Utilities Sector

• There continues to be little traction above $93 on the MSCI ACWI (ACWI-US), which remains the top-end of our anticipated 2023 trading range.
• At the same time, we cannot get too bearish until there is a break below $90.50 short-term support.
• EURO STOXX 50 pulling back to 4100-4200 buy area. TOPIX holding above 2120 support. Buy ideas within Technology, Construction Materials, gold miners, Utilities, other defensives.

• S&P has raised Naturgy Energy Group SA (NTGY SM)‘s credit outlook from negative to stable considering that the company may not finally carry out the Gemini spin-off project.
• Naturgy’s shares do not trade on fundamentals, rather on expectations that IFM tries to increase its stake (free float is just 15%). There’s some potential overhang risk though.
• IFM has not acquired any significant stake since April, but I would not short the shares as IFM could resume share purchases on an opportunistic basis.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Azure Power Global Ltd

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess China Water Affairs’ ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.

• The New Mexico Supreme Court denied a joint motion filed by PNM Resources (PNM US), Avangrid Inc (AGR US) and the New Mexico Public Regulation Commission last February.
• The New Mexico Court assess the operation in an oral hearing convened next September. The delay of the decision implies higher uncertainty about the closing of this deal.
• I continue to believe that Iberdrola/Avangrid’s acquisition will be completed. PNM shares look fairly valued on an EV/Fwd EBITDA basis, therefore I see it as a reasonably balanced risk-reward proposition. Long.

• Late Wednesday, the boards of Adani Enterprises, Adani Green Energy, and Adani Transmission announced they would meet Saturday to consider fund-raising proposals.
• They will consider issuance of equity shares or other eligible securities through a private placement, a qualified institutions placement, or a preferential issue, among other methods.
• Earnings just out were generally good/up. They still need/want to raise equity. SEBI is still conducting its investigation but hints are there’s trouble. A set of private placements looks likelier.

• Black Rock Mining Ltd (ASX:BKT) is developing the Mahenge natural graphite project in Tanzania, eastern Africa and is well advanced in defining and planning a low capex, high margin, high return operation.
• The company holds an 84% interest in Mahenge with the Tanzanian government retaining a free-carried 16% stake.
• Mahenge is one of the largest JORC-compliant flake graphite resources globally and is well positioned to benefit from growing global demand for natural graphite from use in Li-ion batteries. 

• The review period for the price cutoff for the MSCI May Quarterly Comprehensive Index Review (QCIR) ended 28 April. MSCI should select a day from week one.
• The most changes are expected in China and there are a couple of stocks that could trigger the Extreme Price Increase thresholds.
• Some stocks appear on the list of potential changes on certain days during the review period and their addition/deletion will depend on the day that MSCI chooses for computation.

• The reduction of credit loans by Korea Investment & Securities and Kiwoom Securities in the past week may have accelerated unwinding of positions of 8 stocks related to CFD selling.  
• The balance of credit loans for KOSPI increased 12.7% YTD. On the other hand, the balance of credit loans for KOSDAQ increased by 36.1% YTD. 
• As local securities companies further reduce credit loans and regulators also restrict CFD related leverage, a sound pair trade could be to go long KOSPI 200 and short KOSDAQ 150. 

• Five days ago, Tokyo Gas (9531 JP) announced a revision to earnings for the year to 31 March 2023. Today they reported results, and announced March 2024 guidance.
• The company also announced a buyback programme to spend up to ¥113 billion to repurchase up to 53mm shares (12.2% of TSO). ¥113 billion is a very specific number. 
• With the price where it is, ¥113bn is “only” 9.6% of shares out but this is very interesting indeed.

• The biggest story in the Korean stock market in the past three days has been the crash in 8 stocks related to CFD derivatives.
• As a result of the CFD related margin call selling, the following are the major impact on the 8 related stocks and the overall Korean stock market in our view.
• They include a) overshooting on the downside on 8 related names, b) negative impact on the major rechargeable battery names, and c) negative impact on the overall Korean stock market.