NASDAQ Tumble Through Just 5 Stocks.

When it comes to the ongoing technology beat-down in the stock market, it appears not all shares are created equal.

Indeed, just five names account for nearly 75 percent of the drop in the Nasdaq Composite Index, which has fallen more than 2.1 percent since June 7. Meanwhile, the Dow Jones Industrial Average and S&P 500 Index are roughly unchanged over the same time frame.

Much of this dynamic is due to giants like Apple Inc., Microsoft Corp. and Goggle parent Alphabet Inc. falling as much as 6.5 percent. Add Facebook and Amazon to the mix and those companies account for nearly 30 percent of the index’s weighting, and their outsize impact has driven the gauge lower even though the bulk of the stocks are doing fine.

This selloff was “way overdue given the extreme out-performance and positioning in technology shares,” Morgan Stanley analyst Michael Wilson wrote in a note to clients Monday, Shares of Apple, for instance, are still up 25 percent this year, giving them room to fall.

But while Wilson expects the drubbing to continue in the short-term, he doesn’t think the market has seen a peak in tech shares.

“We would be surprised if this is the end for technology stocks given the very strong earnings growth we are witnessing,” he wrote.

Analysts now believe performance in technology will depend on the economic outlook. And if conditions change, finance will be the likely beneficiary.

“If the current economic ‘Goldilocks’ environment persists, technology and other growth stocks should continue to outperform, despite today’s price declines,” Goldman Sachs Group Inc. analysts led by David Kostin wrote in a note to clients late Friday. “However, if investors recalibrate expectations for inflation and Fed policy to match the growth optimism suggested by the S&P 500 level, higher rates should lead to financial sector outperformance.”

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The Pinstripe and Bowler Club shares information with MF Solutions Ltd.

 

Chinese Volatilty

China stocks tumbled more than 1 percent on Monday and looked set for their biggest loss of the year amid signs that Beijing would tolerate more market volatility as regulators clamp down on shadow banking and speculative trading.

Recent signs of stability in China’s economy “have provided a good external environment and a window of opportunity to reduce leverage in the financial system, strengthen supervision and ward off risks,” the official Xinhua News Agency reported on Sunday.

“Over the past week, interbank rates trended higher, bond and capital markets suffered from sustained corrections and some institutions faced liquidity pressure. But these have little impact to the stability of the broader environment.”

The Shanghai Composite Index slumped 1.6 percent to 3,123.80 points by the lunch break, after posting its biggest weekly loss so far this year last week.

The blue-chip CSI300 index fell 1.3 percent to 3,423.11. Barring a rebound, the indexes looked set for their biggest one-day percentage loss since mid-December. Daily declines of more than 1 percent in the indexes have been rare for notoriously volatile Chinese markets this year.

“Even the better-than-expected Q1 data could not boost the market, as investors are concerned about regulatory risks,” wrote Larry Hu, analyst at Macquarie Capital Ltd, referring to stronger-than-expected 6.9 percent economic growth early in the year.

In the latest of a flurry of regulatory measures, China’s insurance regulator said on Sunday it will ramp up its supervision of insurance companies to make sure they comply with tighter risk controls and threatened to investigate executives who flout rules aimed at rooting out risk-taking.

The banking regulator said late on Friday that growth in Chinese wealth management products (WMPs) and interbank liabilities eased in the first quarter, suggesting authorities are making some headway in containing financial risks built up by years of debt-fuelled stimulus.

But while the clampdown is expected to continue, most analysts believe moves will be cautious to avoid hitting economic growth.

Investors are already concerned that the economy could lose momentum in coming months as local governments launch more stringent measures to cool heated property prices.

“Market risk appetites could continue to decline if financial regulation keeps tightening,” said Gao Ting, Head of China Strategy at UBS Securities.

“Investors seem to mostly be responding by adjusting their positions, particularly by rotating into high-quality blue-chips.”

Banking is the only main sector that ended the morning in positive territory, while small-caps suffered massive sell-offs, with an index tracking start-up stocks falling nearly 2 percent.

Hong Kong

In Hong Kong, stocks dipped slightly, with the bearish sentiment from China largely neutralized after the market’s favored candidate won through the first round of the French election, reducing the risk of a Brexit-like shock.

The Hang Seng Index dropped 0.1 percent to 24,016.23 points, while the Hong Kong China Enterprises Index was unchanged at 10,045.78.

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The Pinstripe and Bowler Club shares information with MF Solutions Ltd.

Bull Not In The China Shop

Mark Mobius is tempering his bullishness toward China’s equity market.

The legendary emerging-market investor says Chinese shares traded offshore have become too pricey after an almost 20 percent jump in technology stocks helped propel the MSCI China Index to its most expensive level in more than six years.

“We won’t be adding aggressively at these levels,” Mobius, executive chairman of Templeton Emerging Markets Group, said in an interview on TV Thursday, referring to tech shares. “The problem you face now with China is that the index is so heavily weighted to tech stocks which are naturally very expensive so it pushes up the whole index.”

Chinese tech giants Tencent Holdings Ltd., Alibaba Group Holding Ltd. and NetEase Inc. have driven the MSCI China gauge up 14 percent this year, making it the best performer globally. Company earnings, meanwhile, haven’t kept up the pace, which has contributed to the index’s swelling valuation. The MSCI China traded at 14.9 times members’ reported earnings on March 20, the highest level since December 2010.

Tencent, the Internet company best known for its blockbuster WeChat messaging service, has gained 18 percent since Mobius made a bullish call on onshore Chinese shares back in November, pushing its market capitalization above that of Wells Fargo Inc. His argument then was that Beijing may be forced to speed up the pace of opening China’s markets by the threat of a trade war with President Donald Trump.

Five months on, Mobius is confident Trump will put the bluster aside when he meets Chinese President Xi Jinping for the first time Thursday in Florida. China’s intent will be to build a smooth relationship with the U.S., he said.

“The Chinese are in pretty good position because they could easily raise their exchange rate, make it stronger and still export a heck of a lot,” Mobius said Thursday.

While offshore-traded Chinese shares have outpaced their mainland brethren this year, Mobius sees greater gains onshore in the long term. MSCI Inc.’s plan to include mainland stocks in its global benchmarks will lure more foreign investors, while government stimulus should invigorate demand from locals, he said.

Cheerio

The Pinstripe and Bowler Club shares information with MF Solutions Ltd

New IPO

The Irish government’s sale of part of its stake in Allied Irish Banks Plc came a step closer last week. On Thursday in Dublin, the finance ministry appointed another group of banks to help in what could be the biggest listing on the London and Irish stock exchanges this year.

How much of AIB will be sold?

The government hopes to recoup about 3 billion euros ($3.3 billion) or more from selling 25 percent of AIB, which had to be rescued by the state during the financial crisis. Including the so-called greenshoe, about 27 percent of the lender could be sold. The government owns 99.9 percent of the bank, and Finance Minister Michael Noonan has said it may take a decade to return the bank fully to private hands.

When is the IPO going to happen?

Noonan has indicated the sale could take place in May or June. If that’s delayed, the next window is probably in the fall. Noonan has consistently said the determining factor will be maximizing value from the sale, and the state of the wider market will play a key role. The Bloomberg Europe Banks and Financial Services Index has risen 28 percent over the last six months. That rally has stalled in recent weeks, and privately, government officials insist they won’t be rushed into a sale.

What is AIB worth?

The agency that manages the government’s shareholding, the Irish Strategic Investment Fund, valued AIB at 11.3 billion euros in February. That was before the bank released its 2016 results, including a pretax profit of 1.7 billion euros and a reinstated dividend, and government officials view the February valuation as low.

How will the sale be priced?

A tiny sliver of AIB’s shares is still traded on the junior Dublin market. These are so thinly traded, they aren’t considered a particularly useful measure of the bank’s value. As ever, the price will be determined by demand, and early soundings indicate demand will be strong. AIB is viewed as a proxy for the Irish economy, which is growing at twice the pace of the euro-region. The bank is the biggest player in the Irish mortgage market, with about 35 percent of new lending. A valuation of about 12 billion euros would suggest a price of around 4.50 euros per share.

Cheerio

The Pinstripe and Bowler Club shares information with MF Solutions Ltd

HK Stock Drops 85% In One Morning !

One of the most striking things about the 85 percent plunge in Huishan Dairy Holdings Co.’s stock on Friday was how little it surprised market observers in Hong Kong.

The mysterious crash, the indefinite trading halt, the hours without a company statement explaining the move — it was all too familiar for traders who’ve had to navigate at least three similar episodes in the past two years.

While the city is upfront about its buyer-beware approach to regulation, the frequent sight of multi-billion dollar stocks collapsing in minutes has deterred investors and raised questions about Hong Kong’s role as one of Asia’s premier trading hubs. It’s one reason why the city’s benchmark Hang Seng Index commands by far the lowest valuation among counterparts in the world’s 10 largest markets.

“There are regulatory discounts to the price-earnings multiple,” said Niklas Hageback, a Hong Kong-based money manager who helps oversee about $180 million at Valkyria Kapital Ltd. “Valuation is lagging and this has become a market-wide problem.”

The Hang Seng index trades for about 13 times reported earnings, versus 22 for the MSCI World Index.

Hang Fat Ginseng Holdings Co., Hanergy Thin Film Power Group Ltd. and Tech Pro Technology Development Ltd. have all suffered crashes similar to Huishan’s in the past two years. Tech Pro, a provider of LED lighting products, fell 86 percent in 17 minutes in July, while Hang Fat Ginseng plunged 91 percent in an hour in January 2016. Eight months before that, solar panel manufacturer Hanergy dropped 47 percent, wiping out $19 billion of market value in 24 minutes.

Swift Slump

Huishan’s slump took less than 90 minutes. About 779 million shares in the company changed hands, the most during the morning session on Hong Kong’s exchange, which doesn’t have daily limits on share-price swings. By the time the stock was halted at midday in Hong Kong, it had lost $4.1 billion of market value.

The Shenyang, China-based company issued a statement about two hours after the rout began, saying it suspended trading after a “significant decrease” in the shares. Huishan said it would comment further after completing an inquiry. Chairman Yang Kai said speculation that the company’s largest shareholder misappropriated 3 billion yuan ($435 million) to invest in mainland real estate was untrue, Netease reported, citing a phone interview with Yang.

Lorraine Chan, a spokeswoman for Hong Kong Exchanges & Clearing Ltd., said the bourse operator doesn’t comment on individual companies. Ernest Kong, a spokesman at the Securities and Futures Commission, declined to comment.

The fallout spread on Monday to a Chinese bank that — like Huishan Dairy — counts Champ Harvest Ltd., a company controlled by Yang, as its largest shareholder. Jilin Jiutai Rural Commercial Bank Corp. slumped as much 11 percent in Hong Kong, the most since the lender listed in January. Jiutai Bank is Huishan Dairy’s second-biggest creditor with 1.83 billion yuan of loans, Caixin reported Saturday.

By no coincidence, there was a rally in Hong Kong gold buying.

Cheerio.

The Pinstripe and Bowler Club shares information with MF Solutions.

IPO ? Think Again

The latest IPO of the next big thing — Snapchat — is not looking so good. True to form, the Wall Street investment banking machine and the financial media hypesters at CNBC whipped the crowd into enough of a frenzy that the stock popped nicely in its first two days of trading.

The stock “went public” at $17 a share. But of course, it was never really available at $17. That’s not how this works. Sure, big important clients at some investment banks might’ve gotten it at $17, but you and me? Yeah, right. Again, that’s not how it works. Individual investors are third on the food chain, maybe fourth…

First there are the venture capitalist guys that buy into hot new companies in the early stages. Then there are the investment banks that come in with some investment capital in order to ensure a piece of the action when IPO day rolls around. Then there are the favored clients that get the cheap shares of the actual offering — which were $17 for SNAP. Then, after all those players get their piece, those shares hit the market.

It’s basically payola, all the way down to when the shares are actually available on the Nasdaq or New York Stock Exchange. Which means when you buy an IPO, you’re paying the favored clientele their profit. You’re paying the investment banks. And you’re paying the venture capitalists. And you’re paying the company insiders…

They are all selling — and you’re buying.

In this case, it probably won’t help you to know that SNAP founder Evan Spiegel is now a 26-year-old who’s worth over $5 billion.

Cheerio

The Pinstripe and Bowler Club shares information with MF Solutions Ltd