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Monday, 28 June 2021

A record-breaking year for IPOs. Plus: Have commodities peaked?

Another record-breaking year for IPOs: Almost USD 350 bn has been raised in IPOs in 1H2021, exceeding the previous record set in 2H2020 when investors poured USD 282 bn into new listings, Bloomberg reports. Renewable energy companies, e-commerce companies joined tech firms to capitalize on the huge stimulus-fuelled demand for new listings, which has now eclipsed the dot-com mania of the late 1990s.

But some fear the market is becoming oversaturated, and some high-profile stocks such as Deliveroo have on their trading debuts as investors are spoilt for choice. Investor appetite for SPACs also seems to be fading, with their share of the proceeds of the IPO market shrinking to 13% this quarter, down from almost 50% in the first quarter.

Have commodities peaked? Commodity prices have finally begun to ease from their pandemic levels, calming fears of runaway inflation and calling the supercycle thesis into question. Copper is down 10% from its record high in March, corn and soybean futures are down 13% and 19% respectively, while lumber has plunged 54%. Federal Reserve Chairman Jerome Powell has said the fall in lumber prices proves his theory correct: that rising inflation is linked to supply bottlenecks and that it will soon fall as post-lockdown economies normalize. “A few months ago the consensus was that prices for commodities can’t go anywhere but up,” one analyst told the Wall Street Journal. “More recently, though, we’ve had a few reminders that prices don’t go up in a straight line.”

Or is this the start of something bigger? Despite the decreases, lumber is still at twice its typical price at this time of year, while oil, natural gas and copper prices also remain relatively high. China’s economic resurgence, a large infrastructure bill in the US, and American households flush with stimulus money are reasons to believe commodities have a way to go before they top out. “I think we’re in the early innings of this,” said one trader active in commodity-linked ETFs. “I don’t believe it’s as transitory as the Fed is saying.”

From the region:

  • International Holding Company has become the UAE’s most valuable company, overtaking Emirates Telecommunications Group after its subsidiary Alpha Dhabi Holding went public in Abu Dhabi yesterday. IHC, which is chaired by the UAE’s national security adviser, saw its share price climb 15%, the maximum jump in a single session allowed by regulators. IHC has an investment portfolio ranging from shares in Elon Musk’s SpaceX to a local company working in seafood processing. (Bloomberg)
  • Kuwaiti e-commerce company Floward is planning an IPO within the next two years, with London, New York, and Saudi Arabia as possible venues. An early investor in the ride-hailing company Careem is backing Floward, which expects to post a profit starting next year. Floward will use proceeds to expand further in the region, and is eyeing entry into two more unspecified Arab countries and a possible entry to the European market. (Bloomberg)

In tech miscellany:

  • An increased crackdown on the Chinese tech sector has seen the value of tech companies’ listings crash by 60% in 2Q2021, with their share of the Chinese IPO market dropping to its lowest levels in two years. Chinese regulators have stepped in to stop many IPOs to put a halt to potential monopolistic practices, the most prominent example being the halt of Ant Group’s USD 37 bn IPO days before it was set to go to market last year. (FT)
  • One of the world’s biggest crypto exchanges just got banned from the UK: The UK’s financial regulator has banned all operations by crypto exchange Binance and warned consumers against using the platform. The move comes one week after Japan’s financial watchdog warned that Binance was conducting unauthorized cryptocurrency trades. (FCA)

Up

EGX30

10,305

+0.25% (YTD: -5.0%)

None

USD (CBE)

Buy 15.62

Sell 15.72

None

USD at CIB

Buy 15.62

Sell 15.72

None

Interest rates CBE

8.25% deposit

9.25% lending

Up

Tadawul

10,966

+0.4% (YTD: +26.2%)

Up

ADX

6,706

+2.0% (YTD: +32.9%)

Up

DFM

2,870

+0.5% (YTD: +15.2%)

Up

S&P 500

4,280

+0.3% (YTD: +14.0%)

Up

FTSE 100

7,136

+0.4% (YTD: +10.5%)

Up

Brent crude

USD 76.18

+0.8%

Up

Natural gas (Nymex)

USD 3.50

+2.3%

Up

Gold

USD 1,777.80

+0.1%

Up

BTC

USD 34,210

+7.9% (as of midnight)

THE CLOSING BELL-

The EGX30 rose 0.3% at today’s close on turnover of EGP 1.25 bn (1.3% below the 90-day average). Foreign investors were net sellers. The index is down 5.0% YTD.

In the green: Palm Hills Development (+2.8%), Ibnsina Pharma (+2.2%) and TMG Holding (+2.0%).

In the red: Qalaa Holdings (-2.6%), AMOC (-2.4%) and Sidi Kerir Petrochemicals (-1.3%).

Asian markets are mixed in early trading this morning and futures suggest that shares in Europe will fall when the market opens this morning. US stocks are poised to see early gains later today.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2021 Enterprise Ventures LLC.