 is due for a significant pullback after a 70 percent run since March, with the rise in long-dormant yields the latest sign of trouble for equities as it means bonds are more serious investment competition. The yield on the 10-year US Treasury note this week jumped to a one-year peak of 1.6 percent before pulling back.
Economic improvement will be in focus in the coming weeks, including the monthly US jobs report due next Friday, as will the country’s ability to ensure widespread coronavirus vaccinations, especially as new variants emerge.
Tech and momentum stocks helped drive returns in 2020 “when everyone was locked down and all they had was their computer,” said Jack Ablin, chief investment officer at Cresset Capital Management. “Now it seems with the vaccines, the stimulus and the prospect of reopening that we are looking out toward a recovery phase.”
The shift in the market this week is building on one that was fueled in early November, when Pfizer’s breakthrough COVID-19 vaccine news generated broad bets on an economic rebound in 2021.
Among the moves since that point: the S&P 500 financial and energy sectors are up 29 percent and 65 percent, respectively, against a nearly 9% rise for the benchmark index and 7 percent rise for the tech sector. The Russell 1000 value index has gained 16.5 percent against a 4.3 percent climb for its growth counterpart, while the smallcap Russell 2000 is up 34 percent.
“You definitely are seeing the reopening trade that has pretty much come alive here,” said Gary Bradshaw, portfolio manager of Hodges Capital Management.
Despite the gains, there remains “plenty of room for the reflation trade to run from a valuation perspective,” Lori Calvasina, head of US equity strategy at RBC Capital Markets, said in a report this week. RBC is “overweight” the financials, materials and energy sectors.
Rising rates tend to be favorable for more cyclical sectors, David Lefkowitz, head of Americas equities at UBS Global Wealth Management, said in a note, with financials, energy, industrials and materials showing the strongest positive correlations among sectors with 10-year Treasury yields.
Still, how long the market’s reopening trade lasts remains to be seen. Investors may be reluctant to stray from tech and growth stocks, especially with many of the companies expected to put up strong profits for years.
Any setbacks with the economy or with efforts to quell the coronavirus could revive the stay-at-home stocks that thrived for most of 2020.
And with a GameStop-fueled retail-trading frenzy taking hold this year, banks and other stocks in the reopening trade may fail to draw the same attention from amateur investors as stocks such as Tesla, said Rick Meckler, partner at Cherry Lane Investments.
“There isn’t the pizzazz to those stocks,” Meckler said. “There rarely is a potential for stocks to make the kind of moves that big tech growth stocks have made.”


Evergrow signs $400m loan to restructure debts

Evergrow signs $400m loan to restructure debts
Updated 22 April 2021

Evergrow signs $400m loan to restructure debts

Evergrow signs $400m loan to restructure debts
  • $74 million of loan will finance construction of fertilizer plant in Sadat City
  • Mashreq Bank and National Bank of Egypt led 12-bank syndicate

RIYADH: Egyptian fertilizer company Evergrow has signed a $400 million loan agreement with a syndicate of 12 banks led by Mashreq Bank and the National Bank of Egypt (NBE), who acted as the facility arrangers, Asharq reported citing a joint statement on Wednesday.

The plan consists of $326 million that will be used to restructure previous debts Evergrow owes to the same banks, while the remaining $74 million will finance the construction of the third phase of the company’s fertilizer plant in Sadat City, slated for completion within nine months.

The financing is one of the largest dollar loans granted by banks to private sector companies in the Egyptian market in the field of potassium fertilizers during the past 10 years.

The deal is part of Evergrow’s financial reform program sponsored by the Central Bank of Egypt.

The new funds will help raise the annual production capacity of all the company’s products from 817,000 tons currently to 1.15 million tons annually, said Evergrow Chairman Mohamed El Kheshen.

Egypt’s Minister of Trade and Industry Neveen Gamea in March said that Egypt aims to increase its exports — especially to EU, African and Arab markets — to $100 billion, through the implementation of a strategic plan.


Turkish crypto founder flees with reported $2bn

Turkish crypto founder flees with reported $2bn
Updated 22 April 2021

Turkish crypto founder flees with reported $2bn

Turkish crypto founder flees with reported $2bn
  • Launched aggressive campaigns to lure investors
  • Founder reported to have flown to either Albania or Thailand
ISTANBUL: Turkish prosecutors on Thursday opened an investigation after the Istanbul-based founder of a cryptocurrency exchange shut down his site and fled the country with a reported $2 billion in investors’ assets.
The Thodex website went dark after posting a mysterious message saying it was suspending trading for five days on Wednesday because of an unspecified outside investment.
Turkish security officials then released a photo of Thodex founder Faruk Fatih Ozer going through passport control at Istanbul airport on his way to an unspecified location.
Local media reports said Ozer — reported to be either 27 or 28 years old — had flown either to Albania or Thailand.
HaberTurk and other media said Thodex shut down after running a promotional campaign that sold Dogecoins at a big rebate — but did not allow investors to sell.
Reports said the website and the entire exchange had shut down while holding at least $2 billion from 391,000 investors.
“The victims are panicked,” investors’ lawyer Oguz Evren Kilic was quoted as saying by HaberTurk.
“They are lodging complaints at prosecutors’ offices in the cities they reside.”
Prosecutors launched an investigation into the businessman on charges of “aggravated fraud and founding a criminal organization,” the private DHA news agency said.
Thodex has launched aggressive campaigns to lure investors.
It had first pledged to distribute luxury cars through a flashy advertising campaign featuring famous Turkish models.
The platform then launched its Dogecoin drive.
The cryptocurrency is getting particularly popular among Turks who are looking to preserve their saving in the middle of a sharp decline in the value of the local lira.
The Turkish crypto market remains unregulated despite growing skepticism from President Recep Tayyip Erdogan’s government about the safety and use of digital currencies.
The Turkish central bank has decided to ban the use of crypto currencies in payments for goods and services starting from April 30.
It warned that cryptos “entail significant risks” because the market is volatile and lacks oversight.
“Wallets can be stolen or used unlawfully without the authorization of their holders,” the central banks warned last week.

Riyadh property prices rise 2% in Q1 even as rents fall

Riyadh property prices rise 2% in Q1 even as rents fall
Updated 22 April 2021

Riyadh property prices rise 2% in Q1 even as rents fall

Riyadh property prices rise 2% in Q1 even as rents fall
  • Mortgages rise, underpinning demand
  • Office sector remains under pandemic pressure

RIYADH: Property prices in the Saudi capital edged higher in the first quarter even as rental rates eased, JLL said.
Riyadh’s residential sale prices registered an annual increase of 2 percent for apartments and villas. By contrast, rental rates reported yearly declines of 1 percent for apartments and villas, it said. Some 7,700 homes were handed over during the period, the broker said.
“Looking ahead, the government initiatives that are pushing Riyadh to be the business hub of the region are expected to spur local and international demand,” JLL said in the report.
It said that strong government support helped to boost demand for residential property in the first three months of the year.
New mortgage loans for individuals jumped by 33,000 contracts in January 2021, it said.
The total value of mortgages increased to SR16.4 billion, according to the Saudi Arabia Monetary Agency (SAMA).
The Riyadh office market remains under pressure with average lease rates across a basket of Grade A & B office spaces in the city falling by 2 percent over the quarter compared to a year earlier.


IATA predicts Middle East airline losses of $4.2 billion in 2021

IATA predicts Middle East airline losses of $4.2 billion in 2021
Updated 22 April 2021

IATA predicts Middle East airline losses of $4.2 billion in 2021

IATA predicts Middle East airline losses of $4.2 billion in 2021
  • Airlines will burn through $81 billion of cash this year
  • Industry crisis much longer and deeper than expected

RIYADH: Middle Eastern airlines will endure losses of $4.2 billion in 2021, down from $7.9 billion in 2020, as pandemic travel restrictions remain in place in much of the world, according to the International Air Transport Association (IATA).
Losses will be equal to 13.8 percent of revenues in 2021, an improvement from 28.9 percent in 2020, but still an historically bad number. Demand will be 67.6 percent lower than 2019 levels, while capacity will shrink 58.9 percent, IATA said.
While the region’s carriers will benefit from some of the highest vaccination rates globally, their relatively small home markets mean airlines like Emirates, Etihad and Qatar Airways will remain heavily exposed to international travel restrictions.
Globally, airline industry losses will narrow to $47.7 billion in 2021 from $126.4 billion in 2020, IATA said.
Airlines will burn through $81 billion of cash this year, following $149 billion in 2020, while the industry has taken on a further $220 billion of debt for a burden of $651 billion, IATA said.
“This crisis is longer and deeper than anyone could have expected,” said IATA Director General Willie Walsh. “Losses will be reduced from 2020, but the pain of the crisis increases. Government imposed travel restrictions continue to dampen the strong underlying demand for international travel.”


L&T Construction to build oil and gas supply base in King Salman Energy Park

L&T Construction to build oil and gas supply base in King Salman Energy Park
Updated 22 April 2021

L&T Construction to build oil and gas supply base in King Salman Energy Park

L&T Construction to build oil and gas supply base in King Salman Energy Park
  • The contract is valued at between $133m and $332m

RIYADH: Indian contractor Larsen & Toubro has been appointed by Oilfields Supply Company Saudi to design and build what it describes as one of the world’s largest oil and gas supply bases, in King Salman Energy Park in Dammam.

The project, valued at between INR1,000 crore ($133.3 million) and INR2,500 crore, involves the construction of industrial facilities, an administration building, ancillary buildings, associated infrastructure and storage yards, and is scheduled for completion in 30 months, L&T said in an emailed statement.

“This project will act as a business incubator to support the oil and gas industry in the Kingdom and help accelerate industrial growth in the energy sector,” said M. V. Satish, senior executive vice president (Buildings), L&T.