After a successful 2013, where the S&P 500 Index in the U.S. returned 29.6% while the S&P/TSX Composite in Canada returned 9.6%, 2014 has had a choppy run, with strong returns in January to February, but some pullback in March and the start of April – although the Canadian market has returned 6.7% to April 22nd, while the U.S. broad market index has returned only 1.9%.
Both indices have had some 4%-6% setbacks this year which have prompted concerns and talk about valuation levels as well as the direction of markets going forward. At the same time, there are indications that markets remain in good shape. One of the major indicators of good health of stock markets is heightened Mergers and Acquisitions (M&A) activity. M&A activity usually picks up when companies have sufficient cash reserves and are confident about their business models and the strength of the market price of their shares. According to news.efinancialcareers.com and the Wall Street Journal, the value of the M&A deals announced in the U.S. in January-March 2014 was the highest in seven years. High M&A activity is reflected in the returns of American investment banks. In particular, this year, Goldman Sachs’ advisory revenue increased 41% while Morgan Stanley’s rose by 34%.
This week has been hot in terms of M&A activity in the global pharmaceutical sector. In particular, a major U.S. pharmaceutical company Pfizer is expected to bid for a British-Swedish multinational company AstraZeneca. What is even more encouraging is that both stocks are up which shows that investors believe that the cost of the deal is not overstretched and that the companies will realize synergies as a result of the merger. In particular, Pfizer shares have climbed more than 4% in the past few days and AstraZeneca is up by more than 7%.
Another pharmaceutical M&A story is an asset swap deal between GlaxoSmithKline and Novartis. GlaxoSmithKline agreed to sell its oncology products to Novartis for $14.5 billion, and in return to buy Novartis' vaccines business (excluding Novartis’ flu vaccine business). GlaxoSmithKline shares are up by almost 7% in the last few days, while Novartis' shares are up more than 3%. And Canada is not sitting on the sidelines - Canadian firm Valeant Pharmaceuticals is bidding for botox maker Allergan. Both stocks have risen strongly in the past few days, by 16% and 29% respectively.
By: Ukrainian Credit Union Limited
No comments:
Post a Comment