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Cool reception for Glencore share launch

Shares in Swiss commodities giant Glencore slipped in their Hong Kong trading debut Wednesday, following a similarly tepid launch in London for the year's biggest initial public offering.

Published: 25 May 2011 10:51 CEST

The firm touched HK$64.65 ($8.31) in early trading, down from their HK$66.53 IPO price, before recovering slightly to HK$65.25 by the break.

Despite the sluggish start, Glencore Chief Executive Ivan Glasenberg said he remained “bullish” on the company’s potential. The world’s biggest commodities trader by revenue raised about $10 billion ahead of the dual listing.

“We are still bullish with commodities and the strength in the commodities market,” he told reporters at the firm’s listing ceremony in Hong Kong.

“At the end of the day, the demand for commodities still continues robustly.

“The big question is whether the big mining companies in the world will continue to increase production to match the demand in Asia,” said Glasenberg, who flew in from London.

Glasenberg rejected suggestions the listing’s weak start was tied to a recent dip in commodities prices.

“We thought it was the time to become a public company, and this was just the time,” he said, adding that “it’s irrelevant the actual time of listing… The underlying market is still very strong.”

Oil prices have slipped in recent weeks — after touching two two-year highs — amid concerns over the global economy and easing demand, while gold has fallen about five percent from its record at the beginning of May.

Hong Kong brokerage Wing Fung Financial advised investors to hold on to the stock given the likelihood of rising commodity prices.

“Although there is some correction in the commodity market recently, most of the prices are (still) higher than (that of) last year. We expect the prices will rise after correction,” it said, according to Dow Jones Newswires.

The Swiss company, which posted revenue of $145 billion in 2010, deals in a range of products including oil, coal, gold and foodstuffs, but also owns a number of mines worldwide. The dual listing values Glencore at nearly $60 billion.

Glencore shares in London sank to 525 pence ($8.49) by the close Tuesday, or 0.84 percent below their IPO price of 530 pence, despite the float being among the most anticipated of the year amid soaring commodities demand in Asia.

Glencore sold 31.25 million shares in the Hong Kong offer, with the retail portion representing just 2.5 percent of the total sale, while the remainder was sold in London.

It plans to use funds raised by the listing to pay down debt, boost its stake in Kazzinc, a zinc producer with core operations in eastern Kazakhstan, and finance other projects to expand its business.

The commodities behemoth has said it secured $3.1 billion from so-called cornerstone investors, including sovereign wealth funds in Singapore and Abu Dhabi, who have subscribed to 31 percent of the shares on offer.

The firm earlier described its secondary listing in Hong Kong as a means to build a “long-term mutually beneficial relationships” with the city’s investors, and enable it to draw on demand from resource-hungry Asian markets, with China and India increasingly keen on resources to power their economies.

Founded in April 1974 by trader Marc Rich, Glencore operated initially out of an apartment in central Switzerland’s Zug canton before quickly emerging as a major player in commodities trading.

From metals, minerals and crude oil, the group moved into agricultural goods and started in the late 1980s to expand to owning mines.

ECONOMY

Geneva watch show opens in throes of Swiss banking turmoil

The Geneva watch fair opened this week buoyed by booming growth in the watchmaking industry, but insiders warily eyed the banking sector turmoil, evoking painful memories of the 2008 financial crisis.

Published: 28 March 2023 09:28 CEST
Geneva watch show opens in throes of Swiss banking turmoil

Industry professionals were upbeat on the first day of the Watches and Wonders annual fair, where 48 prestigious brands including Rolex, Patek Philippe and Cartier were showing off their new creations.

The fair, which runs until Sunday with the weekend open to the public, kicked off after two years of record gains for Swiss watchmakers.

Exports soared by 31.2 percent in 2021, after a strong rebound in sales in the United States and the Middle East.

And the return of luxury tourism to Europe in 2022 after two years of Covid disruptions pushed exports up a further 11.4 percent to 24.8 billion Swiss francs ($27.1 billion).

The growth has also continued so far this year, with exports up by another 10.6 percent during the first two months of 2023, according to statistics from the Federation of the Swiss Watch Industry.

But optimism at the Geneva fair was somewhat dampened by the angst surrounding the turbulence currently lashing the banking sector.

Switzerland – whose vibrant banking scene is a key part of the country’s economy and culture – has been rocked to the core after the government strong-armed the nation’s biggest bank UBS into swallowing up its troubled competitor Credit Suisse, in a bid to ward off a larger global banking crisis.

READ ALSO: ‘A dark day’: How Switzerland reacted to shock UBS buyout of Credit Suisse

‘Global repercussions’

The upheaval has brought back difficult memories for Swiss watchmakers.

After the 2008 round of bank failures sparked a global financial crisis, Swiss watch exports plunged 22.3 percent in 2009 – more even than during Covid-dominated 2020.

“I am unable to say what the global repercussions will be,” Thierry Stern, the boss of Patek Philippe, told AFP.

“But I still think it should be easier than in 2008-2009.”

Participants are seen next to a giant watch by German manufacturer of luxury and prestige watches at the luxury watch fair in Geneva', on March 27, 2023 in Geneva.

Participants are seen next to a giant watch by German manufacturer of luxury and prestige watches at the luxury watch fair in Geneva’, on March 27, 2023 in Geneva. (Photo by Fabrice COFFRINI / AFP)

For the moment the difficulties remain “very localised” as Patek Philippe “sells all over the world”, said Stern, who is counting in particular on Asia to ensure growth in 2023.

Jerome Lambert, managing director of the luxury giant Richemont – owner of the Cartier, Piaget and IWC brands – acknowledged that the turnaround in
demand in 2009 had been “very rapid” and very “severe”.

“But it was a big lesson for us,” he said, explaining that the group had since taken distribution in hand.

Edouard Meylan, owner of the Hautlence brand, nevertheless believes that “lights are turning red”.

“If there is a financial crisis, it will have a very big impact on our sector,” he told AFP, especially since with supply difficulties some watchmakers have gone from “very large orders from their suppliers” and risk finding themselves with large stocks if the market turns.

Other analysts believe there is little reason to panic just yet.

“For now, I would expect the impact to be muted,” Jon Cox, an industry analyst with the Kepler Cheuvreux financial services company, told AFP, adding that he is still expecting to see growth this year of around 10 percent in exports.

READ ALSO: Swiss sweat over size of new superbank

Full steam ahead for China?

However, the Credit Suisse debacle, which threatens tens of thousands of jobs in the financial sector, could take its toll.

“The financial community is an important part of the buying public for the watch industry and there could be impact in local markets, such as Switzerland, on domestic business,” Cox warned, adding though that “this is likely to be offset by tourism”.

For now, Swiss watchmakers are looking to the Chinese market to pick up pace and ensure their 2023 export growth.

When demand was exploding in other markets as they rolled back pandemic protection measures, the watch market in China remained subdued as the country ploughed on with its zero-Covid rules, and then saw infection numbers explode when it abruptly ended that policy late last year.

But watchmakers and experts are expecting that to change with the reopening of the Chinese economy.

Jean-Philippe Bertschy, an analyst with Swiss investment managers Vontobel, warned however that “a return to normalcy” for Chinese watch sales – traditionally Swiss watchmakers’ largest market – will take time.

On the positive side, he told AFP he was confident, given “the level of savings the Chinese had set aside during the health restrictions”.

As for tourism, he cautioned that while Chinese travellers may quickly flock to Asian destinations, “it will take more time before they return to Europe,” due to the continued limited air transport capacity and visa backlogs.

By Nathalie OLOF-ORS

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