🗞️The Wrap: June 4th

In The Wrap this week, the Yuan goes digital, IPOs make a comeback and London traders get an early mark…well maybe.

5 Stocks Making 52 Week Highs

  • Chewy (CHWY) +9.6%
  • Compugen (CGEN) +9.6%
  • Equifax (EFX) +7.8%
  • Square (SQ) +6.4%
  • Sturm Ruger Corp (RGR) +4.4%

eRMB

China is slowly unrolling their own form of digital cash; the first time a major economy has adopted and endorsed an electronic currency. Starting with public sector salaries, eRMB is being trialled in 4 cities.

Backed by government decree, the digital Yuan are pegged to their paper equivalent. Most significantly, consumers don’t need a bank account to use the eRMB. With over 200m Chinese citizens lacking access to banking services (but maintaining access to technology), eRMB can act just like cash and exist outside the banking system.

There are a few reasons why this shift is happening. Digital currency is way easier to monitor than cash. The central bank will increasingly be able to understand the flows of money and how to best enact policy. On a more cynical level, it’s a lot harder to control cash!

Moreover, the reliance on AliPay and WeChat Pay is growing and China may prefer to seize control of the payments system from these two giants; consumption payments through such companies totals 16% of GDP.

Life in the IPO Market

After a few months of silence in the IPO market, which have been more than made up for with the chaos everywhere else, we are in for a big couple of weeks. Over USD$6b in deals are expected to be completed.

Headlining the show is Warner Music. With talent like Ed Sheeran. Stormzy and Michael Bublé on their books, they’re arguably the biggest producer in the States. Expected to list at about $1.8b, the music giant actually delayed its pricing in honour of Black Tuesday.

Other soon-to-be tradable names include ZoomInfo, a service that aggregates information on company executives and employees.

Apart from a few reverse mergers and biotech listings, it’s the first action in a while. Understandably, deal organisers haven’t been able to meet recently and further, the volatile market keeping underwriters wary.

Top 5 Gainers

  • Adaptimmune Therapeutics (ADAP) +128.3% in the last week
  • Precigen (PGEN) +60.0%
  • Sasol (SSL) +48.8%
  • Myovant Sciences (MYOV) +43.0%
  • Michaels Co (MIK) +35.1%

Top 5 Fallers

  • Canopy Growth Company (CGC) -26.5% in the last week
  • Novagold Resources (NG) -15.4%
  • Hailiang Education (HLG) -14.1%
  • Sage Therapeutics (SAGE) -10.9%
  • Six Flags (SIX) -9.8%

Home for Tea

There’s growing support for a reduction to the FTSE trading hours. The London School of Economics collated data from fund managers, traders and brokers and found that most supported a shorter session. The UK has some of the longest hours in the world (8am to 4:30pm); 2h longer than the US markets.

A shorter session may be suitable for more people and ease the stress levels experienced by the Square Mile’s daily workers.

While many asset classes trade around the clock like commodities and currency (24/5), equities are limited to a few hours a day. In fact, the NYSE was open for trading on Saturdays until the 1950s. The relatively short equity market hours are largely a function of market liquidity; there’s significantly less volume in stocks than there is in FX for instance. In equities, most trading happens in the first and last 30 minutes and announcements are made outside market hours.

What We’re Listening To | Chat With Traders w/ Kevin Muir

Everyone’s aware of the massive QE (or is it Not QE?) the Fed is unrolling right now. What’s a bit harder to grasp is how exactly the stimulus works; and why stocks are booming in correlation with the Fed’s balance sheet. This podcast episode is a couple of months old but is an essential listen to understand how the Fed provides liquidity to the credit market and what effect that may have on stocks.

It’s broken down incredibly well and doesn’t need an economics PHD to understand. I recommend it wholeheartedly.

Trader Teaser

I leave my tent and hike 5km South, 5km East and 5km North and end up back at my campsite. When I return there is a bear rummaging through my bag. What colour is the bear?

Best Buy | $DKNG +119%

A killer trade and an absolutely necessary one as the USD gets weaker and weaker. This trader hopped on the humongously hyped DraftKings and held on its way to $40.

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