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BlackRock buys GLobal Infrastructure

06th January 2024 – 13th January 2024 | Another week in the markets

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Source: MarketWatch 

Hello Saturday,

This week, the Middle East heats up as US-led attacks target Houthi hotspots, JP Morgan reports record annual profits and BlackRock buys GLobal Infrastructure partners in a massive $12.5 billion deal

  • US-led attacks on Houthi hotspots elicited strong responses from the Yemen-based militant group. Houthi rebels vowed to continue its attacks on ships in the Red Sea. The Houthis launched the offensive in the channel as a retaliation against Israel’s bombing in Gaza.
  • JP Morgan Chase, the biggest in the U.S, declared record-breaking profits for 2023 clocking in profits of $49.55 billion 
  • BlackRock buys out Global Infrastructure Partners in a $12.5 billion deal cash and stock deal. The target company owns and runs several utility facilities including energy, transportation, water and waste companies
  • Indian IT majors declare Q3FY24 results: HCLTech beats market estimates, reporting a 6% year-on-year rise in net profit of ₹4,350 crore. Wipro posts disappointing results with an 11% drop to ₹2,694.2 crore
  • Tata Motors commences production at Sanand facility acquired from Ford

Taking stock | Houthi hassles | JP Morgan’s jubilations | BlackRock buyout | HCLTech soars, Wipro disappoints | Ford’s loss is Tata’s gain | Invest wisely | Another week in the markets

Taking stock

The S&P500 ended the week within kissing distance of its all-time high that has stood for close to two years, but did not surpass it thanks to a heavy fall in airlines and discretionary spending stocks. Each of the three major indices ended the week higher. Dow Jones eked out marginal gains of 0.34%. S&P500 moved by 1.34% and Nasdaq pushed ahead with a 3.09% jump.

Houthi hassles

Res Sea tensions refuse to die down peacefully.

Responding to US-led attacks on Houthi storage and launch sites, the militant group stated that the US attacks had not caused any significant damage, and that they would persist in launching more attacks on ships passing through the Suez Canal.

The new development marks another worrying escalation in the battle between global forces and Iran-backed groups spread across the region. The US forces are being militarily supported by forces from the UK, Australia, Bahrain, Netherlands and Canada.

Meanwhile, Houthi militants, working hand in glove, with Iranian military and intelligence have unleashed a volley of attacks on critical shipping lines in the region.

The month-long attacks by Yemen-based Houthi rebels have forced international shipping companies to redesign their navigation routes around Africa, instead of cutting through the Suez Canal. 

One of the most strident offensives was let loose by the Houthis during the recent visit of Secretary of State Anthony Blinken to the Middle East. The attacks came despite a warning by the American administration that such unstinting attacks would carry repercussions. 

Initially, the Houthis launched an attack on Israel after its Gaza bombardments. However, Houthi attacks failed in breaching through the advanced Israeli defences, forcing them to re-focus their attention on international shipping lines.

Economists and market analysts expect a resurgence in inflation if attacks continue with the same intensity. Re-routing pushes up transportation costs, especially crude oil prices, which consequently triggers larger inflationary concerns.

JP Morgan’s jubilations

US’ biggest bank declared record-breaking profits for the financial year ended December 2023, despite reporting a one-time slip in the latest quarterly profits. 

For 2023, it reported a net profit of $49.55 billion, a leap of over 32% from its 2022 levels.

In the latest quarter, the bank took a hit of $2.9 billion to cover the dent incurred on account of the failures of Silicon Valley Bank and Signature Bank last March. 

The dent, technically put, is a special assessment issued by the Federal Deposit Insurance Corporation which directed America’s biggest banks to refill its coffers after they were spent providing guarantees for the fallen banks.

The bank’s quarterly profit also dipped as it opted to bear a  $743 million loss over treasury and mortgage-backed securities.

Meanwhile, Chief Executive Jamie Dimon has repeatedly warned that the macroeconomic environment does not encourage optimism, and the probability of significant market disruption remains high. He has also taken the contrarian stand that the market inflation may be stickier. 

Price chart

Source: Google Finance

BlackRock buyout

BlackRock has agreed to purchase Global Infrastructure Partners for a massive $12.5 billion deal in cash and stock. The purchase marks a momentous push of the world’s largest asset manager into the private-market investments world.  

Operated from New York, Global Infrastructure Partners runs several utility facilities spanning energy, transportation, water and waste firms. GIP also has a stake in the London-based Gatwick Airport.  

The acquisition of GIP is one of the biggest purchase deals for BlackRock since its acquisition of Barclay’s asset management operations, going back to 2009.

Further, BlackRock reported that its assets under management had exceeded the $10 trillion mark for the second time in the history of its operations. The AUM figure was reported at the end of the last quarter of 2023.

The deal involves payment of $3 billion cash and 12 million shares of BlackRock amounting to $9.5 billion. The deal will result in the six founding members of GIP becoming the largest shareholders of BlackRock. The six members will eventually own close to 8% of the BlackRock shares.

The deal is expected to send BlackRock’s private assets soaring by a formidable 30% and is likely to be more profitable than its sales of exchange-traded funds.

HCLTech soars, Wipro disappoints

Indian IT majors declared their third-quarter results for FY2024. India’s third-largest IT company beat market expectations and delivered a 6% rise in net profit to ₹4,350 crore compared to the quarter ending December last year.

However, Wipro put up a sad show and reported an 11% fall in net profit to ₹2,694.2 crore as against the ₹3,052.9 crore reported in the same quarter in the previous year.

HCLTech’s future guidance also makes for some sombre predictions. The tech major has forecasted a cut in its revenue growth from 5%-6% to 5%-5.5% on account of clients limiting discretionary spends, and prioritising cost-competitive deals over growth-oriented ones.

HCLTech’s forecast includes the revenue forecast for the German engineering company ASAP, which the former acquired in the middle of last year for $279 million.

Ford’s loss is Tata’s gain

Tata Motors, this week, said that it had commenced operations at the new production plant at Sanand in Gujarat.

The auto manufacturer’s subsidiary— Tata Passenger Electric Mobility Limited — had acquired the plant from Ford India in a ₹725.7 crore deal. 

The company said that the new production facility will help it unlock additional manufacturing muscle of 3 lakh units per annum, which can be scaled to 4.2 lakh units.

The Sanand plant is the company’s second plant in Gujarat, which will secure fruitful employment for over 1,000 employees. As production ramp-up plans come into play, the company said that it will be adding another 1,000 employees in the coming 3-4 months.

Tata Motors will be utilising the plant to manufacture internal combustion engines and electric vehicles.

Invest wisely 

Several US companies are expanding their operations and raking in record-breaking profits. BlackRock’s acquisition of GIP marks a new turn in the road for the company, and only a select few investors who had an insight into the ambitions of the asset manager will benefit from the development. At the same time, JP Mogan Chase’s chief Jamie Dimon must be heeded and investors must brace for sudden market swings, perhaps even an upheaval. Navigating the US markets and striking the right balance, all the while steering away from the extremes of greed and fear is not child’s play. One needs a reliable partner on this investment journey. The Appreciate app is one such platform that can help you seamlessly invest in the US markets and multiply your wealth without worrying about the fallouts from market volatility.

Warm regards,
Another week
in the markets

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