Before the bell: Wall Street holds steady, but Asia does not

While Wall Street managed to close in the green yesterday, losses in Asia this morning are mounting from 3% to as much as 7%. In Belgium, meanwhile, there is quite a bit of pharmaceutical news.

Monday was a red trading day for European markets. Chemical stocks in particular were hit hard. Azelis (-3.8%), IMCD (-4.9%) and Solvay (-3.3%) all lost ground. The trigger was the sharp rise in energy prices. The price of a barrel of Brent oil has risen by 10 dollar per barrel since last week’s low. European gas prices also briefly jumped by about 50%. On Wall Street there was no sign of panic. The S&P 500 and the technology-heavy Nasdaq both closed in the green. One exception was Berkshire Hathaway (-4.9%), Warren Buffett’s holding company. The quarterly results published over the weekend were received lukewarmly by investors. Cruise stocks such as Norwegian Cruise Line (-10.5%) and Carnival (-7.6%) were under pressure due to tensions around Iran, as were other tourism-related stocks.

In Asia this morning, the South Korean market stands out. The Kospi index is down 7%. The exchange had been closed yesterday for an extended weekend, meaning investors are only now able to react to the war in Iran. Japan’s Topix index is also down 3.4%. In Brussels, attention is focused on the reaction to news surrounding UCB (-1.1%). Bloomberg reports that the US Food and Drug Administration has granted orphan drug status to Cimzia. That status comes with seven years of market exclusivity in the United States if the drug is approved for certain indications. Pharmaceutical company Fagron (-0.9%) completed its acquisition of Vepakum. The Brazilian competition authority had previously approved the transaction. Investors will also be watching to see whether EVS (+6%) can extend its gains today. The technology company was Monday’s strongest riser on the Brussels exchange after strong quarterly results. Among others, Target, Best Buy, CrowdStrike and Sea Limited publish annual results today.

Do not invest in the losers

At Spaarvarkens we have not been fans of healthcare real estate operator Care Property Invest for years. We have consistently preferred Cofinimmo. Still, the company presented fairly solid results on Monday evening. EPRA earnings rose 9% and earnings per share came in at 1.16 euro. This allows for a dividend of 1 euro per share. Many investors look fondly at Care Property Invest because the dividend is tax-advantaged, with withholding tax of only 15%. At the current share price that results in a net dividend yield of 6.2%. Yet we remain cautious. Historically, Care Property Invest has built its portfolio through finance leases that will expire in the coming years. That could put pressure on future figures. We are also not enthusiastic about the recent capital increase. After that operation, the debt ratio remains higher than a year ago. With the capital raised, the group took over, among other things, problematic properties from Korian, a healthcare operator that itself ran into difficulties. Whether taking over troubled assets is the right strategy remains to be seen. It is now up to Care Property Invest to prove itself. For the time being, we remain on the sidelines.

Invest in the winners

A company that absolutely belongs on an investor’s watchlist? That would be Sea Limited. The Singapore-based holding has nothing to do with the sea, but it has built an impressive technology ecosystem in Southeast Asia. Sea Limited owns Shopee, an e-commerce platform that is extremely popular in the Philippines. Shopee controls around 50% of the e-commerce market in Southeast Asia and is growing strongly in a region with 700 million inhabitants where the middle class is expanding year after year. That explains why institutional investors in particular are buying into Sea Limited. In addition to e-commerce, the group also has an entertainment division and a financial arm, both of which are performing strongly. Like many other technology stocks, the share has performed weakly in recent times. That may create opportunities. The group publishes its annual results today. Analysts expect revenue growth of 36% and earnings per share of 0.90 dollar. Due to the strong growth, analysts expect Sea Limited to post earnings per share of 4.26 dollar in 2026. Based on that expectation, the share trades at a price-earnings ratio of 24.64. That is not expensive, provided that growth remains intact. And take it from this world traveler: anyone looking for growth today should look to Southeast Asia, not to Europe.

Did you know…

that despite the recent spike, European gas prices are roughly at the same level as a year ago? Gas prices are highly volatile, so price increases should always be viewed against absolute levels in the past. In reality, the move is less dramatic than the percentage increase suggests.

This article was translated from Dutch and was originally published on Spaarvarkens.be.