With new developments arising over the respective regions, here are our market highlights for last week.
Hong Kong
HKEX working relentlessly to land part of the world’s largest IPO
Ant Group, a financial giant headquartered in Hangzhou, has been preparing an IPO in Hong Kong and Shanghai’s new board, the Star Market. While the group has already given regulatory approval by the Mainland financial authorities, the Hong Kong Stock Exchange is still lagging behind in approving the IPO. In order to catch up with Shanghai’s speedy process, the staff in the exchange has been working overtime to vet the group’s listing papers, according to people familiar with the matter.
Investors have been carefully following every update from the Hong Kong regulators so that they can estimate when will the finance and tech giant debut on the market. In light of the mega IPO, overseas investors have been moving their money into Hong Kong, causing the Hong Kong Money Authority to intervene several times in currency markets to try to weaken the Hong Kong dollar. Apart from investors, companies interested in listing in Hong Kong, or in Shanghai, have also paid attention to the IPO in order to avoid competing head-on with Ant Group for investor interest.
Apart from evaluating the suitability of Ant to go IPO in Hong Kong, the exchange is also deciding on whether to grant the group a special waiver to shrink its free float to 10% of its shares. Traditionally, all stocks traded on the exchange must have a free float of at least 25%, ensuring the stock’s liquidity. However, since Ant Group’s expected market capitalization is so big, a 10% free float may still make the company easily tradable.
If Ant indeed gets listed, it will be the largest IPO ever recording. US$35 billion is expected to be raised, beating the record set by Saudi Aramco last year at US$29.4 billion. The market capitalization of the company is expected to be US$300 billion, making it one of the largest companies by market cap in the world.
Due to the high profile of Ant’s listing, the Hong Kong stock exchange is making processing its filing a priority. Expectations are high that they will get the job done before the public holidays on October 1 and October 2. Ant is one of the 55 companies that have submitted a listing application in this financial quarter in the city. While the number has dwindled from the 87 applications last year, the total amount raised has risen due to the much larger average size of IPOs this year.
UK
Countdown to Brexit
With less than three weeks from the October 15th soft deadline, Brexit talks have officially entered into a crucial phase. Last Monday marked the final round of scheduled talks between the EU and the UK in Brussels. However, there were no breakthroughs as both parties remain significantly apart over the same key issues. Meanwhile, EU commission president Leyan and UK Prime minister Johnson have both approved the extension of Brexit negotiations by a month, signaling stronger commitment to the deal. Despite this, it is unlikely that any major progress will be made until the final deadline which is the end of October to allow sufficient time for any ramification by year end. The following weeks will be key as trade talks are likely to intensify in order to push for more progress before the October EU summit.
On the COVID front, the UK has reported a record level of more than 10,000 cases new daily cases. The UK govt has clarified that the figure is due to a technical issue which delayed the publishing of a number of new Covid-19 cases. It is expected that the new daily cases will continue to rise in the following days. Tighter restrictions are now imposed in the northern part of England and if cases in London starts to pick up significantly, it is likely that a full national lockdown might be implemented once again.
United States
President Trump has been tested positive for Covid-19, what was the impact to the markets?
This Friday (2 October 2020), people worldwide had been astonished that the US President, namely President Trump, was affected by the coronavirus. Consequently, the markets quickly respond to this news. The Dow Jones Industrial Average (DJIA) closed 134.09 points, or 0.5%, lower at 27,682.81. The S&P 500 slid 1.0%, or 32.36 points, to 3,248.44. The Nasdaq Composite declined 2.2%, or 251.49 points, to 11,075.02. The president’s health risk also implies the uncertainty of the upcoming election on 3 November, together with the possibility of a second wave of the coronavirus in the United States. To conclude, the market has been negatively affected by the news about president trump tested positive for COVID-19.
On the other hand, this news has also incentivized the fiscal stimulus talks in Washington. The reason being that agreement on another aid package could act as a stabilizing force on markets in the face of election-related uncertainty. The fresh stimulus will bring millions of Americans to the workforce and speed up the economic recovery in the States. Together with that, the stimulus announcement will also positively impact the markets as this depicts an early stage of economic recovery. Therefore, investors should pay close attention to the upcoming news this month, especially this coming week.
The M Word 