From the Securities Lending Trading Desk

Action Camera in Yellow Case Vector Illustration

US Biotech company Novavax Inc. have seen their shares plummet; resulting in strong directional demand, and fee levels stay elevated for GoPro as bearish sentiment remains prevalent in the market. Following China’s anti-corruption campaign, casinos in Macau are seeing their revenue increase. In Europe, there is an increase in securities lending demand for Rec Silicon after their shares plummeted by 25% this week.

Below please find the September 29 edition of From the Trading Desk, which provides timely commentary about top security earners, revenue drivers and other factors influencing the securities lending market from the BBH Securities Lending Trading Team.

Americas 

Biotech company, Novavax Inc. saw their shares plummet after a failed vaccine trial, resulting in strong directional demand. On September 16, shares fell 84% to a 52-week low on news that the company’s RSV-F vaccine did not achieve its primary and secondary endpoints in a clinical trial. The disappointing results triggered several analyst downgrades as upcoming events could restore value and drive shares upward. The increase in short interest sent fee levels higher.

Fee levels stay elevated for GoPro, Inc. as bearish sentiment remains prevalent in the market. The company’s shares have been on the upswing, hitting a 6-month high at the close on Friday. The company hopes to kick-start growth after recently unveiling its new products: the Hero 5 action camera and Karma flying-camera drone. Sales have declined by nearly half in recent quarters after the flop of the company’s first everyman camera last year. In July, GoPro reported a quarterly loss of $91.8 million; its third consecutive loss. Despite the recent share climb, some investors question whether the new products will be enough to jump start sales growth and profitability.

Asia Pacific 

After plummeting in 2014-15 following China’s anti-corruption campaign, Macau’s casino revenue is showing signs of improvement. Monthly casino revenue remained within range for the past year of about $2-2.5 billion. New casino openings including Wynn’s Palace and Sands’ Parisian may lure more Chinese visitors, who make up about two-thirds of Macau’s total visitors. Big spenders however are likely to remain wary of excess spending and continue to stay away. We continue to see long term lending demand for Macau Legend Development Limited and Wynn Macau Ltd.

Noble Group Ltd’s founder and Chairman said it could take up to two years for the distressed commodities trader to return to profit. Noble Group Ltd announced that it may seek a ‘strategic partner’, as it battles to return to profitability following a share price collapse resulting from accusations of accounting impropriety and its first reported annual loss in two decades. The company is seeking to save $2 billion through cost cutting measures and the sale of shares and other assets but is still in need of additional capital. We have seen long term lending demand for Noble Group Ltd.

Europe 

Securities lending demand has increased for Rec Silicon after shares plummet 25% this week The company cut third quarter guidance following a China-U.S. trade dispute which disrupted demand for polysilicon. The arrival of new silicon gas supply from competitors drove average selling prices down 6% in 2015. This pressure will likely intensify as competitors seek market share gains from incumbent leader REC Silicon. REC Silicon seeks to bolster its cash position and reduce inventories by restricting output further at its Moses Lake plant, with a planned capacity utilisation of 50%. Capital spending is to be limited to maintenance requirements only.

Pressure continues to mount on Italian banking sector Borrow demand continues to strengthen for Italian banks amid a number of capital increases necessary to bolster balance sheets. Banca Monte dei Paschi is examining whether a voluntary debt-for-equity swap would cut the amount of stock the firm needs to sell through a rights issue. Banca Popolare and Pop Milano are both in demand with EGM’s scheduled mid-October ahead of their proposed merger. Ubi Banca levels are climbing quickly from easy-to-borrow levels as they are among the most distressed banks in Italy and need to raise capital.