31 January 2022 - Interest Rates and Inflation

The last week of equity capital markets was a significant one for investors and companies alike, as crucial inflation data became available. Capital raising activity picked up from the week prior, with 13 companies raising via placements across the market.

As we've briefly explained prior, January is typically a slow month for capital raising activity in general as companies and investors shake off the holiday period. Despite this, January 2022 has been substantially slower than we would historically expect, with a 50% decrease in activity when compared to January 2021 and 2020.

A significant change in the macroeconomic outlook when compared to prior years is likely to blame, with uncertainty surrounding interest rates and the ongoing inflation concerns affecting global markets.

Market Summary

Global markets remained volatile as investors held their breath pending an update from the Federal Reserve, whose announcement to taper quantitive easing on January 5th saw the S&P 500 enter correction territory only 3 weeks later.

This had ramifications for all investors, and this was evidenced by heightened volatility for global markets. The S&P/ASX 200 VIX is a real-time market index which represents the market's expectations for volatility over the next 30 days, and it saw a 1 year peak on the 27th of January.

The Federal Reserve policy meeting at the end of January coincided with an announcement that it would 'soon be appropriate' to raise interest rates. Inflation data for Australia was also released by the Reserve Bank of Australia, with the Consumer Price Index (CPI) rising by 3.5% in the twelve months to the December 2021 quarter.

Investors now look ahead into 2022 with a clearer picture on inflation information and potential interest rate hikes, as well as more assurance on the macroeconomic outlook.

Placement Breakdown

Capital raising activity picked up this week with 13 placements raising a total of $234m. This was spread between 3 different sectors, but materials remained the frequency leader with 10 placements accounting for $54m (23%) of the week's capital raising.

The health sector saw $180m raised through a two placements, which contributed the majority of this week's capital raising amount.

The largest placement for the week was undertaken by Telix Pharmaceuticals (ASX:TLX) who successfully raised $175m via an institutional placement, and $25m via a Share Purchase Plan.

The placement was made at a discount of 4.8% to the last closing price prior to the trading halt, and funds are to be used towards executing it's late stage clinical product pipeline and advancing multiple programs towards commercialisation (particularly the prostate cancer therapy).

You can read more about this placement here, and the company's website.

90 Days Post Placement Performance

This week's performance chart was somewhat unreadable as Superior Resources Limited (ASX:SPQ) had an mind-blowing run up to 595% at 83 days post placement, which effectively scaled the data so heavily that all placements in that timeframe looked misleadingly flat in their performance.

Luckily, you can refer to the values above and check out the best and worst performers for this time period. Superior Resources Limited (ASX:SPQ) settled down to a still insane 376% 90 days post raise return, while we saw substantial returns for Greenwing Resources Ltd (ASX:GW1) and Neuren Pharmaceuticals Ltd (ASX:NEU) respectively.

In addition to this, we also tracked how these placements performed to present, with a comparison done between the offer price and the last traded price on January 28th, 2022. We can see that Superior Resources Limited (ASX:SPQ) settled down further but is still heads and shoulders above the pack with a 329% return from offer price until today.

Check out our Past Capital Raises page for more information on past transactions. If you want more information on Fresh Equities and how we work, feel free to contact our team at clients@freshequities