Buying the Dip | CSL Acquisition

3 December 2021

Global markets were mixed overnight, with Wall  Street (S&P500+1.4%) rebounding sharply as volatility remains elevated. All major sectors rose, with eight sectors seeing gains greater than +1%; airlines jumped +4.5%, hotels, restaurants and leisure bounced +2.8%, and financials added +2.3%.

Apple’s stock dropped after Bloomberg News reported the tech giant is experiencing slowing iPhone demand ahead of the all-important holiday season, causing tech shares to lag gains across the rest of the market. Semiconductor companies ASML (-5.4%), AMS (-5.3%) and Infineon Technologies (-4.6%) slumped on Apple’s warning of slowing demand for the iPhone 13.

European Markets (Stoxx 600 index -1.2%) as inflation fears persisted, coupled by Omicron related market weakness. 
Banks slipped on uncertainty about whether the Bank of England will raise interest rates this month. UK regulators approved GlaxoSmithKline's sotrovimab drug for COVID-19 – lab results suggest it may be effective against Omicron.
Vifor Pharma soared +20.9% on reports Australian biotech firm CSL is launching a takeover.


CSL shares were down -1.3% yesterday, following rumours that the Aussie biotech is set to buy Vifor Pharma, a Swiss-based company, in a deal that could see CSL fork out $10 billion.

Vifor is a company that makes $2.66 billion in revenue form the sale of treatments for iron deficiency and chronic kidney dieses. CSL might be heading to the capital markets to raise additional equity capital to the tune of $3 billion–$4 billion.

We remain BUY rated on CSL as a top-quality healthcare portfolio holding, which should also benefit from a re-opening/loosening of COVID restrictions in terms of collecting blood plasma for its core products. 


Australia & New Zealand Market Movers

The Australian market fell (ASX 200 index -0.2%) as a weak lead from wall street caused heavy losses for tech companies which pulled the market lower.

Crown rose +0.8% after rejecting Blackstone’s initial $12.50 per share takeover bid, but allowed them access to the books for due diligence to make a better offer. 
Woolworths rose +0.4% after topping rival Wesfarmers' takeover bid for Australian Pharmaceutical Industries by 20% to $1.75 per share. Shareholders of Playtech approved the sale of its Finalto financial trading division, meeting a key condition of Aristocrat’s offer.

The New Zealand market fell (NZX 50 index -0.4%) as omicron concerns weigh down on the market.

Air NZ (-1.3%) and Sky City (-1%) fell over concerns when international travel would commence  
Kiwi Property group fell -0.6% after announcing it would sell a piece of land next to Sylvia park to retail giant Ikea. Rising building consents in Christchurch region saw Fletcher building lead gains rising +3.3%.


3 Things Markets will be Watching this Week

  1. Key events this week US nonfarm payroll, the latest CPI data in the Eurozone and PMI data in China.
  2. Developments around the Nu variant of covid will be dominating headlines. 
  3. Locally, Australia’s third quarter GPD numbers and ANZ’s latest Business Confidence reading in NZ. Earnings release from Oceania Healthcare and AGM”s from Lynas, Orocobre, Synlait and Premier Investments. 
Global markets were mixed overnight, with Wall Street (S&P500+1.4%) rebounding sharply as volatility remains elevated.

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