about 2 years ago • 3 mins
US stock exchanges are feeling pretty unfulfilled by a sudden slowdown in business from China, so they’re looking elsewhere in Asia to get their fix.
What does this mean?
Chinese government crackdowns are pushing more of the country’s firms to cancel plans to list their stocks on US exchanges, since the prospect of regulators getting involved isn’t exactly something to look forward to. Bad news for US stock exchanges: a lack of new Chinese listings means their revenues are at risk, so they’re looking for companies from other Asian countries to pick up the slack. But that’s hardly the norm: more Chinese companies listed in the US this year alone than Asian-Pacific companies have over the past decade. Still, that hasn’t put the exchanges off: they reckon that, thanks to large populations and growth potential, companies in countries like India and Indonesia could be big opportunities for new listings going forward.
Why should I care?
For markets: Once bitten, twice shy.
Chinese companies might have dodged a bullet: data from Bloomberg on Wednesday showed more than half of this year’s initial public offerings (IPOs) in the US are now trading below their initial prices. In fact, on average, stocks of companies that went public in 2021 are up less than 2% – way less than the 26% rise of the country’s stock market. That’s got some analysts predicting that investors, wary about getting burnt twice, might be extra cautious about investing in any new listings going forward.
The bigger picture: Investors love China.
If there’s one thing investors don’t seem cautious about, it’s investing in China: data out this week showed that an index tracking Chinese internet companies received more than twice as much net investment as any other US thematic index since mid-February. That might have something to do with China’s “common prosperity” drive: it’s wiped over $1 trillion from the market value of Chinese stocks since February, so investors can snap them up more cheaply.
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General Mills became the latest consumer staples giants to announce further price hikes earlier this week, so customers will have to start saving up for those daily essentials.
What does this mean?
Companies have been forking out more and more for raw materials and labor, as supply shortages and strong demand keep pushing up prices. But consumer staples companies are in a good spot: they sell products that shoppers tend to buy no matter what, so they can up their prices to protect their bottom lines without losing customers.
You don’t have to tell General Mills twice: the maker of foods like Cheerios and Fruit Roll-Ups announced earlier this week that it’ll be raising the prices of hundreds of items next month, with some reportedly set to increase by around 20%. It’ll be in good company: consumer staples companies Procter & Gamble, Kimberly Clark, Tyson Foods, and Kraft Heinz have all announced price rises starting next year too.
Why should I care?
For markets: Consumer staples are star stocks.
Consumer staples stocks have been doing well recently, with an index tracking some of the world’s biggest consumer staples companies outperforming the US stock market since the start of the month. That might just be because investors like companies that can offset rising costs by upping product prices, but it could also be a sign that nervous investors are flocking to more stable companies that do well even in economic downturns – perhaps prompted by Omicron and lessening government support.
The bigger picture: Expensive essentials.
Price rises aren’t what we need right now: UN data already showed that an index tracking global food prices hit its highest level in a decade last month. And that’s across the board: indexes tracking cereal, meat, and sugar prices were up 23%, 18%, and 40% respectively compared to this time last year. Worse yet, economists reckon this could continue, as high fertilizer costs and potential bad weather might restrict food supplies.
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