Category: 3. Business

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Western banks have been the biggest beneficiaries of Hong Kong equity sales this year, shrugging off US-China tensions as dealmaking booms in Asia’s financial hub.

Morgan Stanley helped raise $11.6bn in equity offerings in the year to the end of November, according to data compiled by Bloomberg. Goldman Sachs was in second position after raising $7.4bn, followed by Chinese banks Citic and CICC and Switzerland’s UBS.

The data includes both initial public offerings and follow-on share sales by companies already listed in the territory, including a $4.6bn share sale by the world’s largest battery maker CATL and the IPO of mining company Zijin Gold.

Hong Kong’s capital markets have been revived by a wave of Chinese companies raising billions of dollars in the city, which is on track for a four-year high in IPO fundraising. Foreign investors are showing renewed interest in Chinese equities after years of shunning the market.

“For huge deals you still need these global brands,” said Alicia García Herrero, chief Asia-Pacific economist at Natixis. “The reason why they still need Goldman or Morgan Stanley is they want to attract foreign investment, especially into the big deals like BYD,” she said, referring to the Chinese electric vehicle and battery maker that had a $5.6bn share sale in March. 

Hong Kong-listed ECM activity hit $73.1bn so far this year, up 232 per cent on the same period in 2024, according to data from LSEG.

“We’ve seen quite a strong turnaround with respect to equity issuance from Chinese companies in Hong Kong,” said Saurabh Dinakar, head of Asia Pacific global capital markets at Morgan Stanley.

Rising US-China tensions have put the banks’ operations in Hong Kong under more scrutiny. This month, a US congressional committee wrote to Morgan Stanley’s chief executive Ted Pick to request more information on the bank’s underwriting of Zijin Gold, the offshore arm of China’s Zijin Mining.

The committee alleged that Zijin Mining is associated with human rights abuses in the Xinjiang region of China and has “deep ties” to the communist party.

Morgan Stanley declined to comment on this matter.

Federico Bazzoni, executive chair of Eight Capital Partners, said Chinese companies “need these [western] banks to reach out to international investors”. He added: “Of course, you’ve got the trade war and political tension but I think the markets are opportunistic.”

Chinese banks have expanded in Hong Kong, with the goal of taking a larger share of advisory fees in the territory, where deals often have bigger fees compared with mainland China.

CICC, a prominent mainland investment bank, recently announced a plan to acquire two smaller brokerages.

“We are seeing Chinese securities firms expanding aggressively in Hong Kong,” said Rowena Chang, a director at rating agency Fitch. “Typically they want a US investment bank and a local investment bank as joint sponsors.”

Chinese banks CICC, Citic Securities and Huatai Securities top this year’s Hong Kong deal volume for IPOs alone.

They have established relationships with Chinese companies that are already listed on a mainland bourse, said Jean Thio, a partner in the capital markets group at law firm Clifford Chance, which has advised on 18 IPOs in Hong Kong this year.  

Chinese banks are important partners for mainland companies seeking to list in Hong Kong because of their close channels of communication with regulators in Beijing such as the China Securities Regulatory Commission, which must give mainland companies approval before they list offshore.

“Communication with the CSRC is important and that’s where the PRC banks have strengths,” Thio added. 

Data by Haohsiang Ko

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

One of the world’s biggest cyber insurers is pulling back from the market as it contends with rising claims and falling prices, even as rivals extend their bet on policies covering hacks and ransom demands.

Beazley reported this week that cyber gross written premiums, a measure of top-line revenue, declined 8 per cent in the nine months to September 30 to $848mn, sending shares in the FTSE 100 insurer tumbling on the day.

“There’s more claims, and they’re more expensive,” chief underwriting officer Paul Bantick told the Financial Times. He said a rise in ransomware attacks and hackings had been fuelled by rising geopolitical volatility, as cyber gangs used such tactics to sow distrust.

“What we’re trying to understand is why the market’s not reacting to those things,” he added.

While Beazley has trimmed its exposure, Chubb and AIG — two of its largest rivals in the US market — have maintained or grown their books. The diverging strategies highlight volatility in the nascent sector.

Chubb and AIG declined to comment.

Despite the rise in claims and high-profile attacks on businesses, premiums for cyber insurance have been falling since early 2024, according to broker Marsh, due to rising competition for a finite pool of clients and a broader flood of investment into speciality insurance.

“They’re all fighting for new business,” said Kelly Butler, head of cyber for Marsh. “It’s not an oversaturated market, but there’s a limited pool of buyers.”

Businesses in the US and UK have purchased more cyber coverage in recent years due to the rise in claims. Despite rising demand for policies, margins have been eroded as hedge funds, private equity firms and other investors flooded the insurance market.

Some risk managers also doubt that cyber policies will cover enough of the costs of an attack, after exclusions came under criticism from brokers and clients.

In response, Lloyd’s of London, the insurance marketplace, has pointed to the need to limit liability for potentially sweeping claims stemming from cyber risks, in order to offer any cover against the peril.

While cyber insurance prices had fallen 6 per cent to 7 per cent for each of the past four quarters, Butler said the price slide was now slowing.

Chief executive Adrian Cox told analysts on a call that Beazley was willing to continue to shrink its revenue from cyber in the US, where he said the business line had become “unprofitable”, to protect margins.

He warned that cyber insurance prices could experience “extreme swings in pricing” if others continued to cut their rates.

Beazley shares have since pared their losses, leaving them about 2 per cent lower since the start of the year and valuing the insurer at just over £4.8bn. The stock has gained 120 per cent since 2020, however.

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Infrastructure investors including BlackRock, Brookfield and Apollo are courting the leading oil and gas companies, sensing an opportunity as the sector grapples with lower prices and a lack of enthusiasm from public-market investors. 

At a closed-door meeting ahead of this month’s Adipec energy conference in Abu Dhabi, the heads of ExxonMobil, TotalEnergies, Eni and BP were urged to offload more of their networks of pipelines, storage terminals and other assets to raise cash to be deployed elsewhere in their operations. 

“You guys need to rethink how you think about capital,” one participant told the majors, arguing that equity markets were “not as receptive” to the industry.

“You’re trading at four to seven times earnings multiples. What’s wrong with selling your infrastructure assets for 10 to 12 times?” the person asked. “Take the cheap capital and reinvest it in your core business.”

Saudi Aramco is among those to embrace the trend, completing an $11bn sale and leaseback deal with BlackRock-owned Global Infrastructure Partners in August for the gas network of its Jafurah project. It is weighing further disposals, according to one person familiar with the situation. 

“Why sit on such a vast and lucrative asset base?” said the person. “A lot of the major sovereign wealth funds and private funds were frustrated they did not get a piece of the Jafurah pie and the deals team has been flooded with offers. So they were told to pitch and come formally with ideas.”

Aramco has not determined how much it may sell, according to the person, but such transactions have the potential to raise billions of dollars to support its balance sheet and fund capital spending.

Abu Dhabi moved in 2020 with a $20.7bn pipeline agreement with GIP, Brookfield and the sovereign wealth fund of Singapore, while Oman, Bahrain and Kuwait have all either completed or are considering similar transactions.

Such deals signal a change of approach for state oil companies that have not traditionally sought to open up their businesses to foreign capital.

David Waring, head of energy in Emea at Evercore, said the Aramco deal had “sparked a real wave of interest” from other state oil groups and infrastructure funds seeking a “piece of the action”.

Fossil fuel infrastructure has become more attractive for private-capital groups as expectations grow that the green energy transition will take longer than previously forecast.

Energy groups’ pipelines and other assets, which come with steady revenues backed by long-term contracts, are appealing to funds backed by pools of insurance money that are seeking to deploy large amounts of capital and secure reliable returns.

“They have captive insurance money, which is long-term and cheap,” said the head of the deals team at one oil company. “They sit in the middle and take 2 per cent to 3 per cent.”

The big international oil companies (IOCs), by contrast, have been more cautious, although they have started doing deals as they seek to balance their growth plans against shareholder demands for tight balance sheets and a focus on dividends and share buybacks. 

This year, Shell offloaded its interest in the US Colonial pipeline to Brookfield in a deal that valued the asset at $9bn, while BP sold a stake in the Trans-Anatolian network to Apollo for $1bn.

Waring suggested the influx of money from infrastructure funds into the state-run oil companies would trigger a reaction from the IOCs, which have often relied on more conventional financing.

“Can the IOCs afford to operate within the confines that the equity market imposes, without considering more innovative solutions?” he asked.  

As President Donald Trump approaches the one-year anniversary of his second term in office, the FT’s chief economics commentator Martin Wolf, and Nobel prize-winning economist Paul Krugman sit down to discuss the US economy and the state of American democracy. Are American consumers finally feeling the effect of Trump’s tariffs? Is AI to blame for the frozen labour market? Or is the spectre of a weakening democracy and plutocracy to blame for slumping consumer sentiment? In the first of four weekly episodes, Wolf and Krugman unpick the US and world economy, with Krugman explaining why he’s less pessimistic now than he was earlier this year.

Subscribe and listen to this series of The Economics Show on Apple Podcasts, Spotify, Pocket Casts or wherever you listen to podcasts.

Read Martin’s column here.

Subscribe to Paul’s Substack here.

Find Paul’s cultural coda here.

Find Martin’s cultural coda here.

Produced by Mischa Frankl-Duval. Manuela Saragosa is the executive producer. Original music and sound design by Breen Turner.

Read a transcript of this episode on FT.com

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HONG KONG — China’s factory activity contracted for the eighth straight month in November, according to an official survey on Sunday, underscoring challenges for the country’s economy despite the U.S.-China trade truce.

The official manufacturing purchasing managers index rose slightly to 49.2 in November from 49 in October, China’s National Bureau of Statistics said.

The PMI is measured on a scale between 0 and 100, with a reading below 50 indicating contraction. The contraction was in line with analyst expectations.

A U.S. tariff cut earlier this month likely would mean that Chinese exports could gain competitiveness in the U.S. market, but it may be too early to say whether exports have regained momentum following the trade truce.

U.S. President Donald Trump said the U.S. would cut its tariffs on Chinese goods after meeting Chinese leader Xi Jinping in South Korea on Oct. 30, raising some optimism over Chinese exports and manufacturing.

A prolonged slump in China’s property market and falling home prices are still hurting consumer confidence, and real estate investments have been down. Intense price competition domestically in many sectors including the auto industry have also put pressure on many businesses.

More government policy support is required to help boost the economy, economists said.

But “policymakers appear to be delaying further policy support,” Lynn Song, chief economist for Greater China at ING bank, wrote in a note earlier this month.

While Chinese authorities previously rolled out measures such as trade-in subsidies for home appliances and electric vehicles, some of these subsidies are set to be phased out, and sales and demand are likely to drop, analysts said.

The fading boost from the consumer goods trade-in policies may be weighing on domestic demand for manufactured goods and “signals on domestic demand have been mixed,” said Zichun Huang, China economist at Capital Economics, last week.

Chinese officials have set a target of around 5% economic growth for the whole of 2025. The economy expanded 4.8% in the July-September quarter.

“This year’s growth target is likely to require minimal additional support to be reached,” Song wrote.

Story Continues

• Keppel REIT recently issued S$100 million in subordinated perpetual securities under its multicurrency debt programme, having received approval-in-principle for listing on the Singapore Exchange.

• This move is set to provide Keppel REIT with greater financial flexibility and supports its plans for future portfolio growth.

• We will assess how the increased capital flexibility from this perpetual securities issuance could shift Keppel REIT’s investment narrative.

Uncover the next big thing with financially sound penny stocks that balance risk and reward.

To be a shareholder in Keppel REIT, you need confidence in the continued strong demand for premium Grade A office space in Singapore and regional gateway cities, as well as the trust’s ability to manage sector and geographic concentration risks. The recent S$100 million perpetual securities issuance boosts Keppel REIT’s capital flexibility, but does not materially change the main short-term catalyst of rental growth in key markets or the cyclical risks tied to office occupancy and portfolio concentration.

Among recent developments, the acquisition of a 75% interest in Top Ryde City Shopping Centre in Sydney stands out. This move is relevant as it increases portfolio diversification beyond the office sector and into retail, potentially balancing the risks posed by Keppel REIT’s office-heavy exposure while positioning the trust to benefit from stable, non-discretionary retail income streams.

Yet, while recent expansion points to greater diversification, investors should still keep an eye on the persistent risks from concentrated exposure to Singapore’s office market if…

Read the full narrative on Keppel REIT (it’s free!)

Keppel REIT’s narrative projects SGD319.1 million in revenue and SGD188.0 million in earnings by 2028. This requires a 6.4% annual revenue decline and an earnings increase of about 19% from today’s earnings of SGD157.8 million.

Uncover how Keppel REIT’s forecasts yield a SGD1.06 fair value, in line with its current price.

Simply Wall St Community members provided 2 fair value estimates for Keppel REIT, ranging from S$1.06 to S$1.72 per unit. Ongoing concerns about sector-specific downturns and portfolio concentration continue to shape differing outlooks on future performance, explore these varied perspectives to better understand your options.

Explore 2 other fair value estimates on Keppel REIT – why the stock might be worth just SGD1.06!

Disagree with existing narratives? Create your own in under 3 minutes – extraordinary investment returns rarely come from following the herd.

Early movers are already taking notice. See the stocks they’re targeting before they’ve flown the coop:

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include K71U.SI.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

• Thinking about investing in NuScale Power? You might be wondering whether the recent ups and downs in the share price have created a new value opportunity, or if the risk profile has just shifted.

• NuScale’s stock has moved a lot lately, climbing 7.5% over the past week, but still down 52.7% across the last month and 32.5% over the last year. This reflects a volatile period, despite a notable 12.9% gain year to date.

• News of new project partnerships, as well as ongoing discussions about U.S. energy policy and small modular reactor adoption, have been fueling trading sentiment recently. Investors are weighing both the growth potential of NuScale’s nuclear technology and the challenges facing the broader clean energy sector.

• With a valuation score of 1 out of 6, there is a lot to uncover about how NuScale Power stacks up on different valuation metrics. Stay tuned as we break those down and reveal a smarter way to interpret valuation at the end.

NuScale Power scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

A Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by forecasting its future cash flows and discounting them back to today. This approach attempts to answer what NuScale Power is fundamentally worth based on current and expected financial performance.

Currently, NuScale Power’s latest twelve-month Free Cash Flow (FCF) sits at a negative $284.0 million, and analysts expect the company to remain cash flow negative for the next several years. According to projections, NuScale’s FCF is only expected to turn positive by 2029, reaching $27.4 million, with continued growth beyond that point driven by anticipated deployment of its modular nuclear technology. Notably, the longer-term FCF forecasts, extending out to 2035, are largely extrapolated from analyst consensus.

Plugging these estimates into the DCF model yields a “fair value” of $3.20 per share. Compared to the current market price, this implies the stock is 525% above its calculated intrinsic value, suggesting significant overvaluation at present.

The DCF model, therefore, paints a challenging picture for value seekers. NuScale’s growth narrative is not yet reflected in its cash flows, and the stock trades with a large premium to its estimated worth.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests NuScale Power may be overvalued by 525.0%. Discover 917 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for NuScale Power.

The Price-to-Book (P/B) ratio is a widely used valuation metric, especially for companies where traditional earnings or cash flow metrics may not yet reflect future potential. This often includes innovative but unprofitable businesses like NuScale Power. The P/B ratio captures the relationship between a company’s market value and its net assets, making it relevant when investor focus is on the value of assets and future growth prospects rather than current profits.

Growth expectations and risks both play a crucial role in determining what an appropriate or “fair” P/B ratio should be. High growth prospects can justify a premium, while greater risk or asset uncertainty typically means a lower fair multiple. For NuScale Power, the current P/B sits at 6.72x, which is significantly above the electrical industry average of 2.38x and the peer group average of 18.32x. This signals that the market expects substantial future value creation from NuScale’s assets compared to most competitors.

Simply Wall St’s proprietary “Fair Ratio” is designed to refine this comparison. Unlike raw peer or industry averages, the Fair Ratio blends factors like NuScale’s earnings growth outlook, profit margins, market cap, sector trends, and risk profile. This offers a more tailored assessment of what multiple is justifiable for the company now, factoring in its distinct position and prospects in the market.

Comparing NuScale Power’s current P/B of 6.72x to its Fair Ratio, the difference is meaningful. This suggests the stock is OVERVALUED on a price-to-book basis at the moment and may not yet offer an attractive entry point for value-seeking investors.

Result: OVERVALUED

PB ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1439 companies where insiders are betting big on explosive growth.

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives, a dynamic, story-driven approach to investing used by millions of investors on Simply Wall St’s Community page.

A Narrative is your personal way of connecting the company’s story and your perspective to informed numbers. You explain what you believe will drive NuScale Power’s future, estimate upcoming revenues, earnings, and margins, and see how that translates to a fair value for the stock.

With Narratives, you can easily compare your fair value estimate to NuScale’s current price, helping decide if now is the right time to buy or sell based on your outlook rather than just traditional metrics.

What makes Narratives especially powerful is that they update automatically when new information comes in, such as earnings results or major news, so your view stays current without extra work on your part.

For example, some NuScale Power Narratives are much more bullish, forecasting a fair value as high as $40.50 per share based on rapid deployment and major utility deals, while others are more cautious, seeing risks and setting fair values as low as $17.00 per share. This shows how quickly perspectives and valuations can change as the story unfolds.

Do you think there’s more to the story for NuScale Power? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include SMR.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com