The logic of the de-equitisation trade<br>股票低迷成大勢，背後原因幾何？

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{"text":[[{"start":11.83,"text":"The writer is a former chief global equity strategist at Citigroup "}],[{"start":16.54,"text":"In 1998, Citigroup poached a team of equity professionals, including me, from HSBC James Capel. "},{"start":23.819,"text":"I got a pay rise and three months off in the south of France. "},{"start":27.073999999999998,"text":"Legend has it that John Bond, then HSBC chief executive, put in an angry phone call to Sandy Weill, his counterpart at Citi, saying back off. "},{"start":35.817,"text":"Those were the days. "}],[{"start":38.12,"text":"This hiring spree reflected Citi’s desire to lead the “equitisation” of Europe. "},{"start":42.623999999999995,"text":"Investors were piling into equity funds. "},{"start":45.178999999999995,"text":"Private and state-owned companies were listing on stock markets. "},{"start":48.497,"text":"A global telecom, media and tech stock boom was in full swing. "},{"start":52.689,"text":"As continental Europe adopted the dominant Anglo-Saxon economic model, the revenue opportunities for investment banks seemed endless. "},{"start":59.607,"text":"They were not — a brutal bear market made sure of that. "}],[{"start":63.739999999999995,"text":"The global stock market stabilised in 2003. "},{"start":67.26899999999999,"text":"Many market participants, including myself, hoped for a “great rotation” out of bonds back into equities. "},{"start":73.387,"text":"This would close the valuation gap that had opened up between the two asset classes. "}],[{"start":78.58,"text":"While it is always tempting to tell clients what they want to hear, it dawned on me that a great rotation was unlikely. "},{"start":84.39699999999999,"text":"New accounting rules for pension funds encouraged them to move further into bonds. "},{"start":88.752,"text":"Regulatory changes for insurance companies made it harder to hold equities. "},{"start":92.794,"text":"Retail investors, burnt as the late 1990s bubble burst, were not coming back soon. "}],[{"start":98.58,"text":"If the valuation opportunity couldn’t be exploited by conventional investors, other arbitrageurs would emerge. "},{"start":104.809,"text":"Companies could raise cheap capital in the bond market to buy cheap shares in the equity market, either their own via a share buyback or those of another company via a takeover. "},{"start":113.714,"text":"Private equity, then a small player in the finance industry, also looked well placed. "}],[{"start":119.49,"text":"The retirement of old, listed shares through takeovers or buybacks started to exceed the issuance of new shares in primary or secondary issues. "},{"start":127.332,"text":"Stock markets began to shrink. "},{"start":129.412,"text":"With a typical lack of imagination, I gave this theme a name: de-equitisation. "},{"start":134.279,"text":"This clumsy, ugly word made my career. "}],[{"start":138.03,"text":"Other agents of the de-equitisation trade emerged. "},{"start":141.122,"text":"Activist investors bullied unloved listed companies into spinning off assets and buying back shares. "},{"start":146.552,"text":"Indeed, de-equitisation was never just a financial trade, it was also a governance trade. "},{"start":151.757,"text":"That’s why it struggled to take hold in Japan — even with languishing share prices, Japanese companies always found it easier to resist shareholder pressure to realise value. "}],[{"start":161.7,"text":"Central banks never really understood de-equitisation. "},{"start":165.129,"text":"They hoped that cutting interest rates and buying bonds would stimulate capital expenditure, but easy money stimulated more financial engineering than real engineering. "},{"start":173.10899999999998,"text":"A political backlash seemed inevitable. "},{"start":175.464,"text":"The US has introduced a tax on share buybacks, although to little effect. "}],[{"start":180.62,"text":"There has been much soul-searching about shrinking stock markets, especially in the UK. "},{"start":185.562,"text":"Many factors have been blamed, such as onerous reporting requirements and a stunted tech sector, but I think the explanation is simple. "},{"start":192.567,"text":"Domestic institutional investors shifted out of equities into bonds, partly via the adoption of liability-driven investment strategies, opening up an especially wide valuation gap between the two asset classes. "},{"start":203.659,"text":"De-equitisation was inevitable. "},{"start":205.66400000000002,"text":"Even with the latest interest rate increases, UK de-equitisers can still borrow at 6 per cent in the corporate bond market to buy assets on a stock market generating an earnings yield of 9 per cent. "},{"start":216.032,"text":"It makes little sense for listed companies to issue more equity or unlisted companies to float. "}],[{"start":221.84,"text":"Some UK companies have chosen to list in the US, where the equity culture is more robust and valuations higher. "},{"start":228.332,"text":"But even here, de-equitisation has taken hold. "},{"start":231.462,"text":"Available stock in the US public market has shrunk by about 1 per cent a year since 2000. "},{"start":236.792,"text":"Even the tech sector has shrunk, with huge buybacks from the likes of Apple countering issuance elsewhere. "},{"start":242.247,"text":"This marks a big difference from the late 1990s bull market. "},{"start":245.78900000000002,"text":"In 1999-2000, the US tech sector equitised by 29 per cent; in the 2021-22 bubble that figure was only 3 per cent. "},{"start":254.632,"text":"Maybe that’s why the Nasdaq is more resilient this time — the oversupply of tech equity is less extreme. "}],[{"start":261.3,"text":"The US equity market now trades on a similar (earnings) yield to the corporate bond market, so the de-equitisation trade looks less compelling. "},{"start":269.492,"text":"But I do not expect it to disappear completely. "}],[{"start":273.12,"text":"As for me, I was the last of those HSBC exiles to leave Citi. "},{"start":277.662,"text":"I should have followed my research all those years ago and switched out of public into private equity. "},{"start":282.30400000000003,"text":"I didn’t. "},{"start":283.247,"text":"However, the de-equitisation trade still makes sense, especially in Europe. "},{"start":287.852,"text":"Maybe it’s not too late. "}],[{"start":289.43,"text":""}]],"url":"https://creatives.ftacademy.cn/album/d18984e6-e6c7-4ca1-8e29-fba2c7696b5e-1691649839.mp3"}

The logic of the de-equitisation trade
股票低迷成大勢，背後原因幾何？

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The logic of the de-equitisation trade股票低迷成大勢，背後原因幾何？

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The logic of the de-equitisation trade
股票低迷成大勢，背後原因幾何？

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