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Time to own Bitcoin? Chris Wood to trim Gold weightage and make way for Bitcoin investment

Bitcoin is again making headlines with the unreal upwards movement it recorded on the price charts recently, setting fresh all-time highs. The crypto currency has gained nearly 400% since March this year and over 200% since the beginning of this pandemic struck year. Investor’s interest in bitcoin has been gaining steam in 2020 and it’s not just small investors, institutions too have joined in cheering it. Seeing these developments, Chris Wood, global head (equity strategy) at Jefferies, has decided to introduce Bitcoin in its long-only global portfolio.

In his weekly newsletter, Greed & Fear, Chris Wood said that Bitcoin will be introduced in the long only global portfolio for US dollar-denominated pension funds. Chris Wood had made a case for owning Bitcoin back in June of 2019. The investment space for Bitcoin will be made by reducing the weight of physical gold bullion by 5 percentage points. “If there is a big drawdown in bitcoin from the current level, after yesterday’s historic breakout above the US$20,000 level, the intention will be to add to this position,” Chris Wood said last week.

Bitcoin institutionalisation

His views on owning the crypto currency have been strengthened by the ‘institutionalisation of Bitcoin’ and with custodian arrangements being made available. Retail investors can now buy into Bitcoin via quoted vehicles, unlike before when the risk of Bitcoin accounts being hacked was real. Wood also highlighted the case of Nasdaq-listed MicroStrategy, a business intelligence software company, that has invested in the Bitcoin equivalent of$425 million ($250m in August and$175m in September), amounting to almost 100% of its own treasury funds, to hold on its balance sheet.

MicroStrategy, in its filings to the SEC said that the aim is to make Bitcoin “the primary treasury reserve asset on an ongoing basis”, along with cash and short-term investments. “This marks a watershed moment in GREED & fear’s view since the auditors approved MicroStrategy putting Bitcoin on its balance sheet as did the SEC,” Chris Wood noted. He further highlighted that MicroStrategy’s market capitalization has risen 131% since announcing its investment in Bitcoin and the value of its Bitcoin holding has almost doubled to $917 million.

Gold not out

Although Chris Wood is trimming Gold’s weight, he said that this does not mean that he is going to give up on gold. “… the yellow metal should rally again if the Fed stays dovish in the face of the dramatic cyclical recovery that is coming on the other side of the pandemic, in line with GREED & fear’s base case,” he said.

Eqwires Research Analyst

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Asian shares up as strong Japan data offsets Wall St losses

Shares have risen in Asia, shrugging off a weak close last week on Wall Street after Japan’s central bank reported a strong improvement in business sentiment.

Tokyo’s Nikkei 225 climbed 0.6 per cent and shares were also higher in Shanghai, Seoul and Sydney. Hong Kong’s Hang Seng declined.

The quarterly “tankan” survey by the Bank of Japan showed business sentiment has improved sharply with expectations for a recovery from a year-long recession.

The main measure of business conditions of large manufacturers rose to minus 10 from minus 27.

It showed rebounds in all categories, both manufacturing and nonmanufacturing companies, large and small. It was a marked improvement from the past several quarterly reports as Japan battled the coronavirus pandemic.

The tankan measures corporate sentiment by subtracting the number of companies saying business conditions are negative from those responding they are positive.

U.S. markets ended last week on a downbeat note. Benchmarks pulled further away from their recent highs Friday as prospects for another aid package from Washington faded while a surge in virus cases is threatening to inflict more damage on an already battered economy.

The proposed $900 billion aid package from a bipartisan group of lawmakers has essentially collapsed because of continued partisan bickering.

But President Donald Trump signed a temporary government-wide funding bill into law, averting a federal shutdown at midnight and buying Congress time for the on-again, off-again talks on COVID-19 aid.

“Given these talks have been running since July, the market may be bored to tears, but if the stimulus door slam shut before Christmas, it could still change the positive vaccine mood music,” Stephen Innes of Axi said in a commentary.

The S&P 500 slipped 0.1per cent to 3,663.46, its third-straight decline since it set a record high on Tuesday. It ended the week 1per cent lower after two weeks of solid gains.

Treasury yields fell broadly, a signal that traders were seeking to lessen their exposure to riskier holdings. On Monday, the yield on the 10-year Treasury was at 0.90per cent, up from 0.89per cent on Friday.

The Dow Jones Industrial Average got a boost from Disney, which hit a new high after giving investors an encouraging update on subscriber growth and future plans for its Disney Plus streaming service. The index rose 0.2per cent, to 30,046.37. The tech-heavy Nasdaq lost 0.2per cent to 12,377.87. The Russell 2000 small-cap index gave up 0.6per cent to 1,911.70.

Investors are watching for updates on the rollout of coronavirus vaccines that might help beat back surging infections that threaten to derail recoveries from business shutdowns and other pandemic-related shocks.

The first of many freezer-packed COVID-19 vaccine vials made their way to distribution sites across the United States on Sunday, as the nation’s pandemic deaths approached the horrifying new milestone of 300,000.

Widespread vaccination will take months and the virus pandemic is prompting tighter restrictions on businesses. An already slow economic recovery appears to be stalling in the wake of the latest surge and unemployment is rising.

Wall Street is also waiting for a special election in Georgia in early January, which could potentially switch the balance of power in the U.S. Senate.

In other trading, benchmark U.S. crude oil gained 13 cents to $46.70 per barrel in electronic trading on the New York Mercantile Exchange. It lost 11 cents to $46.57 per barrel on Friday. Brent crude, the international standard, picked up 16 cents to $50.13 per barrel.

The dollar weakened to 103.98 Japanese yen from 104.93 yen late Friday. The euro rose to $1.2135 from $1.2115.

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IEX expands Green Market; Adds daily, weekly contracts

Indian Energy Exchange (IEX) on Friday announced the expansion of its Green Market with the launch of new contracts that will offer greater choice to market participants to buy renewable energy on the same day and up to 11 days ahead.
IEX has expanded its delivery-based Green Market with the launch of two new products – Green Daily Contract and Green Weekly Contract, an IEX statement said. According to the statement, trading in the new contracts in both solar and non-solar segments will commence with immediate effect.

With this launch, the IEX Green Market now has four contracts, and offers greater choice to market participants to buy renewable energy on the same day and up to 11 days ahead. In a first for IEX Green Market, the Daily and Weekly contracts, will enable market participants to trade in on energy basis (MWh) with the bidding taking place on a 15-minute time-block.
The trading in energy terms will help to address the intermittency issues involved in renewable energy procurement.

Further, this will also assist market participants to minimise deviations as well as related penalties. Energy will be delivered leveraging the national, regional and state level transmission network. The Green Market at IEX, a first of its kind initiative in the country, was formally launched by Power Minister R K Singh on September 1, 2020. The market has received encouraging response from all stakeholders and has cumulatively traded 459 MU (million units) comprising 404 MU under Solar and 55 MU under Non-Solar segments within 100 days since the commencement of trading on August 21, 2020.

Moreover, it stated that with an average price of Rs 3.47 per unit in solar and Rs 3.77 per unit in non-solar segments, the market offers an attractive avenue to participants for renewable energy procurement. “India is witnessing a rapid change in the energy sector with renewables driving the energy shift. To meet our ambitious renewable energy targets and sustain the existing pace of growth in renewable capacity addition, there is a need for a market-based framework.” IEX Chairman S N Goel said.

IEX Green Market allows the obligated entities to meet their Renewable Purchase Obligation as well as facilitates efficient and seamless integration of the renewable energy. With a total of 36 market participants, the platform is being leveraged by the distribution utilities, renewable generators and open access consumers.

The utilities from the States and Union Territories of: West Bengal, Haryana, Dadra and Nagar Haveli (DNH), Daman & Diu, Delhi, Bihar, Maharashtra, Delhi, UP, Telangana and Karnataka amongst the top market participants on the IEX

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Burger King India IPO: Listing gains in offing; retail quota subscribed over 17 times so far

Burger King India initial public offer (IPO) received a robust response from retail investors on the day one of the bidding process. The Rs 810-crore issue received bids for 26.46 crore shares against 7.44 crore equity shares on offer, implying an overall 3.53 times subscription, so far. Most of the brokerages suggest to subscribe to one of the fastest growing international QSR chains in India for the listing gains. The issue is being sold in the price band of Rs 59-60 apiece. Link Intime India Pvt Ltd will manage allocation and refund of the issue and is the registrar of Burger King India IPO.

According to the exchange data, retail portion saw 17.64 times applications as retail had the lowest allocation quota of only 10 per cent. While, non-institutional investors (NIIs) and Qualified Institutional Buyers (QIBs) bid for 75 per cent and 17 per cent, of their respective quotas. These two categories usually subscribe the most on the last day of the three-day bidding process. Burger King India has reserved up to 75 per cent of the issue for QIBs while 15 per cent for NIIs.

Subscribe to Burger King India for listing gains

Analysts at GEPL Capital recommend to ‘subscribe’ to Burger King India IPO for listing gains. At the upper price of Rs 60, the offer is priced at 14.8x FY20 CFO (cash flow from operations) per share. “As a long-term investment, we would wait a few quarters for signs of a sustainable recovery in the same-store sales growth and the ability to repay the pending obligations with a sustainable debt to equity,” Gaurav Hinduja, Associate Analyst at GEPL Capital said.

Research and brokerage firm Motilal Oswal Financial Services has also suggested to subscribe to the issue for listing gains. The brokerage firm said that considering Burger King India’s strong brand positioning, robust store expansion plans and the bright growth prospects of the QSR industry in India, it expects its financials to improve going ahead. The net debt/equity as of Sep’20 stood at 3.3x which post IPO will reduce to zero.

Burger King is one of the fastest-growing QSR businesses in India; it has been growing at a CAGR of 98% over 5 years bearing Covid-19 impacted quarter. “We, therefore, expect the growth trajectory will continue and its financial position to improve going ahead. Therefore, we recommend to subscribe over the issue,” said analysts at Dealmoney Securities.

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