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European Stocks Erase Decline as Corporate News Beats China Woes

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(Bloomberg) — European stocks fell for a second day, following a slump in Asian markets after China planned to impose a national security law on Hong Kong.

The Stoxx Europe 600 Index dropped 1.6% as of 8:16 a.m. in London. All 19 industry groups fell, led by miners, energy shares and banks.

China’s proposal is fueling concern of fresh protests in Hong Kong and threatens to escalate tensions with the U.S. That’s adding to risk-off sentiment in European equities, which have lost momentum after kicking off this week with strong gains on hopes of a vaccine against the coronavirus. The Stoxx 600 is heading for a weekly gain of 2.2%.

A security law on Hong Kong “would strengthen Beijing’s control over the territory, which would probably spark protests,” said David Madden, a market analyst at CMC Markets. “Last year, pro-democracy protests were common in Hong Kong, some of which caused major disruption, so traders are now worried the situation will flare up again. President Trump is likely to weigh in on the matter if the Chinese authorities take a tough stance in relation to Hong Kong.”

Among notable movers, Asia-focused HSBC Holdings Plc fell 5.5%. Burberry Group Plc gained 2.3% after its full-year comparable retail sales beat estimates. Samhallsbyggnadsbolaget i Norden AB jumped 9% after its chief executive officer was dropped from an investigation regarding insider dealing.

©2020 Bloomberg L.P.

 

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HSBC Loyalists Lose Faith After Stock’s $83 Billion Plunge

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(Bloomberg) — HSBC Holdings Plc’s tumbling stock price is testing the patience of even the bank’s most loyal investors.

Choi Chen Po-sum, a former vice chair of Hong Kong’s exchange who has owned HSBC shares for more than 40 years, now calls her investment a mistake. Simon Yuen, a money manager who has lobbied unsuccessfully for the bank to reinstate its dividend, says the stock’s slump to a 25-year low may have further to go. Ping An Insurance Group Co., HSBC’s biggest shareholder, has passed on opportunities to express confidence in the bank, saying only that its holding is a “long-term financial investment.”

The responses underscore the depth of investor malaise toward HSBC, which has tumbled faster than every other major financial stock globally over the past six months. Even historically upbeat sell-side analysts have mostly turned bearish on the bank amid growing concerns about loan losses and its ability to navigate mounting tensions between the U.S. and China.

“I’ve lost faith,” said Choi, 89, who’s chair of National Resources Securities Ltd. in Hong Kong, where scores of individual investors have long considered HSBC to be a core holding. “You want the shares to recover? Don’t even think about it.”

HSBC’s Hong Kong shares lost as much as 2.6% as of 11:15 a.m. on Thursday. The stock has tumbled more than 9% so far this week, bringing the year’s decline to 54% and making it the worst performer in the benchmark Hang Seng Index. In London, the shares have fallen about 51%. After losing $83 billion of market value this year, HSBC is now smaller than Commonwealth Bank of Australia and trailing far behind major rivals such as Citigroup Inc.

Analysts have never been so downbeat on HSBC, with only 16.7% of 30 who follow the stock having a buy recommendation whereas just two years ago the ratio was 47%. Even after its slump, the bank is valued at 16.3 times forecast earnings for 2020, a pricier level than some peers. Both Citigroup and smaller rival Standard Chartered Plc trade at multiples of about 13.

Ping An, which has owned a major stake in HSBC since late 2017, has seen the value of those shares tumble by at least $8.6 billion over the past three years, according to data compiled by Bloomberg.

The depth of HSBC’s slump “means even long-term investors are starting to lose confidence in the stock, which is certainly a bad sign,” said Benny Lee, a director at Plotio Financial Group Ltd.

HSBC declined to comment on its share performance.

The growing disillusion in Hong Kong with the bank’s prospects comes after it earlier this year was among banks forced by U.K. regulators to scrap its dividend, causing an uproar with the city’s broad base of retail investors. It has also rankled China over its participation in the American investigation of Huawei Technologies Co.

Concerns are mounting that the bank’s expansion in China will be derailed after the ruling Communist Party’s Global Times newspaper reported over the weekend that HSBC could be named an “unreliable entity.” Penalties for companies that appear on the list include restrictions on trade, investments and visas. HSBC has declined to comment on the article.

“Should it be on the list, even without tough measures taken, its mainland China business would likely be adversely impacted as its clients reduce transactions,” Citigroup analysts led by Yafei Tian wrote in a note on Tuesday. “Mainland China clients in HK might also avoid unnecessary transactions with HSBC HK. In a worst case scenario, HSBC might be forced to divest its investments in mainland China.”

HSBC Chief Executive Officer Noel Quinn last month warned about tough times ahead while reporting that first-half profit halved and predicting loan losses could swell to $13 billion this year. Quinn said the bank would attempt to hasten a shakeup of its global operations, accelerating a further pivot into Asia as its European operations lose money.

Some investors aren’t convinced it’s enough.

In Hong Kong’s derivatives market, the second-most traded HSBC stock option on Thursday was a bearish contract betting the shares will drop to HK$18.50 by the end of December. That implies a downside of more than 30% from HSBC’s current levels. The most traded option was a bullish call that expires next week at HK$30, with the contract losing three-quarters of its value.

“The share price will hardly recover in the near term and there’s still room for a further decline,” said Yuen, founder of Surich Asset Management. “Hong Kong investors’ love for HSBC is still there, but it’s indeed heartbreaking. The times have changed.”

(Updates with HSBC options trading in the penultimate paragraph.)

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Timbercreek Financial Declares September 2020 Dividend | 2020-09-23 | Press Releases

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TORONTO, Sept. 23, 2020 (GLOBE NEWSWIRE) — Timbercreek Financial (TSX: TF) (the “Company”) is pleased to announce that its board of directors (the “Board”) has declared a monthly cash dividend of $0.0575 per common share (“Common Share”) of the Company to be paid on October 15, 2020 to holders of Common Shares of record on September 30, 2020.

The Company also offers a Dividend Reinvestment Plan (the “Plan”), which is eligible to holders of Common Shares and provides a convenient means to purchase additional Common Shares by reinvesting cash dividends at a potential discount and without having to pay commissions, service charges or brokerage fees.

Pursuant to the Plan and at the discretion of Timbercreek Capital Inc., the Manager, Common Shares will be acquired in the open market at prevailing prices or issued from treasury at 98 percent of the average market price (the “Average Market Price”) for the five trading day period ending on the third business day immediately prior to the dividend payment date (the “Trading Period”).

Common Shares acquired under the Plan will be automatically enrolled in the Plan. Shareholders who hold their Common Shares through a broker, financial institution or other nominee must enroll for distribution reinvestment through their nominee holder.

The full text of the Plan can be obtained on the Company’s website at https://www.timbercreekfinancial.com/investor-relations/dividend-reinvestment-plan

About Timbercreek Financial

Timbercreek Financial is a leading non-bank, commercial real estate lender providing shorter-duration, structured financing solutions to commercial real estate investors. Our sophisticated, service-oriented approach allows us to meet the needs of borrowers, including faster execution and more flexible terms that are not typically provided by Canadian financial institutions. By employing thorough underwriting, active management and strong governance, we are able to meet these needs while targeting strong risk-adjusted returns for investors.

CONTACT:

Timbercreek Financial

Cam Goodnough

President & CEO

cgoodnough@timbercreek.com

www.timbercreekfinancial.com

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Tesla Slumps as Battery Day Letdown Clouds $320 Billion Gain

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(Bloomberg) — Tesla Inc.’s highly anticipated “Battery Day” fell short of expectations that helped fuel its $320 billion surge in market value this year, with Elon Musk outlining grandiose goals that will take time to pull off.

The chief executive officer laid out a plan Tuesday to build a $25,000 car and cut battery costs in half over the next three years. Analysts said while the technology and manufacturing innovations outlined were impressive, Tesla’s valuation already reflected its ability to disrupt and investors may be let down by the lack of surprises at the much-hyped battery-showcase event.

This seemed to be the case on Wednesday, as the company’s shares fell as much as 10% to $380. They were trading at $380.16 as of 2:48 p.m. in New York and are up about 360% for the year so far.

“With the Battery Day in the rearview, we think there is a lack of upcoming catalysts and are cautious about demand given the recessionary environment,” Robert W. Baird’s Ben Kallo wrote in a Wednesday report naming Tesla a bearish “fresh pick.”

That was echoed by Patrick Hummel, an analyst at UBS with a “neutral” rating on the stock, who said in a research note Tesla’s leadership in battery technology and costs is fully valued into the stock. “Given the high expectations into the event, we think the market will initially respond negatively to the relatively long timelines of the innovations and the lack of granularity,” he wrote.

Musk, 49, said Tesla wants eventually to produce 20 million cars a year. He described a series of innovations that include using dry-electrode technology and making the battery a structural element of the car. Those incremental and longer-term advances belied expectations for a blockbuster leap forward, which Musk himself played up in the weeks leading up to the event.

“The challenge with the stock is that everything they are talking about is three years away,” said Gene Munster, managing director of Loup Ventures. “I think traditional auto is in an even tighter spot, but Tesla investors want this tomorrow.”

Vertical-integration improvements — from making its own battery cells on a pilot line at its factory in Fremont, California, to owning rights to a lithium clay deposit in Nevada — are designed to allow Tesla to cut costs and offer a cheap car as soon as 2023.

“This has always been our dream from the very beginning,” Musk said at the event focused on Tesla’s battery technology. “In about three years from now, we are confident we can make a compelling $25,000 electric vehicle that is also fully autonomous.”

Halving Battery Costs

Musk is teasing prospects for a cheaper mystery model without ever having really delivered on the $35,000 price point he had long promised for the Model 3. Three years after Tesla started taking orders for the car in early 2016, the CEO announced plans to close most of Tesla’s stores as a cost-saving measure, allowing him to offer the car at that cost. He backtracked 10 days later, and the cheapest Model 3 available now is $37,990.

Making a truly mass-market electric car and boosting Tesla’s current annual production to 20 million cars will require vastly more batteries than are currently being produced from a handful of suppliers around the world. So Musk plans to expand global capacity by manufacturing battery cells in-house to supplement what it can buy.

“Today’s batteries can’t scale fast enough,” said Musk, who is driven in part by the need to find sustainable energy sources. “There’s a clear path to success but a ton of work to do.” Musk said the gasoline-powered internal-combustion engine will one day be obsolete.

Musk described an “incredible series of innovations with varying levels of difficulty,” said Venkat Viswanathan, a battery expert at Carnegie Mellon University. While battery-manufacturing advances are feasible and deliverable in the three-year time frame, Viswanathan thinks that chemistry developments will take a longer.

If the planned innovations pay off, vehicle range could increase 54%, cost could decrease 56% and investment in gigafactories could decline 69%, said Andrew Baglino, Tesla’s senior vice president for powertrain and energy engineering.

BloombergNEF estimates Tesla’s pack prices were $128/kWh in 2019. A 56% cost reduction would bring prices down to $56/kWh. In addition to the pilot line for battery-cell production in Fremont, and Musk said the company also will make cells at the factory that is under construction in Berlin.

Battery Cell ‘Leap’

Most global automakers have shied away from making their own battery cells, citing the high investment costs and their lack of expertise in an industry dominated mostly by Asian electronics manufactures such as Panasonic Corp. and LG Chem Ltd.

Musk said in a tweet Monday that Tesla will need to start producing its own battery cells to support its various products, even as it ramps up purchases from outside suppliers. He wrote that the company expects significant shortages of cells in 2022 and beyond unless it ramps up output of its own.

“I’m really surprised that they’re taking that leap themselves,” said Tony Posawatz, a consultant who led development of General Motors Co.’s plug-in hybrid Chevrolet Volt and now sits on the board of Lucid Motors Inc., a Tesla rival. “I think this is going to be a bit harder than what they think, and I don’t think we’ll see a lot of volume out of that for quite some time.”

Tesla’s most important and long-standing partner on batteries is Osaka-based Panasonic, but it also has smaller-scale agreements with Contemporary Amperex Technology Co., or CATL, in China’s Fujian province and South Korea’s LG Chem.

Read more: LG Chem, Panasonic Slide as Tesla Looks to Lower Battery Costs

The highly technical Battery Day presentation included several nuggets of news that were overshadowed by the talk of cathodes and electrolytes. One example: The “Plaid” version of the Model S sedan — with a range of 520 miles — is now available to order, though the vehicle isn’t expected to go on sales until late 2021.

Tuesday’s three-hour event began with the annual shareholder meeting, held outside to allow for social distancing. Shareholders sat in Tesla cars in a parking lot, beeping loudly instead of cheering as Musk spoke.

Investors voted to re-elect Musk and chairman Robyn Denholm to the board and voted against resolutions that would have required more transparency about human rights in the supply chain and the use of arbitration with employees. One shareholder resolution, which requires Tesla to adopt a simple majority vote, did pass.

Musk told shareholders he expects to see deliveries grow on the order of 30% to 40% this year, reaffirming Tesla’s forecast at a time when automakers are struggling to recover from the coronavirus pandemic. “While the rest of the industry has gone down, Tesla has gone up,” he said.

Tesla has said it anticipates delivering 500,000 vehicles in 2020, up about 36% from 2019. In July, the electric-car maker said achieving that goal would be “more difficult” due to a pandemic-related production shutdown early in the year. Global sales are projected to drop about 17% this year to 75 million from 90 million last year, according to research firm LMC Automotive.

(Updates stock performance in third paragraph)

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