ETF Express: Week Ending 25 August 2023
- Uranium ETFs (ATOM, URNM) were a theme across the top performers last week as Sweden unveiled plans to lift its uranium mining ban.1 The week prior, the nation had announced plans to triple its nuclear power capacity over the next two decades by building at least 10 new nuclear reactor facilities.2
- Short US-equity funds (BBUS, SNAS) were among the poorest performers as markets rebounded despite mild commentary from the Federal Chair Jerome Powell at Jackson Hole. Traders have priced in an increasing likelihood of up to two rate-hikes before the end of 2023, however equity markets seem to be unconcerned as China introduces economic initiatives.3
- There were $359 million in reported inflows for the week, and only $218 million in outflows, marking another consecutive week of net inflows for the Australian ETF industry.
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ARM-ed and Ready for IPO
Semiconductors & Technology
Shockwaves were felt in the semiconductor industry last week as Softbank’s Arm Holdings (Arm) began filing for what may become one of the largest tech IPOs of all time. Arm, which stands for ‘Advanced RISC Machines’ is a semiconductor design firm that specialises in the development of low power, yet high-performing microchips. Their chip designs, which utilise the RISC – Reduced Instruction Set Computer – architecture, is used in 99% of smartphones around the world.4 Their customers include Apple, Samsung, and Qualcomm, as well as many other tech giants not limited to the mobile phone industry.5
Such a dominant position over entire tech sectors has seen industry analysts project valuations upward of US$60 billion.6 Softbank has set its sights on raising US$10 billion on Arm’s IPO, which would make it the third largest tech IPO in history.7 Alibaba currently holds the record after raising US$25 billion on its initial offering in 2014, whilst Meta, then known as Facebook, raised US$16 billion in 2012.8
But despite all the excitement, this isn’t Arm’s first rodeo with either IPOs or acquisitions. Founded in 1990 as a joint venture between Acorn computers, Apple, and VLSI technology, Arm went through its first round of IPO on the London Stock Exchange and Nasdaq in 1998.9 The company then went on to be acquired by Softbank as part of its ‘Vision Fund’ in 2016, and even more recently, Nvidia, the market leader in chip design, also tried its hand at acquiring Arm for US$40 billion in 2021 but was denied by the US Federal Trade Commission on anti-trust grounds.10 Suffice to say, with so much interest on Arm, its IPO later this year will definitely be one to watch for the semiconductor industry.
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- Globally visible copper inventories are at record low levels, while exchange inventories decreased by 56% against the 5-year seasonal average.11
- A worsening property crisis in China contributes to worries over the country’s struggling economy. Existing home prices have fallen at least 15% from 2021 highs in major cities such as Shanghai or Shenzhen, lower home prices may dampen property demand with flow-on effects on copper.12
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- China has announced a slew of measures to boost stock and property markets, helping offset concerns surrounding weakening demand and monetary tightening in other central banks.13
- A tropical storm off the coast of the US Gulf Coast could cause significant supply disruption to roughly 15% of total US crude production.14
- Federal Reserve Chair Jerome Powell has stated that the US central bank may raise rates further to cool inflation, raising concerns for demand.15
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- Gold’s outlook may improve as US inflation has fallen sharply from 2022.16 Traders are awaiting further data indicators as the Federal Reserve failed to deliver decisive comments on future interest rate changes at Jackson Hole.17
- Despite the Federal Reserve’s insistence that future monetary policy will be data dependent, traders have priced-in higher odds of two further rate hikes by the end of 2023.18
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Forecasts are not guaranteed, and undue reliance should not be placed on them. This information is based on views held by Global X or referenced sources as at 25th August 2023.