The volume of shares outstanding globally is shrinking at the fastest pace in 25 years as the number of offerings falls due to economic and geopolitical uncertainty while companies continue to buy back significant amounts of their securities, writes the Financial Times.
Net volume of publicly traded shares has already fallen by $120 billion this year, compared with $40 billion for the full year 2023, according to JPMorgan. The decline marks the third consecutive year of decline, which hasn’t happened since the settlement began in 1999.
According to the bank, the scale of buyback programs this year is comparable to their volumes in the previous three years. By December, according to forecasts, the total amount of buybacks could reach $1.2 trillion.
At the same time, expectations for IPOs and other equity offerings have not yet been met, the article notes.
The two trends reflect “ongoing uncertainty” among companies around the world, said Nikolaos Panigirtzoglou of JPMorgan.
Stock offerings were previously expected to increase this year as investors became more confident that the U.S. (the world’s largest stock market) could avoid an economic recession. But lingering fears that inflation could accelerate again due to strong economic growth mean that “it hasn’t really happened,” Panigirtzoglu said. “It shows that some people don’t think the worst is behind them,” he added.
Last November, analysts at JPMorgan predicted the stock market would grow by $360 billion in 2024 thanks to IPOs of new companies and buyback reductions.
Since 2000, the number of listed companies in the US has fallen from more than 7,000 to less than 4,000, according to index provider Wilshire. A similar trend has been seen in Europe and the UK.
Stock indexes in Asia are rising during trading on Tuesday, including due to good quarterly reports of companies.
Investors’ attention this week is focused on the meeting of the Federal Reserve, which, as most analysts expect, will once again raise the base rate by 0.75 percentage points (pp). Then its range will be 3.75-4% per annum.
Meanwhile, the Reserve Bank of Australia (RBA) raised its key interest rate by 0.25 percentage points on Tuesday. – up to 2.85% per annum. This coincided with the forecast of most analysts, according to Trading Economics.
The Central Bank raised the rate for the seventh time in a row. It is currently at its highest since April 2013. At the same time, RBA management does not exclude its further rise to curb inflation, which remains at a high level.
The Australian S&P/ASX 200 rose 1.65% on Tuesday.
Share prices of the world’s largest mining companies BHP and Rio Tinto rose by 2.8% and 2.6%, respectively.
In addition, shares of all four largest banks in the country rose in price: Commonwealth Bank – by 1.3%, ANZ Bank – by 1.6%, Westpac Banking and National Australia Bank – by 0.9%.
The value of the Japanese index Nikkei 225 to 8:31 CSK increased by 0.2%.
The stock prices of Japan Tobacco Inc. have risen most significantly. (+9.1%), NTN Corp. (+6.4%) and Panasonic (+6%).
In addition, the value of such large companies as SoftBank Group (+3.2%), Sony Group (+0.7%), Fast Retailing (+0.1%) is growing.
At the same time, the share price of Toyota Motor falls by 2.2%. The automaker in July-September reduced its net profit by 31%, while it turned out to be worse than expected.
The Chinese Shanghai Composite index increased by 1% by 8:36 am CSK. The Hong Kong Hang Seng soared 3.4% after hitting a 13.5-year low a day earlier.
The leading gainers on the Hong Kong stock exchange are China Resources Beer (+9.2%), Internet company Meituan (+8.9%), Sino Biopharmaceutical (+8.4%), and chipmaker Sunny Optical Technology Group. Co. (+8.2%).
In addition, Tencent Holdings Ltd. rose by 7.2%, retailers Alibaba Group and JD.com Inc. – respectively by 5.3% and 5.1%.
AIA Group Ltd., one of the largest Asian insurers, increased the value of new business (the volume of contracts sold) in July-September by 1%. Quotes of the company’s papers jumped by 5.9%.
The South Korean index Kospi by 8:28 KSK added 1.4%.
Quotes of securities of one of the world’s largest manufacturers of chips and electronics Samsung Electronics Co. rise by 0.7%, while the cost of automaker Hyundai Motor decreased by 0.6%.
A large Ukrainian manufacturer of feed for cats and dogs, Kormotech LLC (Prylbychi village, Lviv region), has accumulated stocks of finished products in Poland for four weeks of work, and also signed contracts for feed production in the EU in case its factories stop in Ukraine.
Such measures allow the company to guarantee the continuity of product supplies to European partners in the context of the war in Ukraine, its CEO Rostyslav Vovk said at the Forbes online conference Building Together on Friday.
According to the head, Kormotech opened a logistics center in Poland, where it keeps a stock of products corresponding to four weeks of operation of the company’s two factories located in the western regions of Ukraine – the production time and delivery to a European buyer under normal conditions. This allows “covering” orders from the EU with finished products for a month, while the company solves possible problems with production or logistics.
Vovk also emphasized that his company can guarantee the supply of dry pet food to Europeans from its factories in Ukraine even if production in the country stops due to factors caused by the Russian invasion. To do this, at the beginning of the war, Kormotech signed an agreement with its European partners for production of feed under the Kormotech brand at third-party enterprises in the EU.
“We gave our partners two options: we will work in Ukraine until the very end. As long as we can produce feed in Ukraine, we will produce it. If we have any difficulties or problems, you will receive a similar product from our European partners next month” Vovk said.
He clarified that doing business in Europe usually does not bring super profits, but it also allows for stable development over a long period.
“If you are planning to develop your business in Europe, you need to be clear that this is a long-term business – it can take months or years to sign a contract, and there are no super profits if you do not have a unique or monopoly product. On the other hand, you have a guarantee for many years that you will gradually grow and be able to plan your business processes,” the CEO of Kormotech said.
Kormotech LLC is a leading Ukrainian manufacturer of feed for cats and dogs. The company exports products to 32 countries, including the USA, UK, Germany, France, Finland, Sweden, the Netherlands, Spain, Italy, Poland, Turkey, Iran and Chile.
Stocks of coal in the warehouses of thermal power plants of generating companies in Ukraine grew by 5.8% (by 38,300 tonnes) from January 31 to February 7, 2022, to 695,500 tonnes, according to data from the Ministry of Energy.
According to the calculations of Interfax-Ukraine, since the beginning of the year, stocks have grew by 1.6 times (as of December 31, 2021 it were 435,700 tonnes), they are also 1.8 times more than a year earlier (as of February 8 2021 it were 384,400 tonnes).
As reported, the supply of coal to the warehouses of Ukraine’s thermal power plants in January 2022 rose by 8% (by 148,200 tonnes) compared to December 2021, to 1.991 million tonnes, including 643,400 tonnes of imported coal (1.6 times more), 1.347 million tonnes of Ukrainian-made coal (6.5% less).
The reserves of natural gas in underground gas storage facilities (UGS) of Ukraine as of May 10, 2020 amounted to 17.032 billion cubic meters (bcm), according to recent data from JSC Ukrtransgaz.
According to the calculations of the Interfax-Ukraine agency, this volume exceeds the inventory indicator for the same date in 2015-2019 by 1.7-2 times (by 7-8.5 billion cubic meters).
According to Ukrtransgaz, as of May 1, 2020 non-residents stored 1.173 billion cubic meters of gas in the “customs warehouse” mode in the underground gas storage facilities, while residents some 1.197 billion cubic meters.
In particular, today companies from Austria, Germany, Poland, Slovakia, the United States, France, Switzerland and Estonia use the services of UGS facilities in Ukraine.
At the same time, over the four months of this year, the share of foreign traders is a quarter of the total volume of gas pumped into the storage facilities (551 million cubic meters out of 2.318 billion cubic meters).
Ukraine reduced gas stocks in underground storage facilities 4.7% or by 1.022 billion cubic meters (bcm), to 20.761 bcm between November 1 and 30, according to preliminary data from gas infrastructure operator JSC Ukrtransgaz.
According to Interfax-Ukraine’s calculations, the gas stocks on November 30 were 28.7% higher than on the same date last year, 28.8% higher than on November 30, 2017 and 53.1% higher than on November 30, 2016.
Gas withdrawals from underground storage facilities totaled 48.65 million cubic meters on November. Ukraine imported 17.49 mcm and produced 56.33 mcm of gas that day.
