As a result of the global economic crisis and the instability related with the public deficit and sovereign debt in Portugal, which culminated with the request for financial assistance in April 2011, the Portuguese Equity Capital Markets (“ECM”) during 2011 and 2012 saw limited activity, as international investors showed significant levels of aversion towards Portuguese equities.During this period, only a few number of transactions were concluded successfully, being mainly related with rights offerings of Portuguese financial institutions that had to comply with the capital requirements imposed by the Bank of Portugal and the European Banking Authority.
Simultaneously, the index PSI20 in 2011 presented high volatility levels and a significant negative performance, with an annual decrease of 27.0%, maintaining this markedly negative trend until the summer of 2012. Only from this point onwards there was an inversion in this trend, as the ECB announced several actions to support the economies of the Euro Zone.
Since then and up until June 2014 the PSI20 was able to maintain a positive performance, except for brief periods, reaching an annual growth of 16.0% in 2013 and,from the beginning of 2014 to the end of May, of 8.4%. For this positive behaviour there were two additional instrumental factors, namely the strong signs of macroeconomic recovery in Portugal, with GDP projections evolving towards a more solid growth, and the greater stability at a political level, since Portugal was able to fulfil the targets set by Troika and exit the Assistance Programme successfully in May 2014.
The Portuguese ECM market also benefited from these positive factors and moreover by the gradual change in investors’ perception towards domestic assets that began in 2013, which allowed it to reopen to new market offers with the IPO of CTT in December of 2013, the first IPO in Portugal since 2008. This Offer was considered a great success as it was able to generate high interest among international institutional investors, causing the total demand to exceed significantly the Offer’s shares and the final price to be set at the maximum point of the range.
CaixaBI was Joint Global Coordinator and Bookrunner in this transaction and, by exploiting its significant experience and leading role in ECM, it was able to take a crucial part in the reopening of the Portuguese ECM market and on the attraction of international investors’ interest towards Portuguese domestic assets.
CTT’s IPO was a significant landmark in the Portuguese ECM market as, once again, a Portuguese company was able to attract the generalised interest of international investors through a primary transaction, paving the way for further equity offerings in Portugal.
Furthermore, by capitalising on the significant improvement in market conditions in Portugal, several companies sought to finance themselves or to monetise non-strategic stakes through ECM transactions. As so, in 2013 and first half of 2014 there was an upsurge in the number of Accelerated Bookbuildings (“ABBs”) with Portuguese equities, including companies such as EDP, Portugal Telecom, Galp Energia and Mota-Engil, among others. CaixaBI acted as Advisor and Joint Bookrunner in several of these ABBs and has proven itself a privileged partner of companies and their shareholders by helping them finance their activity and strategic plans and giving them access to international institutional investors.
These transactions benefited from the growing interest of international investors and from favourable market windows, with share prices reaching maximum values of several months/years. This positive context allowed the offers to be concluded with great success, achieving levels of demand that have exceeded the number of shares offered in each transaction and discount values below the average of similar transactions in Iberia and Europe since the beginning of 2013.
The Portuguese Government also took advantage of the improvement in the Portuguese market conditions to fulfil the privatisation plan of the Assistance Program. During this period, in addition to the privatisation of 70% of CTT’s share capital in December 2013, it was also able to conclude the privatisation process of companies such as EDP and REN through ECM transactions, an ABB and a Fully Marketed Offer in February 2013 and June 2014, respectively, both of which attracting a significant interest from institutional investors. CaixaBI was once again an essential partner of the Portuguese Government in the execution of this privatisation plan, acting as Joint Global Coordinator and Bookrunner in these transactions.
From June 2014 onwards there was a substantial inversion in this positive trend,as a result of the instability in the Portuguese financial sector, namely caused by the financial problems detected in the main shareholder of one of the largest Portuguese private banks – Banco Espírito Santo (“BES”) – which culminated with the Bank of Portugal applying a resolution measure to BES, being its general activity and assets transferred to a new bank (“Novo Banco”).
Moreover, the sharp decline in oil prices that began in August 2014 and the most recent political problems in Greece that surfaced in December 2014 and led to the appointment of new legislative elections, had a strong negative impact in the Portuguese equity market, with the PSI20 index presenting a negative performance of 29.4% in the second half of 2014 and of 26.8% in the whole year.
As a consequence, the Portuguese ECM activity suffered a sharp decline. However, even during this negative context the Portuguese Government was able to take advantage of a window of opportunity in early September 2014 and concluded CTT’s privatisation, selling its remaining stake of 31.5% in the Company’s share capital through an ABB. The Offer achieved a high success, reaching a significant level of demand that exceeded the total existing shares for sale, with the demand coming mostly from international investors. CaixaBI was Joint Global Coordinator and Joint Bookrunner in this transaction, being instrumental for its success.
For 2015 the Portuguese ECM activity is highly dependent on the improvement of the overall market conditions, namely of a positive performance of the Portuguese and international equity indexes and of a decrease in the volatility levels. If this is the case and considering that the Portuguese macroeconomic conditions have improved during the last year, there might be a positive context and opportunity windows for the companies to finance themselves through IPOs, follow-ons or other types of ECM transactions.
Northern Trust: Outsourcing Accelerates Through Pandemic as Investment Managers Seek to Improve Margins, Enhance Business Resilience, and Future-Proof Operations
White Paper Sees Increase in Managers Outsourcing Middle and Front Office Functions to Achieve Optimal Business Structures
According to a white paper published today by Northern Trust (Nasdaq: NTRS), investment managers of all sizes and strategies have been prompted to undertake a comprehensive review of their operating models as a result of the Covid-19 pandemic which has accelerated existing trends that are compounding cost pressures. This has led increasing numbers of managers to outsource in-house dealing and other functions, such as foreign exchange and transition management, hitherto seen as core.
While cost savings remain a core driver, and indeed are one outcome of outsourcing, costs are no longer the only focus. Far from being solely a defensive reaction to increased pressure on margins, the white paper (‘From Niche to Norm’) describes outsourcing as part of the target operating model, or moving toward the ‘Optimal State’ for many investment managers, and explains how the focus “has expanded to the variety of other potential benefits offered – enhanced capabilities, improved governance and operational resilience.”
Gary Paulin, global head of Integrated Trading Solutions at Northern Trust Capital Markets said: “The pandemic has challenged a range of operational assumptions. Working from home has, for example, questioned the need for a portfolio manager to be in close proximity with the dealing desk. Previously considered essential, the pandemic has effectively forced firms to ‘outsource‘ their trading desks to remote working setups and the effectiveness of this process has disproved the requirement for proximity, in turn, easing the path to third-party outsourcing. Many investment managers are actively considering outsourcing to a hyper-scale, expert provider as a potential, cost efficient solution – one that maintains service quality and, hopefully, improves it whilst adding resiliency.”
Northern Trust’s white paper compares outsourced trading to software-as-a-service stating: “instead of carrying the cost and complexity of running an in-house solution, firms move to an outsourced one, free up capital to invest in strategic growth and move costs from a fixed to a variable basis in line with the direction of travel for revenues.”
Guy Gibson, global head of Institutional Brokerage at Northern Trust Capital Markets said: “The opportunity to deploy capital to build new fund structures, develop new offerings, focus on distribution and enhance in-house research has been taken up by several of our clients to the benefit of their investment approach, and to the benefit of their investors. Additionally, in the last two months alone, many firms have recognized that outsourcing to a well-capitalized, global platform has enabled them to take advantage of cost-contained growth opportunities in new markets.”
A further development, which has echoes of the journey the technology industry has already undertaken, is the move towards ‘whole office’ solutions, which represent the next potential wave in outsourcing.
According to Paulin; “recently we have observed a growing number of managers wanting to outsource to a single, hyper-scale professional service provider who can do everything, everywhere. This aligns with Northern Trust’s strategy to deliver platform solutions for the whole office, serving our clients’ needs across the entire investment lifecycle.”
Integrated Trading Solutions is Northern Trust’s outsourced trading capability that combines worldwide locations and trading expertise in equities and fixed income and derivatives with access to global markets, high-quality liquidity and an integrated middle and back office service as well as other services, such as FX. It helps asset owners and asset managers to meaningfully lower costs, reduce risk, manage regulatory compliance and enhance transparency and operational efficiency.
How are investors traversing the UK’s transition out of lockdown?
By Giles Coghlan, Chief Currency Analyst, HYCM
Just when we thought we had overcome the initial health challenges posed by COVID-19, the UK Government has once again introduced lockdown measures in certain regions to curb a rise in new cases. This is happening at a time when the government is trying to bring about the country’s post-pandemic recovery and prevent a prolonged economic downturn.
This is the reality of the “new normal” – a constant battle to both contain the spread of the virus but also avoid extended economic stagnation.
Of course, no matter how many policies are introduced to spur on investment, traders and investors are likely to act with caution for the foreseeable future. There are simply too many unknowns to content with at the moment.
To try and measure investor sentiment towards different asset classes at present, HYCM recently commissioned research to uncover which assets investors are planning to invest in over the coming 12 months. After surveying over 900 UK-based investors, our figures show just how COVID-19 has affected different investor portfolios. I have analysed the key findings below.
At present, it seems that by far the most common asset class for investors is cash savings, with 78% of investors identifying as having some form of savings in a bank account. Other popular assets were stocks and shares (48%) and property (38%). While not surprising, when viewed in the context of investor’s future plans for investment, it becomes evident that security, above all else, is what investors are currently seeking.
A third of those surveyed (32%) said that they intended to put more of their wealth into their savings account, the most common strategy by far among those surveyed. This was followed by stocks and shares (21%), property (17%), and fixed interest securities (17%).
When asked about what impact COVID-19 has had on their portfolios throughout 2020, 43% stated that their portfolio had decreased in value as a consequence of the pandemic. This has evidently had an effect on investors’ mindsets, with 73% stating that they were not planning on making any major investment decisions for the rest of the year.
Looking at the road ahead
So, it seems that many investors are adopting a wait-and-see approach; hoping that the promise of a V-shaped recovery comes to fruition. The issue, however, is that this exact type of hesitancy when it comes to investing may well slow the pace of economic recovery. Financial markets need stimulus in order to help facilitate a post-pandemic economic resurgence, but if said financial stimulation only arrives once the recovery has already begun, the economy risks extended stagnation.
It seems, then, that there are two possible set outcomes on the path ahead. The first is a steady decline in COVID-19 cases, then an economic downturn as the markets correct themselves, followed by a return to relative economic stability. The second potential outcome is a second spike of COVID-19 cases which incurs a second nationwide lockdown – delaying an economic revival for the foreseeable future. At present, the former of these two scenarios is seemingly playing out with economic growth and GDP steadily increasing; but recent COVID-19 case upticks show that it’s still too soon to be certain of either scenario.
A cautious approach, therefore, will evidently remain the most common investment strategy looking ahead. But investors must remember that, even in the most uncertain times, there are always opportunities for returns on investment. Merely transforming a varied portfolio into cash savings risks a long-term decline in value.
High Risk Investment Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. For more information please refer to HYCM’s Risk Disclosure.
Hatton Gardens 5 top tips for investing in Diamonds
By Ben Stinson, Head of eCommerce at Diamonds Factory
Investing in diamonds can be extremely rewarding, but only if you know what to look for. For investors who lack experience, finding your diamond in the rough can be quite daunting.
For even the most beginner of diamond investors, the essentials are fairly obvious. For instance, you need to ask yourself will the diamond hold its value over time? What’s the overall condition of the stone and the jewellery? Is there history behind the item in question?
Although common sense plays a big part in investing, people often need insider tips and tricks to go from beginner to expert. Tony French, the in-house Diamond Consultant, at Diamonds Factory shares his professional knowledge on the 5 most important things to look for when investing in diamonds.
1: Using cut, weight and colour to determine value
Firstly, consider the shape, colour, and weight of your diamond, as this can play a pivotal role in guaranteeing growth in the value of your item. Granted, investing trends change with time, but a round cut of your diamond will almost always be the most sought after. The cut of your diamond is incredibly important, as it can influence the sparkle and therefore, the overall value. It’s a similar story for the intensity of some colours, such as Pink, Red, Blue, Green etc. Concerning weight, the heavier (bigger) stones will generally increase in value by a bigger percentage. Collectively these factors also contribute to the supply and demand aspect, which will determine their high price, and will ensure your item is re-sellable.
Looking for significant value? Well, aim to own jewellery or diamonds that come from an important public figure. If you’re lucky enough to own a piece that has significant history, or was owned by a celebrity or person of interest, it’s an absolute must to have concrete evidence of this. Immediately, this proof will increase an item’s overall value, and there’s a good chance the stardom of your item might drum up interest amongst diehard fans, increasing the value even further…
Equally, it’s possible to proactively bring provenance to unique diamonds of yours. For instance, you can offer to loan bespoke, or unusual pieces for film, theatre, or TV performances – then it can be advertised as worn by xyz.
3: Find the source
Establishing your diamond’s source is one of the most important things you can do when investing in diamonds. If you’re starting out, try to purchase diamonds that have NOT been owned by too many people, as the overall value of the diamond will reflect multiple ownership. Alternatively, I’d always recommend buying from suppliers like ourselves or other suppliers and retailers, who buy directly from the people who have had them certified.
Primarily, this will allow you to have a greater degree of transparency, which is crucial when buying such a valuable item. Next, you should immediately see an increase in value of your diamonds, as identifying a source will allow traceability and therefore, market context.
Linked closely with my previous point, is the requirement to ensure that your diamonds are certified by a credible lab, and you have the evidence to prove so (a written document with specific grading details about your diamonds) – this will remove any doubts of impropriety.
It’s essential to remember that not all labs are the same, and many labs are better than others. Both the AGS (American Gem Society) and GIA (Gemological Institute of America) have great reputations and are world renowned. I’d recommend doing your own research into the labs, and when you’ve found the pieces that you’d like to invest in, then make an informed decision based upon your findings. Ultimately, proving certification will make your stones easier to insure, and deep down, you can have peace of mind knowing you have got what you have paid for.
Don’t forget to keep this paperwork in a safe location as well – you’d be surprised how many people we’ve met who have lost, or forget where they’ve placed it.
5: Patience is a virtue…
If the market is strong, it might be tempting to look for an immediate sale once you’ve purchased a high value item. However, I suggest holding onto your diamonds for some time before even thinking about selling. More often than not, an item is more likely to increase in value over a few years than a few days – try and wait a little longer!
Equally, I would encourage having your diamonds, or jewellery professionally valued regularly. If you don’t have the knowledge to make a rough judgement on how much your pieces are worth, a consultant or expert can provide both a valuation, and contextualise that amount in the wider market. From there, you should be empowered with the knowledge to decide whether to keep or sell.
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