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In today’s edition
- Surge in active ETFs
- IPO resurgence
- Amazon targets the discount market
- Webtoon’s strategic IPO
- VanEck proposes SOL ETF
Market Snapshot
The US stock market concluded a strong quarter with slight fluctuations on Friday, influenced by economic data and political events. Over the quarter, the broader market grew nearly 4%, accumulating a 14% gain for the first half of the year despite rising Treasury yields, which closed at two-week highs by the end of June.
Inflation data released on Friday showed Personal Consumption Expenditures (PCE) prices unchanged for May and core PCE up only 0.1%, meeting analysts’ expectations and initially fueling hopes for potential rate cuts. However, the U.S. presidential debate the previous night introduced new uncertainties, placing upward pressure on Treasury yields and tempering the week’s gains. Despite these mixed signals, the market’s overall performance reflects an optimistic investor outlook, balancing economic indicators with political developments.
Stock market closing data for the week of Jun 24th to Jun 28th, 2024
News Summaries
In 2024, the ETF market saw a remarkable influx of new funds, with 236 ETFs launched, including 166 actively managed ones, a significant rise from the previous year’s total of 155 active and passive ETFs combined. This surge is attributed to innovative features in these active ETFs, such as extra income options, double exposure to specific stocks, and loss protection, which have notably piqued investor interest and investment. Prominent financial institutions like Capital Group and BlackRock (Explore: BLK) are expanding their active ETF offerings, reflecting a broader shift in investor preference from traditional mutual funds to more flexible ETF formats. Despite the mutual fund market still being substantially larger, active ETFs are attracting significant capital, drawing nearly $100 billion in just five months of 2024, while mutual funds experienced substantial outflows. This trend underscores a growing confidence in active ETFs among investors and advisors, integrating them more deeply into diversified investment strategies.
The US IPO market has experienced a significant rebound in the first half of 2024, with over $20 billion raised, marking the strongest start since 2021. This resurgence is supported by a stable equity market and low volatility, encouraging companies to pursue public offerings. Notable listings include Viking Holdings Ltd.’s (Explore: VIK) $1.8 billion IPO among three that crossed the $1 billion threshold. As the year progresses, the focus is on the second half, which is shaping up to be active despite the potential distractions of upcoming high-stakes elections in the US, UK, and France. Financial institutions like Morgan Stanley and Goldman Sachs report a healthy engagement from a diverse investor base and more rational valuation discussions, suggesting a sustainable pace of market activity moving forward. Additionally, there is anticipation around private equity firms potentially returning to the market after a period of holding back, which could introduce larger, more liquid IPOs.
Amazon (Explore: AMZN) is set to launch a new direct-from-China discount section on its app, aiming to compete with rising e-commerce stars Temu and Shein by offering ultra-low-cost goods shipped directly from China to the US The new channel will feature items costing less than $20, lightweight, and non-perishable, with delivery times projected between nine to 11 days. This move leverages the ‘de minimis’ rule, allowing tax-free imports of goods valued under $800, a strategy that Temu and Shein have used effectively to avoid tariffs and dominate the low-cost online retail space. Amazon’s initiative, set to begin this autumn, coincides with Shein’s IPO plans and represents a significant shift in strategy as it adapts to the competitive pressures and logistics models that have fueled the success of its Chinese counterparts.
Webtoon Entertainment, a subsidiary of South Korea’s Naver and a key player in the digital transformation of the manga industry, has successfully priced its US IPO, raising $315 million and valuing the company at $2.7 billion. Set to commence trading on Nasdaq, the company boasts 170 million monthly active users globally, with significant markets in South Korea, Japan, and a growing presence in the US Despite a net loss of $145 million on revenues of $1.28 billion last year, investor interest is high, as evidenced by BlackRock’s planned $50 million investment. This move reflects the broader industry trend where digital comics are increasingly inspiring mainstream media productions, potentially attracting new international audiences. The offering, managed by leading financial institutions like Goldman Sachs and Morgan Stanley, occurs amidst a backdrop of slowing industry revenue growth and data sovereignty issues between Naver and LY Corporation.
From the World of Crypto
Solana Valuation Scenarios Overview by 2030. Source
VanEck, an investment firm based in New York City, has recently filed for the first Solana (SOL) exchange-traded fund (ETF) in the US, signalling potential growth in the cryptocurrency ETF market.
The history of cryptocurrency ETFs in the US shows a lengthy approval process, as seen with Bitcoin’s ETF taking over a decade to secure approval. Ethereum ETFs experienced a smoother path, with recent approvals suggesting a potentially quicker process for Solana, especially given regulatory comparisons between Ethereum and Solana. However, Solana faces specific challenges, as it was previously labelled a security by the SEC, complicating its path to ETF approval.
The broader cryptocurrency market is showing signs of shifting focus from Bitcoin to other digital assets like Ether and Solana, especially in the ETF arena. Bitcoin’s initial dominance in the US spot ETF market early in 2024 led to significant investment inflows, pushing its price to record highs. However, as the market matures, Ether and Solana have started gaining traction. Ether’s performance has notably increased by 49% since the beginning of the year, outpacing Bitcoin, while Solana has surged significantly over the past year. These shifts indicate a growing investor interest in diversifying crypto-asset exposure beyond Bitcoin.
The SEC’s evolving stance on cryptocurrency ETFs, marked by the recent approval of Ether ETFs, suggests a changing regulatory environment that could benefit future proposals like the Solana ETF. Despite this, the SEC’s previous classification of Solana as a security raises concerns about the feasibility of a Solana ETF. This regulatory backdrop, combined with ongoing market dynamics, will play a critical role in determining the success of new ETFs, influencing both the timing and the structure of future cryptocurrency investment products.
