Market Recap 1/05/2022

Download PDF USA Major market indexes registered significant losses for the fourth consecutive week, highlighting April 2022 as the worst month for the markets since March 2020. The S&P 500 is still in correction territory, losing 8.8% in the last month, and being down approximately 14% from its January all-time highs. Once again technology stocks led the sell-off, as demonstrated by the technology-heavy Nasdaq Composite that remains in bear market territory after notching its worst Read more…

Investment ideas for the earnings season: Aston Martin Lagonda

Download PDF Introduction In view of the coming season of earnings releases we analyze the famed British carmaker Aston Martin, and we propose: 1) a long investment on its equity based on a successful execution of its multi-year turnaround plan, and 2) a trade idea on the implied vol of the stock in relation to its earnings which will be announced on the 4th of May. Investment thesis Aston Martin Lagonda (AML) is a well-known Read more…

Yield Curve Control – a viable tool for Central Bankers?

Download PDF Conventional economic theory suggests that Central Banks (CBs) should only intervene to influence short-term interest rates and allow the market to set long-term rates. However, in modern economic history, this belief has been put into question: most notably, the US and the Euro Area have reacted to the Great Financial Crisis by employing aggressive, unconventional expansionary monetary policy, namely Quantitative Easing (QE), to reignite the economy. For some countries, though, QE has not Read more…

Headed for Redemption? GSK and its Strategic Turnaround

Download PDF Introduction Facing rising scrutiny from American activist investors, GlaxoSmithKline (GSK), Britain’s second-largest pharmaceutical company, is undertaking a major strategic shift. By spinning off its consumer healthcare division, and recently acquiring Sierra Oncology for $1.9bn, which is about to introduce a new blood cancer treatment to the market, GSK is hoping to fend off pressure from activist investors and build up a new drug pipeline which it can showcase. About GSK and Sierra Oncology Read more…

Boom in Australian M&A? Analysis of a Growing Market

Download PDF The Macro Environment M&A activity in Australia has been on a tear recently. From every angle, deal activity in 2021 was unprecedented. A$308bn of deals were closed in 2021, compared with the 10-year average of A$100bn. A large amount of ‘mega deals’ pushed the average takeover size to A$3.8bn, compared with A$1.3bn in the years before. The most notable deals include the A$23.6bn buyout of Sydney airport by a group of financial sponsors, Read more…

Blackstone and Benetton family take Atlantia private in blockbuster infrastructure deal

Download PDF Introduction On April 14th, it was announced that Italy’s known Benetton family and US investment fund Blackstone made a buyout offer for Atlantia, valuing the company at €54.3bn. What could be the second biggest deal of the year globally, only behind Activision Blizzard acquisition by Microsoft ($69bn), would also be the largest take-private deal ever for a European-listed company, which highlights the current appeal of the infrastructure sector. The €23-a-share offer, would end Read more…

Pairs Trading: Building a Backtesting Environment with Python

Download PDF Introduction Statistical arbitrage is a class of trading strategies that profit from exploiting what are believed to be market inefficiencies. These inefficiencies are determined through statistical and econometric techniques. Note that the arbitrage part should by no means suggest a riskless strategy, rather a strategy in which risk is statistically assessed. One of the earliest and simplest types of statistical arbitrage is pairs trading. In short, pairs trading is a strategy in which Read more…

Market Recap 24/04/2022

Download PDF USA Following signs of a more hawkish central bank policy, bond markets in the US sold off substantially over the course of the week. On Tuesday, Charles Evans, the Chicago Fed’s president defined a year-end range for the policy rate between 2.25 and 2.5 per cent as realistic, while remarks by the St. Louis head James Bullard spurred speculation about a potential three quarters-percentage point hike at one of the upcoming meetings. Speaking Read more…

Returning Back to Action? The US Airline Industry Analysis

Download PDF Introduction The US airline industry, following two years of devastation and billions of dollars of losses due to the pandemic, appears to be springing back to life. Passenger numbers are returning to pre-pandemic levels and firms are starting to become profitable once again. More interestingly, airlines appear to again be on the quest for mergers and consolidation to cut costs and increase market power in their competitive industry. JetBlue and Frontier Airways are Read more…

Disruption in the payments landscape: Bolt acquires Wyre in bid to extend its payment services to the blockchain

Download PDF Introduction Bolt Financial Inc., a leading payments-focused technology company, announced the acquisition of the crypto-services startup Wyre in a cash and stock deal. Announced on April 7th, 2022, the deal is expected to close later in 2022. It is valued at around $1.5 billion, and, according to research conducted by Dealogic, would represent the largest merger in the crypto industry not involving a SPAC. Here it is worth remembering that in May 2021, Read more…

The Banker’s Toolkit: Power and Utilities

Download PDF Introduction The power and utilities industry refers to a category of companies that focus on providing services to satisfy basic needs. The five main businesses classified as utilities are electric power, natural gas, water supply, steam supply and sewage removal. The sector is mainly known for its stability as demand for utility services tends to remain steady, even during a recession. The utility industry accounts for approximately 3% of the S&P 500 and Read more…

WHAT DRIVES CREDIT? Understanding the Cross Section of Expected Corporate Bond Returns

Download PDF Abstract While the literature investigating risk premia driving the cross section of stock returns is extensive, fewer studies analyze corporate bond returns. We set out to understand which factors and firm characteristics command a premium in terms of expected returns on corporate bonds, both in the investment grade and high yield spaces. We include a broad array of risk exposures ranging from financial characteristics to the macroeconomic environment. This is the first part Read more…

The Banker’s toolkit n.4: Industrials

Download PDF Introduction The Industrials sector has certainly been one of the backbones of the world economy. It is composed of three industry groups: Capital Goods, Commercial & Professional Services, and Transportation. As of now, Industrials is the sixth largest of the 11 GICS sectors in the U.S. market and accounts for approximately 7.8% of the weight of the S&P 500, with an estimated market cap of $5.70tn. With its five largest companies representing only Read more…

SPACs and IPOs: reasons behind 2022 low fees and unperformance in Equity Capital Markets

Download PDF Latest trends in Equity Capital Markets In 2021, Equity capital markets showed an outstanding recovery from 2020, with the S&P 500 closing at historic highs throughout the year. The first half of the year saw a substantial improvement in investor confidence with the passage of the American Rescue Plan Act and a record first quarter in which 390 IPOs raised $126bn, fuelled in part by a wave of special purpose acquisition company (SPAC) Read more…