Research Market strategy
By Swissquote Analysts
Published on 02.09.2022
Morning news

Zur Rose Group completes placement of Convertible Bonds as well as Capital Increase

Topic of the day

Zur Rose fell by 10.9% after raising CHF 139 million through a convertible bond issue and a capital increase. Announced the evening before, the operation was aimed at a maximum of 150 million. While still awaiting the adoption in Germany of an electronic prescription on which the Thurgau-based firm has staked its future, the funds raised will be used to renew a payment facility due to expire in mid-2023 and to finance general activities outside Switzerland. The use of this cash in Switzerland would constitute a violation of the Swiss Federal Tax Administration's regulations on withholding tax, according to a statement issued on Thursday. In detail, the convertible bond issue raised CHF 95 million and the capital increase with institutional investors CHF 44 million. The bond was split into tranches of 1,000 francs and has a maturity date of 15 September 2026, provided that it has not been converted, taken up, redeemed or cancelled by that date. The annual coupon is 6.875%, payable in arrears on a quarterly basis. The conversion price per share of CHF 49.725 includes a premium of 27.5% over the reference price of CHF 39 determined at the time of the accelerated book-building. The capital increase was carried out on the basis of the same reference price of CHF 39, representing a discount of 14.9% on the price on Wednesday evening. The operation increased the number of shares in circulation to 340.97 million, compared with 33.58 million previously. They will make their debut on the Swiss stock exchange around 5 September.

Swiss stocks

Swiss stocks tumbled on Thursday as fears about growth and data showing an acceleration in consumer price inflation triggered a sell-off across the board. The benchmark SMI ended lower by 191.59 points or 1.76% at 10,663.44, slightly off the day's low of 10,652.28. Partners Group, Richemont, Credit Suisse, Sika, UBS Group and Geberit fell 3 to 4.7%. Givaudan ended nearly 3% down. Swiss Life Holding, Lonza Group, Zurich Insurance Group, Logitech and SGS shed 2 to 2.65%. Holci,, ABB and Nestle also declined sharply. Swatch Group, Tecan Group, Georg Fischer, Adecco, AMS, Kuehne & Nagel, Flughafen Zurich, Bachem Holding, Straumann Holding, Ems Chemie Holding, Julius Baer, Clariant and Cembra Money Bank lost 2.5 to 5%. Data from the Federal Statistical Office showed Switzerland's consumer price inflation accelerated unexpectedly in August to its highest level in twenty-nine years, rising 3.5% year-on-year in August, just above the 3.4% stable rate of increase in July. Economists had expected inflation to remain steady at 3.4%. Further, this was the strongest inflation rate since August 1993, when prices had risen 3.6%. Prices of food and non-alcoholic beverages grew 2.5% annually in August and housing and energy prices gained 4.7%. On a monthly basis, consumer prices went up 0.3% in August, after showing no variations in July. The monthly increase was driven by rising costs for in-patient hospital services, social protection services and housing rentals.

International markets

Europe

European shares fell sharply on Thursday as growing concerns about aggressive rate rises and a weak global economic outlook continued to shadow markets. At the close, the Stoxx Europe 600 index fell 1.8% to 407.7 points. In Paris, the CAC 40 and SBF 120 were down 1.5% each. The DAX 40 in Frankfurt lost 1.6%, while the FTSE 100 in London gave up 1.9%. Euroapi (+3.6%) reported a 10% rise in first-half sales and confirmed its financial targets for the full year. Pernod Ricard (+0.5%) announced record results for 2021-2022 and unveiled a new share buyback programme. Although it is still showing remarkable growth rates, the luxury sector is expected to experience a slowdown in the fourth quarter and in 2023, says HSBC. While LVMH (-2.3%) and Hermès (-2.5%) represent safe havens in this context, both stocks have already appreciated significantly recently. Kering (-2.2%), on the other hand, can pull through after suffering from the underperformance of its Gucci brand in China. The share price of the construction and concessions group Eiffage fell by 1.8%, the day after the publication of half-yearly results which were nevertheless welcomed by analysts. The Anglo-Australian mining group Rio Tinto (-3.4% in London) reached an agreement to acquire the shares it did not already own in the Canadian mining company Turquoise Hill Resources (+13.6% during the session in Toronto). British bank Barclays (-1.9% in London) announced on Thursday that it had sold 63 million shares in South African financial services group Absa at a unit price of 169 rand, for a total amount of 10.66 billion rand (618 million euros). The deal increases its CET1 ratio by 4 basis points.

United States

U.S. stocks broke their losing streak, with the S&P 500 and Dow Jones Industrial Average rising slightly even as expectations of higher-for-longer interest rates pummeled other markets. The S&P 500 added 11.85 points, or 0.3% to 3966.85, after falling as much as 1.3% earlier in the session. The Dow rose 145.99 points, or 0.5%, to 31656.42. The Nasdaq Composite slipped 31.08 points, or 0.3% to 11785.13, a fifth straight down day. In the morning, it fell more than 2%. Thursday’s data provided new clues on the health of the economy and the employment market ahead of Friday’s highly-anticipated jobs report. U.S. workers’ filings for unemployment benefits fell last week, suggesting layoffs are holding at a low level in a tight job market. And a survey of U.S. manufacturing activity for August came in stronger than expected. The ISM Manufacturing PMI came in at 52.8, even with July and above expectations of 51.8. In corporate news, shares of Okta fell 34%, or $30.80, to $60.60 after the company disclosed some merger integration issues after its acquisition of Auth0, including a higher rate of employee attrition. Nvidia fell 7.7%, or $11.57, to $139.37 after the company said it could lose as much as $400 million in quarterly sales after the U.S. imposed new licensing requirements on shipments of some of its most advanced chips to China. Bed Bath & Beyond lost 8.6%, or 82 cents, to $8.71 after the company said it would close roughly 20% of its namesake stores, cut its workforce and sell stock to raise money to stabilize the business. Graphics card maker Nvidia (-7.7%) said late Wednesday that it could lose up to $400 million in revenue per quarter due to a U.S. decision to impose new licensing requirements for shipments to China of some of its most advanced chips. New York-listed Turquoise Hill Resources shares jumped 14% to $31.30 after it reached an agreement with Rio Tinto for the group to acquire the shares it did not already own in the Canadian mining company. Food group Campbell Soup (2%) reported a sharp drop in profits and margins in the last quarter due to higher costs.

Asia

Stocks in Asia closed mostly little changed on Friday. In Tokyo, the Nikkei 225 index is hovering around the previous day's close. Some support comes from the weak yen. The Japanese currency is trading at its lowest level in 24 years. One dollar trades for about 140.15 yen. In Shanghai, the composite index is up 0.3 per cent. New pandemic-related restrictions in China dampen the buying mood on the Chinese stock markets. In Hong Kong, the Hang Seng Index loses 0.6 per cent. On the Seoul stock exchange, the Kospi gains 0.2 per cent. The market receives support from encouraging inflation data: Price inflation in South Korea surprisingly eased in August. Shares of carmakers Hyundai Motor (+1%) and Kia (+0.9%) are sought after. Both increased their global vehicle sales in August.

Bonds

U.S. government debt yields soared on Thursday, pushing the policy-sensitive 2-year rate to another 15-year high, as traders await Friday’s U.S. nonfarm payrolls data for August. The 10-year U.S. Treasury note rose by 12.5 basis points to 3.257%. The 2-year U.S. Treasury note which is more sensitive to changes in the Fed's short-term policy, also added 7 basis points to 3.512%.

Analysis

HSBC lowers Swatch to Hold (Buy) - Target 270 CHF
UBS cuts VAT target to CHF 330 (350) - Buy
HSBC reduces Richemont to Hold (Buy) - Target 127 CHF
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