Beauty Sleep

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What's going on?

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 (tweet this). 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.

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.

Originally posted as part of the Finimize daily email.

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