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Emerging Markets Daily - September 9
Sea Ltd Eyes $6.3 B Raise in Largest Equity Deal of 2021, China Tech Stocks Plummet, Nio in $2B Share Sale, Fossil Fuels and Climate Change, Fabindia Eyes IPO
The Top 5 Stories Shaping Emerging Markets - September 9
Singapore’s Sea Ltd. Eyes $6.3 B Raise in 2021’s Biggest Equity Deal
“Sea Ltd. aims to raise $6.3 billion in the largest equity offering of the year, a deal that will propel a global expansion and acquisitions for Southeast Asia’s largest company.”
“The online gaming and e-commerce firm backed by Tencent Holdings Ltd. is offering 11 million shares, a stake worth about $3.8 billion at Wednesday’s close. It also intends to issue $2.5 billion of equity-linked debt. Sea, which has risen more than 70% this year, fell in post-marketing trading in New York.”
“The region’s most valuable company has rapidly expanded its market share in e-commerce and gaming during the pandemic, riding hit titles like shooter game Free Fire and its Shopee online shopping app. Its founder Forrest Li became Singapore’s richest person in August after shares of his company surged.”
“‘Sea is going for a market expansion, especially in new businesses such as e-commerce in Latin America and food delivery in Southeast Asia,’ said Sachin Mittal, an analyst with DBS Group Holdings Ltd. ‘Competition is intensifying and gaining market share is of utmost importance.’” Yoolim Lee and Drew Singer report.
China Tech Stocks Plummet As Gaming Targeted by Authorities; Cathie Wood’s Ark Cuts China Exposure Dramatically
Wall Street Journal and Financial Times
“Shares of Chinese videogame giants Tencent Holdings Ltd. TCEHY -2.95% and NetEase Inc.NTES -5.17% dropped Thursday, after authorities summoned the companies and ordered them to follow new rules for the online-gaming industry.”
“The two companies and others were ordered to follow recent regulations imposing much tighter restrictions over minors’ playing time, to step up content control and censorship, and to refrain from unfair competition, the state-owned news agency Xinhua said.”
“Hong Kong-traded stock in Tencent and NetEase fell 8.5% and 11%, respectively, helping send Hong Kong’s Hang Seng Tech index down 4.5%. Video-platform operators Bilibili Inc. and Kuaishou Technology, 1024 -6.90% which both derive a substantial portion of revenue from game-related businesses, fell 8.9% and 6.9%, respectively.” Yin Wang reports for the Wall Street Journal.
Meanwhile, the Financial Times reports that “Cathie Wood, the chief executive of Ark Invest and one of the world’s most closely watched investors, said her fund had significantly reduced its exposure to China, leaving only a portfolio of companies that were identifiably ‘currying favour’ with Beijing.”
“Ark’s sharp strategy shift, she told an audience of institutional fund managers on Thursday, was because the environment in China was ‘quite different’ from the one that many global asset managers had poured funds into late last year.”
“Chinese authorities were now focusing on social issues and social engineering at the expense of capital markets, she said. Anything deemed by Beijing as too profitable was at risk of being torpedoed.” The FT reports.
Nio Plans $2B US Share Shale in Latest Shot in China EV Wars
Nikkei Asian Review
“Chinese electric vehicle maker Nio announced a plan to sell up to $2 billion worth of new equity in the U.S. on Wednesday, leading to the sharpest dip in the price of its New York-listed shares since a fatal crash involving the company's self-driving system was reported in August.”
“Nio plans to sell new American depositary shares through an at-the-market offering, a prospectus filed with the U.S. Securities and Exchange Commission shows…The news comes a week after the company cut its production forecast for the rest of the year and while Nio's plans to pursue a second listing in Hong Kong remain stalled.”
“The loss-making but fast-growing automaker said the proceeds will be used to strengthen its balance sheet, as well as for general corporate purposes. The company had a loss of $161 million in the first half of 2021, on revenue that more than tripled to $2.5 billion.”
"‘It's an EV arms race, especially in China, and Nio is aggressively competing with the likes of Tesla and others,’ said Dan Ives, managing director at Wedbush Securities. ‘This capital raise is a smart strategic move to give the company dry powder as it further ramps up battery innovation and R&D spending in EVs.’”
“Though the Chinese EV maker's stock has surged nearly fourfold since the market debut in 2018, it is trading around one-quarter lower than at the start of the year, hampered by concerns over Chinese stocks on U.S. markets, supply chain disruptions in the auto industry and a recent safety investigation in Nio's home market.” Yifan Yu reports.
Most Fossil Fuels Must Stay Underground, Climate Scientists Say
“Almost 60% of oil and gas reserves and 90% of coal must remain in the ground to keep global warming below 1.5C, scientists say.”
“The forecast is based on close analysis of global energy supply and demand. It is a ‘bleak’ but realistic assessment of ‘what the science tells us is needed’, the researchers say.”
“And they have ‘painted a scenario of the future’ that leaves much less room for fossil fuels to be extracted than previously estimated. Globally, the researchers calculated, production of fossil fuels needed to have peaked in 2020 and be on a steady decline of 3% every year until 2050…”
“The study, in the journal Nature, also found the decline in oil and gas production required globally by 2050 - to stick to that tight carbon budget - means many regions face peak production now or during the next decade.”
“Many fossil-fuel extraction projects already planned or in operation are likely to hurt the world's chances of meeting internationally agreed target limits on global warming set out by the 2015 Paris Agreement. And this ‘bleak picture’, the scientists say, ‘is very probably an underestimate of what is required’.” BBC reports.
Fabindia Latest to Join India IPO Rush with Up To $1 Billion Sale
“FabIndia Overseas Pvt Ltd has hired five investment banks to help the ethnic wear retailer raise between $750 million and $1 billion, two people familiar with the development said.”
“The company has hired investment banks ICICI Securities, SBI Capital Markets, JP Morgan, Credit Suisse and Nomura, the people said on condition of anonymity. Fabindia is the latest to capitalize on the buoyant investor sentiment that has propelled stocks to record highs.”
“As many as 38 companies have hit the primary markets this year, the most in a decade, raising more than ₹60,000 crore, according to data from stock exchanges. Many more are preparing or set to go public.”
“Fabindia is expected to submit its draft initial public offering (IPO) documents with the markets regulator by November, one of the two people said. Mint first reported in June that the company was exploring an IPO at a $2 billion valuation.” Hindustan Times reports.
“The most authentic thing about us is our capacity to create, to overcome, to endure, to transform, to love and to be greater than our suffering.” Ben Okri, Nigerian poet and novelist
What We’re Also Reading…
COSCO On Track To Become Third Largest Container Shipping Line
“China’s COSCO group could overtake French carrier CMA CGM as the third-biggest container line if the latter does not acquire more ships. COSCO now has 2.97 million TEU of total operating capacity, compared with CMA CGM’s 3.01 million TEU, according to Alphaliner.”
“However, COSCO’s owned fleet stands at 1.55 million TEU, compared with 1.23 million TEU for CMA CGM. The rest of the capacities come from chartered vessels.”
“Therefore, apart from the upcoming change in the number-one spot in liner shipping, with MSC dethroning Maersk after almost two decades, we will possibly see rearrangements in lower rankings, too.”
“On 2 September, COSCO's subsidiary, OOCL contracted ten 16,000TEU ships at affiliated shipyards Dalian COSCO KHI Ship Engineering and Nantong COSCO KHI Ship Engineering for US$158 million each.”
“OOCL’s parent company, Orient Overseas International Ltd said in a Hong Kong Stock Exchange that the orders are in line with the group’s 14th Five Year Plan, which would, among other things, increase its fleet capacity and consolidate its market position.” Container News reports.