Daily Intelligence Briefing – Pharma
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Big Pharma Refills its Blockbuster Pipeline While the Generics Consolidate
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This Week’s Issue Cluster: Pharma
Generic drugmakers get on the megamerger bandwagon
New blockbuster branded drugs are coming down the pike, including Alzheimer’s, malaria, and cholesterol.
US Doctors are organizing to protest higher prices for new drugs and call for regulation
More states are mulling pharmaceutical cost transparency bills to make companies explain drug prices
Biotech valuations are facing a higher discount rate when the Fed starts raising rates
Best of the Rest
China – Officially, GDP growth is on target at 7% … private sector estimates are as low as 3%
Coffee – Pod sales are booming and create much less waste, pushing overall US coffee demand down
NatGas – Asian LNG spot prices are down 30% … with more supply coming from the US and Australia
Germany – Jul: Ifo business confidence up; 108.0 from 107.5 / AFP / AP / WSJ
US – Jun: Durable Goods Orders Up; +3.4% from -2.1% / WSJ / R / AP
China – Biggest One-Day Stock Crash Since 2007
The Shanghai Composite Index ended down 8.5% at 3725.56, its second-straight day of losses and worst daily percentage fall since February 27, 2007. China’s main index is up 6% from its recent low on July 8, but still off 28% from its high in June. The smaller Shenzhen Composite fell 7% to 2160.09 and the small-cap ChiNext Closed 7.4% Lower at 2683.45.
More than 1,700 stocks fell by the maximum daily amount of 10 per cent, while only 78 rose.
All traded index futures contracts also fell by their maximum 10 percent limit, with the exception of a few tracking the large cap SSE50 index, which declined around 9 percent. R
Should the current decline persist, the government could act further to support prices. For example, Beijing could pump more money into the market, either directly or indirectly. Officials have recently signaled their willingness to continue stabilization measures.
Last week, the China Securities Regulatory Commission issued a denial of a report in Caijing, a respected Chinese financial news outlet, which had said the regulator was considering how to begin removing its supports for share prices. NYT
The IMF has told the Chinese government that while interventions in general are appropriate to prevent major disorder, prices should be allowed to settle through market forces, said a person familiar with IMF discussions on the issue and who asked not to be identified because the talks are private. Chinese officials assured the lender that the measures should be considered temporary B
China – Can All Debt Be Rated A+?
The discrepancy between bullish ratings by Chinese ratings firms on local bonds versus much lower ratings by the major global bond-rating companies is becoming an increasing concern… Just under 3% of the country’s bond market is open to foreigners, up from near zero since 2010, and only Chinese local ratings firms can rank those bonds. Around 97% of existing yuan-denominated bonds hold ratings of double-A to triple-Athe best a company can get… Even so, just 1.4% of the almost $12.7 trillion in debt in the U.S. has a double-A rating or above
China – Giant Fund: ‘No Safe Places to Invest’
Bridgewater Associates LP, one of Wall Street’s more outspoken bulls on China, told investors this week that the country’s recent stock-market rout will likely have broad, far-reaching repercussions…. “Our views about China have changed,” Bridgewater’s billionaire founder, Raymond Dalio, wrote with colleagues in a note sent to clients earlier this week. “There are now no safe places to invest.”
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China – IMF says it’s worried about investors’ mobility
The International Monetary Fund (IMF) has told China about its concern over investors’ ability to enter or leave Chinese financial markets as they wish… Those worries were raised last month when the IMF met with Chinese officials in China to discuss the chances of including the yuan in the fund’s basket of currencies, also known as the Special Drawing Rights (SDR)…. The IMF requires any SDR currency to be “freely usable”, a criteria that U.S. Treasury Secretary Jack Lew said in April that China has yet to meet.
China – Japan Investors Use Market Rout as a Chance to Buy
Some Japanese investors have used the recent market rout in China as a buying opportunity, reasoning that growth opportunities there make battered Chinese equities worth acquiring. Japan’s Dai-ichi Life Insurance Co. bought Chinese stocks after markets peaked in mid-June by using cash made from trimming some holdings as shares surged earlier in the year…For Japanese investors, China is a relatively small but increasingly important market. Holdings of Chinese stocks by Japanese investors increased 67% to ¥1.6 trillion ($12.9 billion) at the end of 2014 from a year earlier
China – Equity investors the fortunate few
Data from the China Household Finance Survey … shows that equity ownership expanded rapidly in the last year as new investors piled into rising markets. In the second quarter of 2015, some 8.8 percent of households participated in the equity market, up from 4.1 percent a year earlier… Even so, the share of total assets that households have allocated to equities is small less than 1 percent in 2013 and only slightly increased since then…In 2013, China’s richest 20 percent accounted for 91.8 percent of household equity ownership. The average university graduate owned 4.6 times more shares than the average high school graduate. Beijing, Shanghai and Guangdong chief beneficiaries of Deng Xiaoping’s edict to “let some get rich first” accounted for 52.5 percent of equity ownership. Enthusiastic participation by lower educated and less wealthy investors in the rally of the last year brought a wider cross section into the market but didn’t change the basic picture on the way ownership is distributed.
China – Rail freight remains weak
The railways transported 1.7 billion tons of cargo in the first half, down 10.1 percent year on year, compared with a decrease of 9.4 percent in the first quarter
China – Quickly revisiting those dodgy growth stats
As CreditSights say “The finance sector’s contribution grew by over 20% in 1H15 this is no thanks to the banks and more likely due to profit growth at securities firms and possibly asset management companies. In contrast, the industrial sector, which contributes over a third to GDP, is growing at under 2% YoY.” …it’s real (ish) activity but it most probably isn’t going to be repeated at that level and without it GDP would have been down closer to 6 per cent, according to UBS… Citi, too, say that while “China’s official data show real GDP growth at 7.0% YoY in Q2, matching the Q1 pace. In practice, “genuine” GDP growth probably is below 5%.”
China – Our Momentum Indicator suggests growth is nearer 3.0%
GDP rose by 7.0% in the four quarters to Q2. We remain sceptical about the accuracy of China’s GDP data, and the speed with which they are compiled. Our own measure of economic activity the China Momentum Indicator suggests the current pace of growth is nearer 3.0%.
EMs – Retail sales slump in commodity exporters
The slowdown in consumer spending … is particularly pronounced in Russia, Brazil, Colombia, Chile and South Africa… Retail sales growth in developing countries that are net exporters of commodities slipped to 2.6 per cent in May from 2.7 per cent in April, according to a three-month moving average compiled by Capital Economics…. the lowest level since October 2009, when retail sales growth averaged 2.2 per cent and was well off the 6.8 per cent growth registered in May last year.
EMs – Portfolio flows reveal fear of the Fed
Foreign flows to EM equities were negative for the second and third weeks of June, to a total of $1.63bn, according to the IIF. EM bond flows were negative for four consecutive weeks from mid May to early June, to a total of $10.34bn.
correlations across EM assetsa good barometer of market stresshave surged to levels last seen during the 2013 taper tantrum (and in the case of EM sovereign bonds, to near-record highsChart 1.3). In short, anticipation of an unprecedented Fed exit, coupled with a high degree of policy uncertainty, low commodity prices and a lack of evident drivers of growth, is set to keep the environment for EM investors very challenging near term.
Investors are dumping billions of dollars worth of gold, commodities and emerging market assets in a wave of “capitulation” selling, Bank of America Merrill Lynch said … the likelihood of a U.S. interest rate hike this year has spooked emerging markets. Investors redeemed $1.1 billion from precious metals funds in the week ending July 22, the biggest outflow in four months… A net $3.3 billion was pulled from emerging markets funds, bringing the total outflow over the last fortnight to $10 billion. R
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Daily Intelligence Briefing – Pharma
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