PE space on spirits, DM vs EM debate and More

1. Deals on wheels:

   1. The animal spirit in the boardrooms, cheap borrowing costs, and trillions in coffers of private equity treasures, have led to the record merger and acquisition activity in 2021. After the summer boom, we have had $3.9 trillion activity so far. This is just behind the 4.3 trillion mark after the 2008 crisis. The tech sector has led the bunch of transactions, with 21% of the deals.

2. The ECB rate decision should ideally dial back on the purchase programme as the Eurozone saw very high inflation numbers this month. Analysts expect them to cut back their purchase by 10 billion euros. But a complete pull back is something unlikely even for the next year.

3. And the time is here, the US treasury is running short of cash and now has declared emergency borrowing plans. But now the yields will be pushed higher, and people don’t subscribe to bonds, treasury will have to start fire sale of assets.

4. Though we see a massive drop in Chinese Tech ETFs , after the regulatory crackdown, of late we see a lot of bargain hunting in the tech space. Even though prices are collapsing, investors are flocking to the tech sectors, as we see continued rise in the outstanding shares of these ETFs. I am more interested about the implications such regulatory upheavals can have for SP500, as the top 6 tech companies account for a fourth of the market cap, and if the White House were to take any hasty decisions, NASDAQ can nosedive to pre pandemic levels.

5. The Delta variant has changed the tapering timeline, the market is calling this 'Taper of Tapering'. Central Banks across DMs are not expected to raise rates by 2023, and such a narrative can have interesting implications for the credit markets.

6. How often has a resignation of a PM been taken by the markets, both domestic and global, so positively that the index rose to highs. This week, Japanese PM, Yoshihide Suga, resigned. Japan looks like a promising investment destination because of attractive valuations and a brighter future under the new admin. Across the DMs, Japan is lagging its western counterparts by a margin not seen before.

7. The market would look into the components of inflation this time, to ascertain the level and persistence nature of inflation. If we see more sectors showing new signs of inflation then, the Fed and the treasury might have to prepone their taper and soon devise ways to scale inflation back to target 2%.

8. Asset managers are starting to build business around the carbon offsets and the likely benefit from enabling better transaction liquidity in the carbon credit trading. So now banks and asset managers will quote Assets under management and Hectares under mgt. This is leading to higher land prices for carbon projects. These developments can have interesting implications on timber returns.

9. Global equity funds have reduced their exposure to China and Hong Kong, according to an analysis of 381 funds. Average exposure has dropped from 5.1% in January to 3.8% in September, as China’s regulatory crackdown on its tech sector hits industries like e-commerce, gaming, and education. Investors have instead upped their US holdings.

10. Technologies of the future, banks are chasing them, so they are destined to succeed. We identified fourteen emerging technologies that currently form a $330 billion market, but could be worth $6 trillion by 2030. The technologies include brain-computer interfaces, bionic humans, carbon capture storage, 6G, emotional artificial intelligence, eVTOL aircraft, green mining, holograms, the metaverse, next-gen batteries, ocean-tech, synthetic biology, wireless electricity, and immortality tech.

11. Interesting Charts: