Investec Market Review September 2022

• September saw global indices contract relative to August, while equity volatility levels rose considerably.
  
  
• Hawkish monetary policies by global central banks in the face of an increasingly challenging market back-drop continues to weigh on risk appetite, notably in equity capital markets. Domestic market participants are focused on the continued fall-out from the Government’s ‘mini-budget’.
  
  
• A swathe of listed companies reported results over the course of September. Real Estate and Financial companies posted the best(interim) performances, however results were more challenging for the likes of Energy, Technology and Healthcare stocks in particular.
  
  
• Against a difficult market back-drop, UK ECM activity continued to decline in September, with the number of transactions successfully completing in the month falling to a level not seen since August 2019.
  
  
• It remains to be seen as to whether the Frankfurt listing of Porsche will in part catalyse the European IPO market given ongoingmarket turmoil and volatility.
  
  
• There were a handful of UK PLC takeover transactions announced in September as acquirers continue to take advantage of mispriced assets.

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Monthly market snapshot

September's key market drivers

• UK Chancellor of the Exchequer Kwasi Kwarteng unveils ‘mini-budget’
• UK pound falls to 1.09 against the US Dollar: a 37-year low
• U.S. Treasuries rallied after the Bank of England intervened in the UK bond market
• Bank of England lifted its key rate to 2.25%
• US Federal Reserve announces a 0.5 percentage point rate hike
• Eurozone business activity contracts for third consecutive month
• Japanese government intervenes to support Yen for first time since 1998
• UK equity funds post highest level of outflows in a decade

Global equity market performance & equity market volatility

Source: Bloomberg, FactSet, Calastone
 

The dollar continues its onward march

Source: Bloomberg, FactSet, Calastone
 

Bond yields continue to rise

Source: Bloomberg, FactSet, Calastone 

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Monthly sector snapshot

Sector performance drivers and outlook commentary

• Rising raw material prices support Oil & Gas and Mining stocks
• Continued geo-political tensions across Europe bolster Aerospace and Defence sector
• Increasing expectations around interest rate hikes place pressure on growth-orientated sectors such as Tech Hardware & Equipment, Electric and Electrical Equipment, and Software and Computer Services
• Concerns over economic growth outlook place pressure on Real Estate and Leisure Goods sectors

Sector performance (since mid-March 2020)

Source: FactSet
 

Sector performance (YTD)

Source: FactSet

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Of those UK companies who reported results in September, those in the Real Estate and Financial sectors managed to generally beat consensus estimates. Results were less positive for macro-sensitive consumer-centric stocks, as well as those in typically growth-focused Energy, Technology and Healthcare sectors.

Source: Bloomberg

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Following numerous seasons of rising earning expectations across the FTSE All Share, we saw consensus EPS forecasts dipping as at the end of September.

Source: Bloomberg

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UK public equity-issuance rises relative to August, however deal numbers remain in-line, at the joint lowest monthly level of the year so far

Public equity fund-raises by sector and highlighted deals

Sell-down activity over September

ECM issuance across the deal size spectrum in September

The UK IPO pipeline

Source: Dealogic. Analysis and commentary only includes transactions greater or equal to £5m, and only includes transactions involving an issue of new shares i.e. primary share issuances

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