Return of Greed, Spacs’ Downfall, and the Energy Sector’s Conundrum By



© Reuters

In the last week of September 2023, several market trends emerged that are causing a stir among investors. Despite an overwhelming sense of dread due to worries about a recession, inflation, and interest rates, there have been signs of returning greed in the market.

This was particularly seen in the case of VinFast Auto Ltd. (NASDAQ:), a Vietnamese electric vehicle company valued at $41 billion. After a withdrawn IPO last year, the company finally got listed this year. From a low of US$9 in early August, the stock soared to US$93 by the end of August, making it the second-largest automaker in the world, behind only Tesla (NASDAQ:) Inc. However, following news of more insider selling, VinFast’s stock has now dropped to US$18, down 81 percent from its peak less than a month ago.

On another note, Special Purpose Acquisition Companies (SPACs) appear to be on a downward trajectory. Since 2020, out of 400 SPACs that have made deals, 15 have gone bankrupt and 160 are down more than 80 percent. Recent annual average returns for SPACs have been negative, with this year to date seeing a decrease of 50 percent.

Contrary to these trends, Initial Public Offerings (IPOs) are making a comeback this year. Notable recent IPOs include Arm Holdings (NASDAQ:) PLC and Instacart (under Maplebear Inc.). While some view more IPOs as a sign that the market is healthy, others interpret it as an indication of a market peak.

Meanwhile, there is speculation that the Bank of Canada could potentially cure inflation. An analyst at 5i modeled that if Canadian five-year yields drop by 1.5 percentage points over the next six months (from four percent to 2.5 percent), the shelter component of the consumer price index (CPI) could decrease from a year-over-year increase of 6.3 percent to two percent.

Finally, the energy sector has seen an unexpected lack of investor interest despite oil being at a one-year high. Energy companies on average are very cheap, have improved their balance sheets dramatically, are generating significant cash flow, pay good dividends, and are growing production. The energy sector is now up on the year, after significant declines earlier. It is currently ahead of the S&P/TSX composite’s year-to-date return. However, more investor interest in the sector is anticipated given its high dividends and low valuations.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.


Source link

Related articles

Recent articles