Financial markets are expected to open normally on Monday after ParisAttack

Financial markets are expected to open normally on Monday after the Paris attack. During the attack at least 129 people were killed on the streets and in a concert venue late on Friday night. Several market professionals are expecting the market opening in Asia to be smooth and thus avoiding big changes. This will help the opening bell in Europe as well.

– History will tell us that if the economic impact is limited, and I think it will be, the markets will quickly recover, said head of strategy Shane Oliver from Australia AMP Capital to Reuters.

Euronext, the Paris Stock Exchange also informed during the weekend, that the markets will open normally on Monday. One of the newcomers in the Stock Exchange is Amundi Asset Management, which started trading last week. Amundi´s market cap is about 7,7 billion euros and the company´s IPO was the biggest IPO in Paris in ten years.

The Paris Attack might have some impact on the tourism, while the country is the number one for global travellers. This industry sectors accounts about 7,5 percent of the country´s GDP. The Group20, with leading industry leaders, will meet today on Sunday in Turkey to discuss about the Paris Attack.

Business Finance

Amundi to start trading in Euronext Paris in November

The European leading Asset Management company, Amundi Asset Management is to start its trading in Euronext Paris in November. The trading day is expected to be the 16th. The company announced today that the indicative price range would be 42-52,50 euros per share.

Societe Generale has said it will sell its 20 percent ownership (33,4 million shares) in Amundi in the IPO and Credit Agricole will reduce its ownership so that its stake will be between 74,6 – 77,6 percent. It also said it has agreed to sell 2 percent of Amundi shares to Agricultural Bank of China to expand their co-operation.

Amundi, which assets under management were 954 billion euros in June (51 percent fixed income, 13 percent equities and 17 percent treasury) said it is well positioned to benefit from the fundamentals of the assets management markets that favor sustainable growth.

Amundi provides diversified expertise across all major asset classes, offering full coverage of the investment management ecosystem.

The company is the biggest in Europe and the 8th biggest globally. The global AUM markets are estimated to be 61 trillion euros.

Business Finance

The Swedish Goverment urges AP funds to invest in low carbon

The Swedish Finance Minister Per Bolund urges the Swedish AP pension funds to mitigate climate change and to invest more in low carbon. He reminded in the SVD´s interview http://www.svd.se/bolund-ap-fonderna-ska-leda-klimatomstallningen/om/svd-2-grader today, that the financial markets are revaluating fossil fuels and assets.

– It is our duty to mitigate the climate change and make the risks for pensions lower, Bolund stated. He would also like to see that the AP funds would work harder to communicate the climate change and to mitigate it. – We would like that AP funds would be the leaders in this field, he said.

The Swedish Goverment is also considering other changes in the pension system. There are plans that three of AP funds will be merged together, but the fund leaders have been againts the proposal while they are afraid it will raise the risks in the overall pension system. In France the Goverment have guided that all the institutional investors have to calculate the carbon footprint in their portfolios. The aim is to highlight the follow up and reporting on carbon emissions and raise the awareness of climate change.

Finance

Apple to record levels on the last quarter of 2015 – Apple Store to all time record

Apple (AAPL:US) announced today its fourth quarter results ending September 2015. According to the press release, the company reported a new record level of iPhones sales and operating income. Apple´s sales were 51,5 billion dollars (42,1 billion in the year earlier or 49,6 billion dollars previous quarter). Operating income was 14,6 billion dollars, growth from the 11,2 billion dollars a year ago and diluted EPS was 1,97 dollars compared to 1,43 dollars. The gross margin was 39,9 (38) percent. The company sold 48 000 iPhones units compared to 47,534 units in the previous quarter.

– Fiscal 2015 was Apple´s most successfull year ever, with revenue growing 28 % to the nearly 234 billion dollars, said CEO Tim Cook in the press release.

According to the company, the near future stays positive with gross margin estimate to 39- 40 percent. Apple said its Apple Pay introduction has grown very well in the US and UK markets and Apple Store gained new record levels. The sales numbers of Apple Watch are not published but the company said it is head of expectations. The sales in China declined a little and were 12,5 billion dollars compared to 13,3 billion dollars in the previous quarter. On the other hand, the company is heading to have 40 stores in China by mid 2016 and has published a new programm for renewable energy in China.

The company annonced a new strategic partnership with Cicso in September and they are looking for the corproate markets with IBM as well.

The Apple shares were down a little, 0,63 percent to 114,55 dollars in the trading. The company market cap is huge, 653 billion dollars.

Business Finance

Ferrari to be listed in the New York Stock Exchange

The Italian luxury car manufacturer Ferrari is going to make its IPO in the New York Stock Exchange. According to Reuters, the sale will consist of 17,2 million shares (9 %) of the Dutch holding company Ferrari NV. The share price is exptected to be at 48-52 dollars. The ticker for the company will be RACE.

Investors are expected to be highly interested of this IPO and the lead coordinator is UBS altough the car industry has faced the recent Volkswagen´s emission testing scandal. The valuation of the company could rise to 9,8 billion dollars and the enterprise value would be around 12 billion dollars.

The parent company Fiat Chrysler Automobiles is exptexcted to cut the debt and to help finance a 48 billion euros investment programm of Jeep, Alfa Romeo and Maserati.

Ferrari´s chairman Piero Ferrari is said to keep a 10 percent stake in the company. He has said that Ferrari is not a traditional car manufacturer and its peer group should rather be Hermes and Prada than for example Porsche. – We don´t sell a car, we sell a dream, he said in an interview in Bloomberg.

Ferrari´s revenue last year was 2,8 billion euros and the company sold 7255 cars. The waiting list for a Ferrari is exptected to be one year. The company earnings before interests and taxes were 389 million euros.

Business Finance

AP4 Andersson: EU Directive for investors of carbon footprint?

The CEO of Swedish Pension Fund A4 Mats Andersson believes that it would be possible that EU countries will lead the carbon footprint reporting in the near future. He expects that there will be EU directive , at some point, for investors to report annually their carbon footprint. At the moment this carbon footprint is voluntarily among the institutional investors and there are initiatives like PRI´s Montreal pledge that is urging investors to report on it. The French Goverment maid an Act during the summer to make the carbon footprint reporting obligatory for institutional investors and pension funds.

– I think that Sweden will follow the French steps to make the reporting an obligatory element for institutional investors. And my guess is that this will happen at the end of this year. And later on there might also be this EU directive on this matter, Mr Andersson said before the PRI meeting in London yesterday.

If this kind of EU directive would come into force, it would mean that all the pension funds and Sovereign Wealth Funds have to report on the carbon footprint in their portfolios. This would also mean that companies in the portfolios are urged to act to report on their carbon emissions.

Business Finance

The awareness of carbon emissions risks is rising among investors – how to hedge climate change?

The awareness of carbon emissions risks is rising among institutional investors. The fact that UN Paris meeting in December will have impact on the thinking of trading and pricing on emissions will lead to different outcomes to different companies and industry sectors. Institutional investors are now thinking how to avoid climate change related risks in portfolios, but on the other hand also how to benefit from the right options. Investor point of view is how to avoid the risks related for example to the time horizon.

Investors see different cap and trade -models in different countries and different renewables programms. Taxation, trading methods and pricing are some of the core elements, but they vary widely. One of the largest cap and trade -areas is EU, and the impact of the new pricing will be seen in the future. The economic slowdown has curbed the emission pricing and at the moment the system is not awarding companies to swift to renewables.

There are two kind of risks for investors related to CO2 emissions: income statement risk and balance sheet risk. Currently there is no or let´s say low CO2 price for companies. In the near future the repricing of emissions and taxation will impact the company profit and loss statements. The second risk area is the so called “stranded assets”. This means that fossil fuels companies are valued on their reserves, but on the other hand the companies cannot monetize all the reserves in their balance sheet because of the global warming and temperature increase.

Low carbon indexes
to hedge climate change

Investos have different strategies to reduce their climate change related risks in portfolios. Exclusion, engagement, hedging or all of them together.
One of the new low carbon indexes is MSCI Europe Low Carbon Leaders, which has been developed by Amundi Asset Management, the Swedish Pension Fund AP4 and the French Pension Fund FRR together with MSCI.

This index was launched September last year and by summer it exceeded its benchmark MSCI Europe index by nearly 200 basis points. The idea is that the most polluting companies are divested and the rest of the companies are weight again so that the exposure of stranded assets will be minimized. At the same time with this index it is possible to reduce the carbon footrpint of the portfolio, which is one of the issues for investors at the moment. For example in France the institutional investors are obliged to publish their portfolio carbon footprint.

Part of this development, Amundi and AP4 are also founders of the Portfolio Decarbonization Coalition (together with United Nations Environment Programme and its Finance Initiative and CDP, Carbon Disclosure Project) which aims to convene investors to reduce their portfolio exposure to GHG emissions. The target of this initiative is 100 billion dollars by the end of this year.

“China International Capital Corporation is committed to promote the decarbonization of investment portfolios and the use of low carbon indexes, particularly in Asia and in China, “said Chairman Jin Liquin in press release related to the support to Decarbonization Coalition.

” Portfolio decarbonization, I know that a Portfolio Decarboniation Coalition has been put in place and announced at the Climate Summit in NYC and that after only a few months of existence it has already received a 45 billion dollars committments. French actors are part of this mobilization, said the French President Francois Hollande.

After the launch, the members in the Coalition have increased and include also for example the Church of Sweden, Local Goverment Super,Mirova and Robeco SAM.

Päivi Härkönen

Finance Research and Insights