US-listed Chinese stocks soar


China has been promoting equity financing as it seeks to reduce banks’ exposure to credit risk
Newsfeed15 Nov 2021
    Photo credit: AFP Photo


    MAINLAND CHINA & HONG KONG

    For years, Chinese leaders have been fighting an uphill battle to drive funding for small business. They are counting on Beijing’s first ever stock exchange to get the job done.

    The Beijing Stock Exchange, which launches on Monday (15 November), is intended as a platform to house small and medium-sized companies that have long faced difficulty raising capital because they are not large enough to list elsewhere. About 70 companies will migrate from an existing Chinese board and an additional 10 will debut for the first time that day.

    The bourse, which will carry just a fraction of the number of companies listed in Shanghai or Shenzhen, is meant to broaden financing channels for firms in hopes of furthering China’s technology ambitions and reduce its reliance on the West. The move also marks a decades-long effort to make the nation’s financial markets – liable to booms and busts – more multifaceted.

    The new stock exchange “could be an important cultivation ground for these little giants”, said a senior portfolio manager for China equities.

    Technically, the bourse provides easier access to listings than Shanghai’s Nasdaq-style Star board and the tech-heavy ChiNext in Shenzhen – just CNY200m for a minimum market capitalisation – and is set to have better liquidity than the NEEQ. Wilder price swings will be allowed – up to 30% either way daily – compared with 20% on the other two venues.

    To be sure, given the mini sizes of the companies and their startup nature, the Beijing exchange is unlikely to make a big splash. More than 300 stocks have listed on Shanghai’s Star board since its 2019 launch.

    China has been promoting equity financing as it seeks to reduce banks’ exposure to credit risks. Meanwhile, it is keen on breeding “specialised, new” companies to break supply chain bottlenecks, according to a statement from a July meeting of top leaders. – Bloomberg News.

    The Hang Seng Index climbed 0.32% to 25,327.97 while the Shanghai Composite Index upped 0.18% to 3,539.10.

     

    REST OF ASIA

    Asia’s earnings growth slowed considerably in the latest quarter, putting the region’s already lacklustre stock markets further behind global peers.

    Third-quarter earnings per share grew by 36% for MSCI Asia Pacific Index members, a muted performance compared with the triple-digit gains in the first half thanks to the rebound from the pandemic, according to the latest earnings data compiled by Bloomberg. Corporate profits for benchmarks in the US and Europe grew 42% and 91% respectively, in the three months through September.

    While global stocks have looked past peak earnings, rising material costs, and supply snags to climb to record highs this year, the picture is different in Asia, where shares are little changed. The region’s relative slowness in removing mobility restrictions, China’s Covid-zero policy and its crackdown on private enterprise have all weighed on businesses, and the outlook remains uncertain.

    On the flip side, upward earnings revisions are expected in India and Southeast Asia, which have made bigger strides toward reopening their economies this quarter. The MSCI Asean Index is up almost 5% since the end of September, outperforming the broader regional gauge by over three percentage points.

    The few bright spots, however, are unlikely to change the trend of earnings revisions for the whole Asian region. Forward profit estimates for the regional index remain below a September high at a time when forecasts for the US and Europe have continued to climb. – Bloomberg News.

    Australia’s S&P/ASX 200 Index was 0.38% higher at 7,471.60 on Monday (15 November) after climbing 0.83% to 7,443.00 the previous session.

    South Korea’s Kospi Index gained 0.61% to 2,986.78 in early-Monday trading, adding to its previous gain of 1.50% to 2,968.80.

    The Taiwan Stock Exchange Weighted Index added 0.38% to 17,518.13.

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