157 Exchange Invest Weekly Podcast August 20th, 2022

Transcript

This week in the parish of bourses and market structure:

TP ICAP in decent results shock

Huobi is for sale

…and could Adena Friedman be returning to an old stomping ground?

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 157.

Good day ladies and gentlemen, this is a very brief reduction of highlights amongst the key headlines from the week in market structure. All the analysis of the many events and happenings of the past seven days can be found in Exchange Invest’s daily subscriber newsletter, the unique guide to the bourse business sent daily to your inbox.

More details at ExchangeInvest.com.

Just a thought to start off from mid-summer with the US dollar in the stratosphere it’s interesting that so far we have yet to see a real drive for mergers and acquisitions from the western side of the Atlantic. Yet, Biden’s economic confusion isn’t a recession, isn’t a recession, well, whatever, it’s driven the greenback up and up and up and it entitles a corporate form of “exorbitant privilege” to those who earn US dollars on their balance sheet.

Will we as a result see an M&A boom out of the USA towards the UK and Europe? Or is the US worried about the Ukraine situation (already heading CEE/SEE tourism and business trips hard, even in places far from the conflict). It could even be that a pro-business new UK PM (presuming they choose Liz Truss over the spendthrift Rishi Sunak) might be the recipient of more bids come the autumn? Watch this space. It could be exciting, particularly in the parish of bourses.

Speaking of the parish of bourses specifically interesting to see that new brokers building up their commodities franchises from China, they are skeptical about the Baltic Exchange, earning its motto. When some Chinese brokers are unconvinced by “my word is my bond” then all of a sudden, it would appear the SGX owned London Baltic Exchange has reached a form of contango in the kettle pot black methodology with these accusations from China.

The Moscow Exchange are opening its bond market to non-residents from what they termed “friendly” countries, ie the countries that have not sanctioned Russia as a result of their invasion of Ukraine. There’s still no news on stock trading access derivatives have been enabled and since Victorian Japan day, August 15.

Non-sanctioned or at least non-sanctioning nations against Russia can play in the Moscow bond market. At the same time there is a Russian law firm that’s seeking to unfreeze funds tied up with Euroclear and indeed, the Russian Central Depository is removing fees for the transfer of stock in certain circumstances again, all trying to get around these sanctions at the same time as various hedge funds are placing into their side pockets Russian assets.

Dubai Clear and the Saudi Securities Central Clearing Company “Muqassa” have signed a memorandum to promote mutual cooperation and share knowledge. At same time the Philippine bourse, President Ramon Monzon said in a virtual briefing that he expects there could be up to 150 billion pesos (about $2.7 billion in real money) a record number of IPOs on the Philippine bourse this year.

Also looking optimistic, Victoria Falls VFEX can be a magnet for capital according to the Zimbabwe Stock Exchange CEO Justin Bgoni. Indeed he said the government could make Victoria Falls a Zimbabwean “Hong Kong” and transform it into a magnet for capital as the country leverages on capital markets for economic growth exploiting the US dollar-denominated Victoria Falls Exchange. Certainly, there’s a phrase to conjure with a “Zimbabwean Hong Kong”.

In results news this week, it was a very busy week for results in the parish all the details were in Exchange Invest daily. Unfortunately, Hong Kong Exchange were somewhat disappointing, but at the same time when you’ve got all those C’s together, China closed down COVID ccan result in an economic problem or two, and there have certainly been fewer IPOs in recent months, if only because of COVID itself, as well as a general malaise in stock markets per se, both in China and overseas. Interesting, fun fact well, probably not a fun fact, if you’re a homeowner, the Chinese property market has now been down for 11 consecutive months.

TP ICAP they surprised with actually good numbers. We saw there and adjusted EBIT +15% for once TP ICAP did not disappoint, and the stock has now rallied 50% from its loss – albeit that has to be put in the perspective of the fact that it has still even on those recent highs declined something like 75% over the years. Me thinks a single swallow just means he’s lost touch with his flock and all that malarkey.

In new market news this week, trading on Egypt’s Commodity Exchange is going to be starting in Q1 of 2023 and we got a lot of exciting news on carbon, the Indonesian Exchange and the Indonesian Commodity Derivatives Exchange are both competing in the hope that they will be appointed the institution to organize carbon trading in Indonesia. That of course came against the backdrop of a report as noted by the AFR (Australian Financial Review) the ‘Fragmented, Inefficient, Uncomplicated’ carbon market needs fixing. Large numbers of blobsters are now gathering in sunny places across the planet to try and do the fixing. Me thinks the bottom-up market approach might actually be better, but we shall see.

Anyway, another exciting new carbon market coming soon, Bourse Malaysia is going to be launching a voluntary carbon market by the end of the year, and they’ll be adopting Verra the Verified Carbon Standards to ensure the integrity of the carbon credits.

Deals news this week, interesting news in deals this week. First of all, the Chinese crypto tycoon, founder of Huobi Leon Li is in talks with investors to sell his majority stake in the Huobi Group at a valuation of up to $3 billion, according to reports by Bloomberg.

Elsewhere another much, much smaller deal, ABRDN that’s the fund manager named after the city of Aberdeen and headquartered in Edinburgh in Scotland, they’ve taken a stake in the digital exchange Archax. “Blockchain technologies are inevitably going to form a big part of the future of financial markets,” Abrdn Chief Executive Stephen Bird has said.

Now ladies and gentlemen if you’d asked me last week, what was the future of Archax I would have said “insolvency”. Having heard that Abrdn has invested, I would posit that the long-term future of Archax is…still insolvency. It has big ambitions and – to be fair – a broad regulatory tableau of UK licences are at the core of this wannabe exchange but there’s the rub “Wannabe”. Two full years has now passed since Archax were regulated by the FCA and yet they have failed to launch a single market which worries me. Who in the modern world can afford to staff 24 months of non-execution not even launched market? We’re not talking about a market that doesn’t have any listings because it’s launched. It still has not been launched. The management is sound in many respects, but they are big corporate types. Evidence they have the startup hustle or mojo is just not clear. Moreover, constant rumours of mega money investments have not in fact eventuated at the required scale to pay (rather hig) bills, including that prime office in the tower beside the Bank of England where the London Stock Exchange used to have its headquarters pre-Paternoster Square.

All in all, I have to say I think the Abrdn investment sounds more like a bit of a damp squib. Hopefully, I am spectacularly wrong, but I think Archax has set itself on a path to financial failure, even before it managed to actually launch. The latter will apparently finally take place this year. I’m not holding my breath.

Meanwhile, if you’re trying to catch up and understand better the world of digital markets, you need to read my latest book “Victory or Death?” – Blockchain, Cryptocurrency and the FinTech world, it’s published by DV Books and distributed by Ingram worldwide. While you’re waiting for your copy of “Victory or Death?” to arrive, while we are on our summer holidays from producing Livestreams, you can catch all the back episodes. They are available on Facebook, YouTube and indeed linked and if you go to YouTube, for example, search IPO-Vid to get all of the output, hundreds of hours of viewing, suitable for all the families that are interested in greater financial literacy.

In crypto land, well, lots of sad news all round, and we’re seeing crypto exchanges to the left and the right of us going bankrupt. Nuri GmbH, one of Germany’s largest crypto exchanges filed for insolvency with the Berlin Court this week. EQONEX have closed down their crypto exchange, they’re going to be focusing on funds and other products nonetheless Binance says its winning clients thanks to inflation, although this week Binance was amongst the crypto exchanges blocked in a clamp down in Uzbekistan but at the same time, they got approval to operate in a nearby stan Kazakhstan.

Binance is distancing themselves from Wazirx as Indian regulators keep chasing crypto and indeed we saw similarly a problem this week where the Peter Thiel-backed crypto exchange vauld saw its assets frozen and some $46 million being seized by the Indian authorities in a money laundering probe. Meanwhile, back to creditor protection, Singapore, their exchange Zipmex has been granted three months of creditor protection as it struggles to avoid a full-on bankruptcy.

Product news this week, interesting to note actually that China’s IPO market has still been booming (certainly booming relative to the rest of the world anyway) during what has been a challenging time for the western world is NASDAQ going to manage to be resiliently out of its recent bear market as it approaches bull market territory once again in the course of the last week. Nonetheless, there’s a stop for you in the first six months of 2022 the Shanghai and Shenzhen stock exchanges accounted for almost half of the world’s IPO proceeds.

Much more modest ambitions in Africa, Angola, finally they have got their first IPO coming to market. “Will It Open the Privatisation Floodgates? African Business magazine was asking while there’s bad news, the ongoing audit spat continues between the USA and China. Five Chinese state-owned companies announced last week they’re going to delist from the New York Stock Exchange.

In technology news this week, SEBI are going to use their ‘fund blocking’ mechanism to empower investors. Essentially, you’re going to be able to much more easily take money from retail investors who can’t block it before they actually complete trade and therefore, they can bring the entire market under the T+1 settlement regime leveraging the efficiency and the payment system built by the Reserve Bank of India the Central Bank and thus making near real time settlements a reality, at least in retail trades.

Unfortunately, New Zealand Exchange (NZX) has a slight technology glitch this week. The markets kept trading but investors could not locate company announcements for a few hours. Finally, a little heartening news from ASX and their troubled blockchain projects. We know that they’ve been having years of problems with digital assets and indeed there is a semi-permanent it seems state of delay. We await the end of the hiatus when finally a CHESS replacement is ready. Nonetheless, the ASX has scored a much-needed modest win for its world’s first blockchain settlement scheme, which will of course actually not be the world’s first blockchain settlement scheme at an established exchange by the time they have implemented it. They’ve completed a test pilot with Melbourne-based digital custody providers Zerocap to show how ASX-listed companies could store and trade all kinds of digital assets via the ASX’s infrastructure.

Regulation news this week, wow meme stock news, way back when, you know, “man down!” meant a soldier was going to be rescued on the battlefield. In financial markets, it now means that the troops of Gary Gensler SEC will come in and give you a PTSD kicking after whatever the trauma was that killed your business in the first place. That I imagine is how they must feel over at Melvin Capital Management, the people who lost the most from shorting game stock, including ultimately their entire fund. They’re being investigated by the SEC just to pile oil on troubled waters.

Meanwhile, Elizabeth Warren seeking to pour a little more oil on some various waters, whether they’re troubled or not. She’s pushing for the SEC to crack down further on insider stock sales and the US courts have authorized a service of a John Doe summons seeking the identities of US taxpayers who have used cryptocurrency. Deputy Assistant Attorney General David A. Hubbert of the Justice Department’s Tax Division noted: “The information sought by the summons approved today will help to ensure that cryptocurrency owners are following the tax laws. Taxpayers who transact with cryptocurrency should understand that income and gains from cryptocurrency transactions are taxable”.

Career news this week, the National Stock Exchange held an extraordinary general meeting. They have passed a resolution resoundingly. So Ashish Chauhan is their new MD and CEO.

Meanwhile, a bit of shareholder upheaval or at least angst. A lawsuit has been filed against Cantor Chief Howard Lutnick saying his $50 million bonus package was undeserved. Of course, parishioners will recall that we recovered what appears to a rather outsized relative to other Ceo’s $12 million in annual remuneration in our Magnificent Seven Chart (you can find that via Echange Invest or Patrick L Young on medium and LinkedIn) and now we discover there’s a $50 million bonus package to boot. Congratulations to Dr. Giorgi Paresishvili he has been appointed the new chairman of the Toshkent. Republic Stock Exchange he’s also been the head of the Georgia Stock Exchange from 2014 to the present and chairman of the Supervisory Board of the Georgian Securities Depository at the same time.

However, the big news in career paths this week is a rumour: “Who could succeed David Rubenstein as CEO of the Carlyle Group? Bloomberg profiled the runners and riders that they deemed to be on the shortlist and parishioners will be fascinated to note that one amongst their number is Adena Friedman, CEO of NASDAQ. Of course as a former CFO, Adena would be ideally placed to run Carlyle while her excellent stewardship of NASDAQ would be in her favour but then again right now, which offers the most opportunities #InterestingTimes – at least for those who can perceive the possibilities of the nexus of digital markets, legacy bourses, data technology et al. which clearly Adena has been proving from her hot seat at NASDAQ.

Now, amidst all this recessionary talk, there are some very, very contradictory currents. Yes, the property is wobbling in places, I mentioned earlier, the fact that Chinese property has been down 11 months in a row and there are a lot of supply chain SNAFUS out there but one set of results this quarter looked remarkable to me – and actually it was not alone amongst luxury product companies reporting in recent weeks: Ferrari the purveyors of fine automobiles from modern Italy reported such a strong order book that they promptly hiked prices without it seems dislodging a single advance booking.

There’s something happening here, which doesn’t, in my humble opinion, spell widespread or long lasting / deep recession – and then again, of course, wholesale commodity prices are no longer stratospheric either, although of course the energy impact is more than acute for all the poor folks, particularly in say Europe amongst other nations where Gisa-lust in their case was coupled with Russian gas to create a potential economic catastrophe which may yet lead to a spot of blood on the streets this winter.

On a separate note, formerly QE obsessed western central bankers are now modelling interest rate policy and these inflationary times based on Buzz Lightyear’s maxim “to infinity and beyond!”. However, there’s an outlier in the East and that presages tough times in at least the world’s most populous country: China this week, lowered their benchmark rates, yes, lowered their benchmark interest rates by 10 basis points.

And on that mysterious and magnificent note, ladies and gentlemen, my name is Patrick L. Young creator of exchange, publisher of the Daily bourse business newsletter information service Exchange Invest.

I wish you all a great week in blockchain, life and markets.

LINKS:

China’s Newbuilding Brokers Believe The Baltic Exchange Has Yet To Earn Its Motto
TradeWinds

Moscow Exchange To Open Bond Market For Non-Residents From “Friendly” Countries
Reuters

Russian Law Firm Seeks To Unfreeze Funds Tied Up With Euroclear
Reuters

Dubai Clear And Saudi’s Securities Clearing Center Company “Muqassa” Sign Memorandum To Promote Mutual Cooperation And Share Knowledge
Zawya

Philippine Bourse President Sees Record Number Of IPOs This Year
Bloomberg

‘Vic Falls, VFEX Can Be Magnet For Capital’
The Zimbabwe Mail

TP ICAP Group Plc Financial And Interim Management Report For The Six Months Ended 30 June 2022
TP ICAP

TP ICAP Beats Profit Estimates As Market Volatility Persists
Reuters

Trading On Egypt’s Commodity Exchange To Start In Q1 of 2023
Egypt Today

IDX, ICDX Compete to Become Carbon Trading Operators
D-Insights – Katadata