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On September 8th, Daiwa issued a research report stating that Bilibili (09626.HK) issued US$700 million in zero-coupon convertible bonds maturing in 2031, while Tencent (00700.HK) completed the sale of its entire approximately 9.6% stake. The bank views this innovative win-win-win structure positively, believing it eliminates Tencents long-standing pressure to cash out, brings Bilibili approximately US$400 million in new funds, and limits equity dilution through the immediate US$300 million share buyback and cancellation. The report states that Bilibili has used US$300 million of the proceeds to buy back shares. Based on the initial conversion price of the convertible bonds (approximately 35.2 million shares), the total dilution is approximately 8.4%. However, after deducting the immediate cancellation of the repurchased shares, the net dilution is limited to approximately 3.5%. The bank reiterated its buy rating on Bilibili. The bank believes the benefits outweigh the drawbacks because it immediately eliminates Tencents selling pressure and raises long-term zero-coupon funds at a cost far lower than ordinary offshore bonds.The Icelandic government summoned the U.S. ambassador to Iceland after Trump posted a map on social media that included Iceland within the U.S. territory.On September 8th, Citigroup issued a report stating that Nikes adjustment of its China distribution strategy starting in January 2027 is expected to negatively impact Topsports (06110.HK) business prospects for fiscal year 2028 (ending February 2028). Currently, the bank is not highly confident that Nike will continue to subsidize Topsports online distribution rights after the current fiscal year (ending February 2027). The bank lowered its net profit forecasts for Topsports for fiscal years 2027 to 2029 by 2%, 19%, and 18% respectively, while its sales forecasts were lowered by 1%, 5%, and 5% respectively. Based on an unchanged target P/E ratio of 11x for each historical year ending in 2027, the target price was lowered from HK$1.91 to HK$1.7. The bank maintains its "Buy" rating, considering the stocks double-digit dividend yield. The relative preference order for the Chinese sportswear sector remains unchanged: Anta (02020.HK) > Li Ning (02331.HK) > Topsports, all with "Buy" ratings.On September 8th, Futures News reported that Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman reaffirmed their commitment to maintaining market stability, deciding to keep their daily crude oil production quotas for October at the same level determined in September 2026. OPEC+ will continue to hold monthly meetings to monitor market dynamics, with the next meeting scheduled for October 4th, 2026. Previously, the production quotas of these seven OPEC+ countries had increased for six consecutive months, and member countries are still working to determine new production quotas. During these six months, the organization gradually lifted production cuts, and the market still has sufficient capacity to absorb the increased oil supply. However, despite the significant increase in production quotas, the Strait of Hormuz is blocked due to the war between the US and Iran, and Russian crude oil exports are also restricted due to Western sanctions. In other words, since these seven countries crude oil is mainly for export, the increased quotas are meaningless given the export restrictions.On September 8th, Bank of America Securities issued a report stating that China Huadian Corporation (01071.HK) still faces short-term profit pressure from rising coal prices. Bank of America Securities reiterated its "underperform" rating but raised its target price for H-shares from HK$3.5 to HK$3.7, and its target price for A-shares from RMB 4.1 to RMB 4.3, to reflect better-than-expected electricity prices, lower financing costs, and increased carbon trading revenue. The report indicated that the improvement in electricity prices in the second quarter was mainly driven by rising spot and monthly market electricity prices following coal prices, and the allocation of capacity tariff revenue to lower power generation volumes. Shandong remains the most mature electricity market in mainland China, with electricity prices closely linked to spot prices, which helps with fuel cost transmission. Management expects the benchmark coal price in Qinhuangdao to fluctuate around RMB 850 per ton in the second half of the year; however, the low base of coal prices in the third quarter of last year will result in a higher base for comparison in fuel costs in the coming quarter. Gas-fired power generation fell by more than 10% year-on-year in the first half of the year, but profitability improved as the company deliberately reduced low-profit periods and focused on generating power during peak demand periods, with capacity tariff mechanisms in Tianjin and Guangdong also providing support.

Oil costs increase as supply restrictions trump economic worries

Charlie Brooks

Jul 05, 2022 11:12


Oil prices climbed on Monday as supply worries spurred by a decrease in OPEC production, unrest in Libya, and sanctions against Russia trumped fears of a worldwide recession that would diminish demand.


In June, Euro zone inflation hit an all-time high, boosting the case for rapid rate rises by the European Central Bank, while consumer sentiment in the United States reached an all-time low.


Brent oil rose $2.26, or 2%, to $113.89 a barrel as of 12:47 p.m. ET (1648 GMT), after shedding more than $1 in early trading. The price of U.S. West Texas Intermediate (WTI) crude rose $2.20, or 2%, to $110.63 despite the lack of trading activity over the Fourth of July holiday.


According to a Reuters survey, the Organization of the Petroleum Exporting Countries (OPEC) failed to meet its June goal of increasing production.


Thursday, authorities in OPEC member Libya declared force majeure at the Es Sidr and Ras Lanuf ports and the El Feel oilfield, claiming a reduction of 865,000 barrels per day in oil output (bpd).


Meanwhile, more than two weeks of unrest have caused Ecuador to lose almost 2 million barrels of production, according to Petroecuador, the country's state-owned oil company.


This week, a strike in Norway may restrict supply from the biggest oil producer in Western Europe and reduce overall petroleum production by 8 percent.


"This background of rising supply interruptions clashes with a probable shortage of spare production capacity among Middle Eastern oil producers," said Stephen Brennock of oil trader PVM, referring to the producers' limited ability to pump more oil.


And prices will climb if new oil production does not reach the market shortly.


On Monday, British Prime Minister Boris Johnson asked OPEC+ to raise oil output to tackle the growing cost of living.


As a consequence of Russia's invasion of Ukraine, supply concerns have sent Brent oil prices close to 2008's record high of $147 a barrel.


As a consequence of restrictions on Russian oil and limited gas supplies, surging energy prices have driven inflation in certain countries to multi-decade highs and stoked fears of a recession.


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