Research Market strategy
By Swissquote Analysts
Published on 03.01.2022
Morning news

SenseTime Shares Jump in Hong Kong Market Debut

Topic of the day

Shares of SenseTime Group Inc. jumped in their Hong Kong market debut, after the Chinese artificial-intelligence leader completed a $744 million initial public offering that had been delayed by tensions between Washington and Beijing. SenseTime shares were around 11% above their IPO price at midday in Hong Kong on Thursday, after earlier rising as much as 23%. The company’s recent stock price of 4.29 Hong Kong dollars, equivalent to 55 U.S. cents, gave seven-year-old SenseTime a market valuation of around $18 billion. The company had sold its shares to the public at HK$3.85 apiece. SenseTime overcame a hump on its journey to listing in Hong Kong. Days after it first launched what was already a scaled-down IPO, the U.S. government added SenseTime to an investment blacklist that barred Americans from buying shares in the firm. U.S. authorities alleged that SenseTime’s facial-recognition technology has been used to suppress and assimilate mainly Muslim ethnic minorities in western China. SenseTime disputed the accusation, but postponed its IPO shortly after, saying the delay would help investors consider the potential impact of the U.S. blacklisting. The company then swiftly relaunched the deal on Dec. 20, adding more Chinese state-backed institutions to support the offering as cornerstone investors. Those cornerstone investors, which included a state-funded investment vehicle called Xuhui Capital, bought 69% of the IPO shares on offer—essentially helping to ensure the sale would be successful.

Swiss stocks

On Thursday, the SMI lost 0.4 percent to 12,876 points. Among the 20 SMI stocks, there were 16 price losers and four price winners. 19.48 (previously: 16.81) million shares were traded. The year's performance was different: the SMI provided investors with rich fruits with a plus of around 21 percent. The strongest performer on Thursday was Lonza, up 0.5 percent, while Geberit ranked at the bottom, down 1.1 percent. Outside the SMI, Zur Rose gained 1.7 percent. The share was thus unaffected by a price target reduction by Citigroup, especially as the buy recommendation was maintained. The strongest annual gainers were Richemont (+72%), the share benefited from the recovery of the important Asian markets. Second strongest stocks were Sika (+59%), followed by Partners Group (+49%). The weakest stock was Credit Suisse (-22%), which has been battered by financial scandals, followed by Novartis (-3.6%) and Zurich Insurance (+7.7%).

International markets

Europe

On Friday, European indices ended lower for their last session of 2021, which was shortened, with the London Stock Exchange closing at 1:30 p.m. and the Euronext markets at 2:05 p.m. The Stoxx Europe 600 index gave up 0.13% to 488.1 points. For the year as a whole, the pan-European index was up 22.3%. In Paris, the CAC 40 lost 0.3% on Friday and the SBF 120 was down 0.2%. In London, the FTSE 100 gave up 0.3% on Friday. On the Frankfurt Stock Exchange, which was closed on Friday, the DAX 40 in Frankfurt ended the year on Thursday up 15.8%. The calm trading Friday juxtaposes a busy year in markets in which individual investors piled into meme stocks and the rollout of Covid-19 vaccines and low interest rates incentivised investments in equities. In addition to Frankfurt, the Milan, Zurich and Madrid stock exchanges were closed. The specialist in dematerialised IT services OVHCloud (+3.8%) finished at the top of the SBF 120 for this last session, before the manufacturer of equipment for the production of green hydrogen McPhy (+3.7%). Vinci (+1%) finalised on Friday the acquisition of Cobra IS, the entity regrouping the activities of the Spanish company ACS in the energy sector. The group had announced in April that it had signed an agreement to buy these activities for 4.9 billion euros, representing an enterprise value of 4.2 billion euros. Asset manager Amundi (+0.1%) on Friday completed the acquisition of Lyxor from banking group Société Générale. "All necessary regulatory and competitive approvals have been obtained" and "this transaction has been completed for a total price of 825 million euros, two months ahead of schedule," Amundi and Societe Generale said in a statement. In Amsterdam, shares of custom blind maker Hunter Douglas soared 69.8 percent after the company announced a takeover offer from investment firm 3G Capital.

United States

U.S. stocks ticked lower on the last trading day of 2021, wrapping up a year of repeated records on Wall Street on low interest rates and the rollout of Covid-19 vaccines. The S&P 500 and the Dow Jones Industrial Average oscillated between small gains and losses as the New Year’s Eve trading session wore on before falling toward the end of the day. The S&P 500 fell 12.55 points, or 0.3%, to 4766.18, the Dow slid 59.78 points, or 0.2%, to 36338.30 and the Nasdaq Composite declined 96.59 points, or 0.6%, to 15644.97. Much of the broader market rally was also driven by a small group of massive stocks, such as Apple, Tesla and Microsoft. Microsoft and Tesla shares have each risen around 50% this year, while Apple has gained more than 30%. Facebook fell $8.01, or 2.3%, to $336.35, while Alphabet lost $26.97, or 0.9%, to $2,897.04 and Netflix retreated $9.65, or 1.6%, to $602.44. Some meme stocks were also in the red, suggesting some investors took profits there, too. Shares of AMC Entertainment Holdings fell $1.74, or 6%, to $27.20 Friday after rising more than tenfold this year. GameStop, up nearly 700% for the year, declined $6.94 on Friday, or 4.5%, to $148.39. Meanwhile, shares of vaccine makers climbed. Pfizer added 65 cents, or 1.1%, to $59.05 in the wake of the the U.K.’s drug regulator authorizing its Covid-19 oral antiviral pill, as well as signs that public health officials in the U.S. may approve booster shots against the virus for 12- to 15-year olds as early as next week. Moderna climbed $2.38, or 0.9%, to $253.98. Shares of Ford Motor also topped the S&P 500, adding 30 cents, or 1.5%, to $20.77.

Asia

In Asia, the stock exchanges start the new year rather slowly. Trading in China (except Hong Kong) and Japan is still closed on Monday. In Hong Kong, the Hang Seng Index falls by 0.6 percent. Shares of China Evergrande are suspended from trading. Real estate investment company Cifi Holdings has announced its plans to redeem the highly indebted Evergrande's 5.5 percent interest-bearing bond due Jan. 7, 2022. Meanwhile, on the stock exchange in Seoul, South Korea, the Kospi is up 0.4 percent. Strong export data released on New Year's Day support the market. LG Chem gives up initial gains and falls 0.2 percent. The IPO of the company's battery subsidiary, scheduled for this month, could raise as much as $10.8 billion and become the largest IPO ever in South Korea. The Shanghai Composite Index rose 0.6 percent on Friday, Dec. 31, 2021. For the year, the index climbed 4.8 percent. The Chinese stock market thus fell behind stock markets in Europe and the U.S., which posted double-digit gains.

Bonds

U.S. Treasury yields were edging lower in the final session of the year, with buying in government debt finding some support amid renewed jitters about the rapid spread of omicron, even if evidence shows that the latest strain of the virus that causes COVID-19 produces milder symptoms. The bond market closed an hour early on Friday in observance of the New Year’s Day holiday as other markets observe regular trading hours. The 10-year Treasury note ended at 1.496%, rising 0.583 percentage point this year, the largest one-year yield gain since 2013. Investors have sold out of government bonds, pushing up yields, because holding bonds that yield less than inflation means locking in a loss.

Analysis

Wells Fargo increases Netflix target to USD 700 (510) - Overweight
Citi lowers Roche's target to CHF 285 (395) - Buy
Stifel increases Covestro's target to EUR 67 (50) - Buy

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