Capital Market Outlook 2021

traditionally, at the beginning of a year, we look into the crystal ball and make forecasts for the development of the Capital Market. The highs of the global stock indices suggest only positively, but one should assume that a forecast is very difficult in the sign of the pandemic.

Even as many companies in the pandemic struggle with business losses and liquidity difficulties, governments around the world are pumping countless billions into the economy and social systems. This must lead to a devaluation of money in the medium term, and so a German business magazine recently wrote: “Inflation is coming”.

If you factor out the energy price that fell in Germany in 2020, the price increase in 2020 was already 1.1 percent. Food prices in particular rose 2.4 percent. No wonder real assets such as (residential) real estate, equities and gold are currently in demand.

Even bitcoin is gaining popularity, as it cannot be printed on paper as often as you want, like Euros and US Dollars. In addition, Central Banks, and thus banks, are resisting deposits through negative interest rates. In a recent interview with the FAZ Newspaper, Martin Lück, Head of Capital Market Strategy at Blackrock, also comes to the recommendation to invest in more inflation-protected investments.

Obviously, many companies want to take advantage of this positive environment for the capital markets this year. The IPO pipeline is well filled. In Germany, Auto1 (known as “Wir kaufen dein Auto de”), the online platform “Mein Auto de”, the Continental subsidiary Vitesco, Vantage Towers (mobile), Suse Software, Synlab, Check 24, Ceramtec, Springer Nature and Wintershall are in the starting blocks.

Renell Bank has already been mandated for the support of two IPOs this year. Those who want to shorten the route to the Capital Market use so-called shell companies, which are already listed on the stock exchange but are not or no longer operational. Here too, we are currently seeing high demand and are currently accompanying three transactions. Also SPACS (Special Purpose Acquisition Companies) are booming. These are companies that are provided with plenty of capital at the IPO and then go in search of a takeover candidate. With 248 SPACS, such transactions accounted for about half of all IPOs in America in 2020.

Which industries are in demand? This still includes tech companies, which are also given high growth potential after the Corona pandemic. And again real estate companies are highly favoured by investors. This also applies to the market for SME bonds, which we particularly value.

Last Friday, Pandion AG became the first company in Germany specialising in residential real estate to issue bonds (20 million volume, coupon 5.5%). This continues a trend from 2020, almost half of the issue volume of German SME bonds came from the real estate sector last year.

Marc Renell