More money poured into stocks in past five months than over last 12 years: BofA

LONDON (Reuters) – Investors have pumped more money into equities over the past five months than in the last 12 years, BofA’s weekly flow figures showed on Friday, as ultra-easy monetary policies and unprecedented stimulus has sparked a secular shift into stocks.

BofA said $576 billion had gone into equity funds in the past five months, beating the combined $452 billion inflows seen in the last 12 years,

Based on clients’ asset allocations, Bofa said a record 63.6% of the money was invested in stocks, 18.5% in debt and 11.6% in cash.

The exuberance has however slowed in recent weeks, with investors pouring $22.7 billion into cash during the week to Wednesday, on top of the nearly $100 billion committed in the last two weeks.

Reporting by Thyagaraju Adinarayan; editing by Sujata Rao

Korean video game firm Krafton applies for IPO, seen worth billions of dollars

SEOUL (Reuters) – South Korea’s Krafton Inc, the video game holding company that publishes the blockbuster game PlayerUnknown’s Battlegrounds (PUBG), has applied for preliminary approval for an initial public offering (IPO), Korea Exchange said on Thursday.

The IPO is expected to be one of the biggest Korean listings this year, Seoul-based analysts said, with over-the-counter trades on Thursday valuing Krafton at around 20 trillion won ($17.92 billion).

Krafton founder Chang Byung-gyu is the largest shareholder with a 16.4% stake as of end-2020, followed by China’s Tencent holding a 15.5% stake through an investment company. Small shareholders with less than 1% stake individually held a combined 23.2% of Krafton, according to a company filing.

PUBG is one of the highest-grossing video games of all time, with up to 55 million daily users excluding China on weekends and 70 million copies of the game sold for PC and game consoles, Krafton said. Upcoming new mobile game “PUBG: New State” gained more than 5 million pre-registrations within a week, Krafton said in March.

Krafton reported revenue of 1.67 trillion won and operating profit of 774 billion won in 2020, Korea Exchange said in a statement.

The main adviser for the IPO is Mirae Asset Daewoo, while other advisers are Credit Suisse, Citigroup Global Markets, Korea Investment & Securities, JP Morgan and NH Investment & Securities.

Robust investor demand has fuelled a flurry of sizable listings in South Korea this year.

An IPO by vaccine developer SK Bioscience Co Ltd last month was the biggest in Seoul in nearly four years, while battery component developer SK IE Technology’s (SKIET) planned IPO is expected to be worth at least $1.5 billion.

($1 = 1,116.3800 won)

Global equities could receive April boost after a pause in rally

(Reuters) – While the pace of the global equity rally has waned in recent weeks, world shares have a better chance of climbing again if history repeats itself.

MSCI’s gauge of stocks across the globe has delivered an average gain of 2.6% in the month of April in the last 19 years, the highest compared with other months of the year.

It was followed by November’s 1.7% gain and July’s 1.1%, according to the data.

Graphic: MSCI World index’s April gains

Reuters Graphic

“April tends to be a strong month for risk assets, with monthly returns statistically significant across major markets, said Andrew Sheets, a strategist at Morgan Stanley, adding that higher dividend payments could be a reason behind this rise in shares in the month.

“The April month could be an important tactical window for investors to take on beta, before heading into a possibly quieter summer period,” he said.

The MSCI World index rose just 4.1% in the Jan-Mar quarter, the lowest in a year, as global shares were pressured by growing concerns about hiccups in vaccine rollouts and a fresh wave of coronavirus infections, particularly in Europe.

Some analysts said higher corporate profits could boost stock prices this month, with factories across Europe and Asia ramping up production in March.

Paul Sandhu, head of multi-asset quant solutions at BNP Paribas Asset Management, said investors should take this pause in the rally as an opportunity to rebalance their portfolios and buy on dips this month.

Refinitiv data showed global companies’ profits in the March quarter are expected to rise 70%, compared with a year ago, led by a recovery in energy, consumer and mining firms.

Graphic: Expected March quarter profit growth

Reuters Graphic

“April should see good data, strong 1Q earnings, still-modest realised inflation and a pause in the yield move,” said Morgan Stanley’s Sheets.

The MSCI World index was up 0.24% on Thursday, which was the first trading day of the month.

Investors focus on market trends: Second quarter

NEW YORK (Reuters) – The first quarter of 2021 kept investors on their toes as it served up surging yields, an accelerated rotation into cyclical stocks and wild rides in the shares of GameStop that brought the retail investors of WallStreetBets into the public eye.

Here are some trends investors are positioning for in the second quarter, and how they could impact broader markets.

(Graphic: Fast and furious – )

Reuters Graphic

HIGHER YIELDS

The yield on the benchmark 10-year U.S. Treasury rose by about 80 basis points in the second quarter – its third-largest quarterly increase over the past decade – as investors sold bonds in anticipation of a U.S. economic recovery and higher inflation.

Many investors believe the move will continue – Goldman Sachs sees the yield at 1.9% by the end of 2021, while TD Securities expects yields to rise to 2%.

The move “is happening, we believe, for the right reasons,” said Gargi Pal Chaudhuri, head of iShares investment strategy, Americas at BlackRock.

Chaudhuri believes further upside in yields is unlikely to derail a rally that took the S&P 500 to a fresh record on Wednesday, as yields are rising from “very, very low levels.”

Others are less certain. Forty-three percent of investors in the most recent BofA Global Research fund manager survey said 2% on the 10-year could trigger a selloff in stocks.

(Graphic: A buck short – )

Reuters Graphic

RESURGENT DOLLAR

Rising yields have helped lift the dollar to its highest level in nearly 17 months, and some investors have positioned for more dollar strength ahead: net bets on a weaker dollar in futures markets stood at $10.3 billion, about a third of their mid-January value, the latest data from the CFTC showed.

A strengthening dollar could weigh on the profits of U.S. multinational companies and spell bad news for the recent commodities rally that has pushed up prices for everything from oil to copper and iron ore.

(Graphic: Value vs growth – )

Reuters Graphic

MORE VALUE

Expectations of a U.S. economic revival have boosted the so-called reopening trade in recent months, fueling rallies in the shares of banks, energy companies and other areas that have for years lagged behind growth and technology stocks.

The Russell 1000 value index rose 11% in the first quarter against its growth counterpart’s gain of 1%, continuing a trend that started at the end of 2020.

“If a new paradigm emerges, consisting of sustainably higher nominal growth and higher yields, the value trade could run for years,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a recent note.

Hiccups in the U.S. reopening effort, however, could reinvigorate the appeal of tech, sending investors back to the stocks that have led markets higher for years.

(Graphic: Volatility recedes – )

Reuters Graphic

LOWER VOLATILITY

The quarter also marked a much-awaited drop in investors’ expectations for stock market gyrations. The Cboe Volatility Index – known as Wall Street’s fear gauge – recently traded just below 20, down from a near-record of 85.47 a year ago.

The decline reflects investors’ expectations that the recent gains in stocks are likely to stick, said Brian Overby, senior options analyst at Ally Invest.

The index remains above its long-term median of 17.5, likely a result of some investors hedging their stock positions using S&P index options, Overby said.

(Graphic: Up, up and away? – )

Reuters Graphic

INFLATION

Although inflation has consistently averaged below the Federal Reserve’s 2% target in the last decade, trillions of dollars in government spending have revived discussions of its return.

One measure of inflation, which tracks the expected average rate over the five-year period starting five years from now, is at 2.16%, the highest since December 2018.

The latest survey by BofA Global Research, meanwhile, showed fund managers see a rise in inflation – which could weigh on the dollar and erode demand for longer-dated bonds – as the market’s biggest “tail risk.”

Wall Street: US stock exchange data analysis

NEW YORK (Reuters) – U.S. stocks ended down slightly on Tuesday, with investors selling tech-related growth shares after U.S. Treasury yields hit a 14-month high.

At the same time, the S&P 500 financials, industrials and consumer discretionary sectors rose, extending the recent rotation out of growth and into so-called value names.

Tech shares trimmed losses in afternoon trading with Treasury yields off the day’s high, but the S&P technology sector ended down 1% on the day and was the biggest drag on the S&P 500. The Nasdaq was on track for its first monthly loss since November following the recent rise in yields.

Tech stocks, which have a low-rate environment heavily baked into their pricey valuations, have been among the hardest hit by the rise in yields.

“It’s somewhat of a leadership-less market,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York. “Investors’ preferences are flipping around here almost on a daily basis, primarily between tech plus and cyclicals.

“Cyclicals have certainly had the upper hand here for a while, trading off the reopening of the economy. Tech plus holds in there because it’s really the promise of the future – it should provide investors with steady growth.”

The 10-year U.S. Treasury yield rose to 1.776% in early London trade, its highest since Jan. 22. But the yield reversed and was lower in late New York trading as traders prepared for quarter-end.

The Dow Jones Industrial Average fell 104.41 points, or 0.31%, to 33,066.96, the S&P 500 lost 12.54 points, or 0.32%, to 3,958.55 and the Nasdaq Composite dropped 14.25 points, or 0.11%, to 13,045.39.

President Joe Biden on Wednesday will unveil more details about the first stage of his infrastructure plan, which could be worth as much as $4 trillion.

A leading value index was up 0.1% while a growth index shed 0.6% in a continuation of a trend since late last year.

“For the next day or two, (value stocks) will probably be leaders because we have quarter-end and institutions want to make sure that they have exposure to the names that performed well,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in New York.

Bets on a swift economic rebound backed by vaccine rollouts and unprecedented stimulus have helped the S&P 500 and the Dow hit record closing highs recently.

Bank stocks rebounded as investors took heart from signs that the impact from the fall of a U.S. hedge fund did not ripple out to broader markets.

Wells Fargo & Co shares jumped 2.5% after the lender said it had a prime brokerage relationship with Archegos Capital and that it no longer had any exposure and did not experience any losses.

Advancing issues outnumbered declining ones on the NYSE by a 1.48-to-1 ratio; on Nasdaq, a 1.47-to-1 ratio favored advancers.

The S&P 500 posted 32 new 52-week highs and no new lows; the Nasdaq Composite recorded 49 new highs and 73 new lows.

Volume on U.S. exchanges was 10.29 billion shares, compared with the 13.5 billion average for the full session over the last 20 trading days.

Asian SPAC listings face stern test as regulators consider rule changes

HONG KONG/SINGAPORE (Reuters) – Asian bourses from Tokyo to Singapore are considering rule changes to allow listing of SPACs, but some industry players say the region may not attract the kind of frenzy, or the massive billions of dollars, seen in the U.S. for such blank cheque firms.

The trend to list through Special Purpose Acquisition Companies (SPACs) has seen such floats raise $96 billion in the United States this year after a bumper 2020.

In Asia, industry executives worry that low valuations in some markets and the need for SPAC regimes to include strong investor protection safeguards would keep such listings from rapidly taking off.

“We don’t get the sense that anyone is rushing to do this,” said one person with knowledge of Asian exchanges’ informal consultations with industry executives, referring to SPAC listing prospects in Asia.

“Hong Kong is more strongly leaning to the no side, while Singapore, because it has less equities activity, has more pressure,” said the person, declining to be named as he was not authorised to speak to the media.

With the hot new method of floating a company taking the U.S. tech world by storm, Asian exchanges are stepping up efforts for SPAC listings although the response has been tepid in Europe.

Earlier this year, Singapore Exchange’s regulatory unit said it was exploring a consultation on SPACs, while the Hong Kong government directed the city’s exchange and regulator to look into allowing such listings.

Indonesia’s bourse has also said it would consider allowing SPACs, and in Japan, a government panel said SPACs listings should be considered to boost growth.

SPACs or shell companies, raise funds via IPOs to merge with operating firms and then take them public by enticing them with shorter listing timeframes and strong valuations.

One problem for SPACs in Hong Kong are recent rule changes brought in to resolve long standing worries about illegal practices linked to the formation and trading of shell companies.

“A lot of the changes that were introduced from 2016-2019 would need to be changed to accommodate SPACs,” said Christina Lee, a capital markets partner at Baker McKenzie, adding that she had received inquiries from clients, many from mainland China, about listing SPACs in Hong Kong.

DESIGNING RULES

Singapore, which has attracted listings mainly of real estate investment trusts, could find it tougher.

“Singapore doesn’t have as deep liquidity and the velocity of the leading markets and that could be an issue particularly when it comes to the adoption of new investment models,” said Yang Eu Jin, co-head of corporate and capital markets practice at RHTLaw Asia.SGX consulted the market on SPAC listings in 2010 but this didn’t take off due to lack of market interest.

Stefanie Yuen Thio, joint managing partner at TSMP Law in Singapore, said a quick roll out of regulations this year and more interest for SPAC listings for Chinese tech targets, due to the unrest in Hong Kong and U.S.-China tensions, could help Singapore.

“The important thing will be to ensure that our rules are, as far as possible, aligned with U.S. listing rules for SPACs so that Singapore can be seen as the Asian alternative bourse,” she said.

“That may be more of a challenge but if Singapore wants to stay competitive and relevant as a stock exchange, we will need to resist the urge to create a Frankenstein’s monster of the SPAC listing rules.”

Goldman securities case: U.S. Supreme Court wrestles over investor class actions

(Reuters) – U.S. Supreme Court justices on Monday struggled in a case involving Goldman Sachs Group Inc over how judges should determine when shareholders can collectively sue publicly traded companies for fraudulent statements that keep their stock prices artificially high.

The justices heard arguments in Goldman’s appeal of a lower court ruling that permitted a class action suit by shareholders accusing the bank and three former executives of concealing conflicts of interest when creating risky subprime securities before the 2008 financial crisis in violation of a federal investor-protection law.

The Arkansas Teacher Retirement System and other pensions that purchased Goldman shares between February 2007 and June 2010 sued the company, accusing it of violating an anti-fraud provision of the Securities Exchange Act of 1934 and a related SEC regulation.

Central to the dispute are the shareholders’ claims that when they bought Goldman shares they relied upon the bank’s statements about its ethical principles and internal controls against conflicts of interest, and its pledge that its “clients’ interests always come first.” Goldman has argued that these “aspirational” statements were too vague and general to have had any impact on the stock price.

Questions posed by the justices during the arguments indicated that when they rule in the case they could provide guidance to judges to consider the generic nature of a company’s statements in deciding whether market price was affected.

But the justices appeared to struggle over how to make that determination and what evidence may be used. Businesses often seek to limit the ability of plaintiffs to pursue class actions in order to avoid the higher damages often seen in such litigation.

“How are you defining generic or, stated otherwise, what kinds of statements are not generic?” Justice Brett Kavanaugh asked an attorney for Goldman.

Some justices wondered how courts would analyze a class action against a company that simply called itself “nice.”

“There are people who would regard, ‘We are a nice company,’ as a fraudulent statement depending upon subsequent events, and how would they make that case?” Chief Justice John Roberts asked.

The case stemmed from Goldman’s sale of collateralized debt obligations including Abacus 2007 AC-1, which it assembled with help from hedge fund manager John Paulson.

In 2010, Goldman reached a $550 million settlement with the U.S. Securities and Exchange Commission (SEC) to resolve charges that it cheated Abacus investors by concealing Paulson’s role, including how he made a $1 billion profit by betting the sale of collateralized debt obligations would fail.

The plaintiffs said that the share price would have been lower if the truth had been known about the company’s conflicts of interest, adding that they lost more than $13 billion due to Goldman’s conduct.

The Manhattan-based 2nd U.S. Circuit Court of Appeals last year upheld a federal judge’s decision to let the plaintiffs sue as a group and rejected the company’s argument that generic statements can never impact a stock price.

A ruling is due by the end of June.

Exclusive: Bitcoin jumps to one-week high above $58,000

LONDON (Reuters) – Bitcoin jumped to a one-week high on Monday, rising as much as 4.5% to $58,300 and nearing a record high above $61,000 hit earlier this month.

Visa Inc said earlier it would allow the use of cryptocurrency to settle transactions on its payment network, the latest sign of growing acceptance of digital currencies by the mainstream financial industry.

Goldman sold $10.5 billion of stocks in block-trade spree: Bloomberg News

Shares in ViacomCBS and Discovery tumbled around 27% each on Friday, while U.S.-listed shares of China based Baidu and Tencent Music plunged during the week, dropping as much as 33.5% and 48.5%, respectively, from Tuesday’s closing levels.

Eric Handler at MKM Partners, who covers Discovery, on Friday said that large blocks of shares in both Viacom and Discovery companies were put in the market on Friday, likely exacerbating the declines.

An email to clients seen by Bloomberg News said Goldman sold $6.6 billion worth of shares of Baidu Inc, Tencent Music Entertainment Group and Vipshop Holdings Ltd, before the U.S. market opened on Friday, the report on Saturday said. bloom.bg/3lYOrZm

Following this, Goldman sold $3.9 billion worth of shares in ViacomCBS Inc, Discovery Inc, Farfetch Ltd, iQIYI Inc and GSX Techedu Inc, according to the report.

A source familiar with the matter said on Saturday that Goldman was involved in the large block trades.

Goldman Sachs did not immediately respond to a Reuters request for comment.

The Financial Times reported that Morgan Stanley sold $4 billion worth of shares earlier in the day, followed by another $4 billion in the afternoon.

Morgan Stanley declined to comment.

The Financial Times reported that Goldman told counterparties that the sales were prompted by a “forced deleveraging”, citing people with knowledge of the matter.

CNBC reported here that the selling pressure was due to liqudation of positions by family office Archegos Capital Management, citing a source with direct knowledge of the situation. A person at Archegos who answered the phone declined to comment.