Daily Brief: China Is Devoting Every Waking Hour – And Every Sleeping One – To IPOs

Daily Brief: China Is Devoting Every Waking Hour – And Every Sleeping One – To IPOs

over 1 year ago3 mins

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Data out on Monday showed that the value of Chinese initial public offerings (IPOs) is the highest in the world so far this year.

What does this mean?

Plenty of cogs in the Chinese economy have ground to a halt this year, but stock market listings aren’t one of them. That’s largely because the government sent officials to Shanghai’s stock exchange amid the city-wide lockdown, leaving them to approve IPOs by day and recuperate on inflatable beds by night. It was in the country’s interests to do just that, given how keen it is for companies in sectors essential to economic growth – renewables, chipmaking, high-end manufacturing – to keep listing. And it worked a treat: China averaged over one IPO a trading day during the lockdown, raising nearly $9 billion in April and May. That means the amount of money raised by Chinese IPOs is up 7% this year from last, even as the rest of the world has seen an 80% dropoff.

China IPOs

Why should I care?

Zooming in: Needs must.

Keep in mind too that some Chinese companies’ hands were tied here. For one thing, those that received the green light just before lockdown were regulation-bound to go ahead. And for another, the government still hasn’t finalized rules around whether companies that hold a lot of sensitive user data can list abroad, which means any that needed a cash boost had next to no choice but to list domestically.

The bigger picture: Eeny meeny miney…

If the going was good when China was in lockdown, analysts think companies could be even more enthusiastic to list now the country’s out of it. It helps too that one of the main alternatives looks a lot less appealing: the US stock market is tanking due to high inflation and rising interest rates, while China’s stock market is up 15% from its lows in April.

China vs US stocks

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The Airline Industry Is Finally Expected To Return To Profit Next Year

Airlines image

A major airline organization predicted on Monday that the industry will return to profit next year.

What does this mean?

Airlines enjoyed their best-ever run of profits before the pandemic hit – a key reason many of them were able to survive at all, albeit now with a collective debt of around $650 billion. And while they’re a long way from those heady days, they have been getting back on track: the industry’s record $138 billion loss in 2020 fell to $42 billion last year, and it’s expected to fall to $10 billion this one. That should, the International Air Transport Association predicts, allow the industry to get back to profitability in 2023. But it won’t be without obstacles: there are doubts over how long bumper post-Covid sales will last, especially as higher fuel costs force airlines to raise ticket prices on already cash-strapped customers. Some execs aren’t worried, mind you: they point out that passenger numbers held steady in 2009 after the financial crisis, and even started to rise in 2010.

IATA predictions

Why should I care?

The bigger picture: Fuel for thought.

Airlines also warned on Monday that the industry’s goal of net-zero by 2050 would be hard to achieve unless governments did more to help. Still, higher fuel prices might actually speed up the transition: the price gap between regular jet fuel and sustainable fuel has narrowed significantly since prices of the former boomed, meaning airlines might be more prepared to make the switch.

Jet fuel prices
Source: S&P Global

Zooming out: EasyJet isn’t happy.

Another issue facing airlines is staff shortages, which are now so bad that London Gatwick and Amsterdam Schiphol are capping the number of flights to help them cope. That’s not good news for airlines like EasyJet, which counts those airports as two of its biggest bases. It was forced to cut capacity on Monday as a result, and analysts suspect the airline could make up to $250 million less in profit this year.

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