John Brooks, a well-known Wall Street financial author, once said: "The new stock boom usually means that a high-risk surge is coming to an end." ”
Wall Street's hot IPO market: SPAC moisture is high
The bull market in the U.S. stock market has lasted throughout 2021, and along with the three major indexes, it is an unprecedented IPO activity on Wall Street.
Wind's data shows that in 2021 (as of December 28, 2021, the same below), the number of IPOs on the New York Stock Exchange and NASDAQ reached 477 and 1,239 respectively, with financing scales of $110.379 billion and $179.96 billion, respectively.
See the chart below, in 2020 and 2021, the IPO activity of US stocks increased significantly compared with previous years, far exceeding the A-share and Hong Kong stock markets, mainly due to the promotion of large-scale water releases in Europe and the United States.
However, it is worth noting that in the unprecedented IPO activities of the US stock market, the blank check company (SPAC) that first goes public to raise funds and then looks for mergers and acquisition opportunities accounts for nearly half, which means that more than a trillion yuan of funds are looking for opportunities and have not yet flowed directly to listed companies with capital needs - these waiting funds are generally used to invest in short-term investment assets with high liquidity, such as US Treasury bills, which shows how high the moisture is.
If you deduct the SPAC type of listing, the scale of US stock IPO financing may be US$128.766 billion, or about RMB820.3 billion, as shown in the table below.
In terms of industry segmentation of the U.S. stock market (according to Wind's data), the financial sector has the most IPOs, with a fundraising scale of $155.059 billion, followed by information technology and healthcare at $80.49 billion and $57.173 billion, respectively. However, the author found from Wind's data that most of the IPOs attributable to the financial industry are SPAC projects.
As far as listed companies are concerned, the largest fundraising scale is Bezos's electric vehicle company Rivian (RIVN. US), (for details, see "Caihua Focus| the lesson of the former "car" won a market value of 100 billion yuan for Rivian, and Tesla's opponent came? The fundraising scale reached 11.934 billion US dollars, which is also the largest IPO in the world this year.
It was followed by Coupang (CPNG.US), South Korea's largest e-commerce platform, and Didi Chuxing (DIDI.US), with initial public offerings of US$4.55 billion and US$4.435 billion, respectively. The fourth is Tencent (00700. HK) invested in Southeast Asian e-commerce platform Sea (SE.US) with a financing scale of US$3.5 billion.
From the perspective of the performance of new stocks, Chinese stocks are generally downward, which is related to regulatory uncertainty.
A-share market: breaking into the norm?
A number of listing reforms have made the A-share IPO market burst with vitality. According to Wind's data, the initial public offering in the A-share market reached 540.1 billion yuan, an increase of 12.38% over 2020 and 2.13 times that of the whole year of 2019 before the epidemic.
Among them, the largest A-share IPO this year is China Mobile (600941.SH, 00941.HK), which is about to be listed on the Shanghai Stock Exchange, with a fundraising scale of 56 billion yuan, and it is also the IPO with the highest amount of abandonment, with a discarded amount of up to 756 million yuan.
The second largest number of initial public offerings was China Telecom (601728. SH, 00728.HK), currently broken.
The improvement of the registration system and the establishment of the Beijing Stock Exchange have promoted the development of the domestic capital market and further optimized the financing channels for small and medium-sized enterprises and science and technology enterprises.
With the improvement of the listing system, the practice of rising on the first day of the listing of A-share new shares has been broken. The author noted that among the 479 new listed companies other than the Beijing Stock Exchange this year, 14 broke on the first day of listing, while 47 had broken down as of the close of trading on December 28. That is to say, one in every ten listed companies this year broke.
This is actually a good thing: reflecting that the A-share IPO market is more market-oriented, the market has begun to say no to new stocks with high valuations.
Excluding the listed companies on the Beijing Stock Exchange, the five companies with the largest declines on the first day were Chengda Bio (688739. SH), Di Zhe Pharmaceutical-U (688192.SH), Zhengguang Shares (301092. SZ), Hualan Shares (301093. SZ) and Kefu Medical (301087.SZ), both fell by more than 10%, with medical pharmaceuticals accounting for the majority.
This may be related to the significant increase in the number of companies that have made their debuts in the healthcare and pharmaceutical industries this year. According to Wind's data, there are 56 healthcare companies listed this year, raising a total of 87.174 billion yuan, second only to the telecom services sector where the two giants gathered, see the chart below.
However, there are breakouts, and there are certainly new stocks that perform well. The five new stocks with the largest gains on the first day were Nano Micro Technology (688690. SH), Ked CNC (688305. SH), Power Diamond (301071. SZ), Reader Culture (301025. SZ) and Fudan Microelectronics (688385.SZ), opening gains reached 10.52 times, 8.32 times, 8 times, 8 times and 7.59 times, respectively, with information technology and semiconductors accounting for the majority.
The two tables with the largest rise and fall can be seen that the new stocks with the largest rise and fall are concentrated in the science and technology innovation board and the ChiNext board, which is because the limit on the rise and fall of the two sectors is relatively loose, and the listed companies are all science and technology enterprises, which have not yet formed a very mature profit model, and the views of investors are more divergent.
In addition, the shift in market style is also more obvious, for the information technology and semiconductor sectors are happy, for the high valuation of medical technology, or reflect the market's current expectations for the industry prospects.
Hong Kong Stock Market: A Lost Paradise of Undervaluation?
In 2018, 2019 and 2020, the Hong Kong stock market was the most important IPO market in the world. In a single regional market, the scale of fundraising can already compete with the two main board exchanges in the A-share market and the NASDAQ and the New York Stock Exchange in the US stock market, mainly due to the new listing rules introduced by the Hong Kong Stock Exchange in the early years: allowing unprofitable biotechnology companies, WVR companies and second-listed companies to list in Hong Kong.
In 2021, the Hong Kong Stock Exchange will remain an important bridge for the return of Chinese stocks and the international capital market for Chinese stocks. Compared with the past, the transaction scale of the Hong Kong stock market has increased significantly, on the one hand, the deepening of the interconnection of Shanghai-Shenzhen-Hong Kong Stock Connect, and on the other hand, the continuous inflow of international capital.
However, it is worth noting that although the volume of the Hong Kong stock market is expanding, the increase in funds does not seem to have kept up, or mainly because of the regulatory uncertainty of large Internet companies, so that the funds have not dared to fall; on the other hand, the US stock market has repeatedly reached new highs and sucked up most of the funds, and the Hong Kong stock market has become the most lost market.
According to the data of Tencent's self-selected stock APP, there are a total of 94 new stocks in the past year, and 43 broke on the first day, accounting for 45.7%, with an average first-day increase of only 10.89%.
In contrast, the average first-day increase of new stocks listed in the United States in the past year reached 23.23%; the average profit of ordinary new shares of A-shares was 16,700 yuan per sign, the average first-day increase of new stocks on the ChiNext board reached 219.34%, and the average first-day increase of new stocks on the Science and Technology Innovation Board reached 190.69%.
From the perspective of fundraising scale, the largest IPOs in the Hong Kong stock market this year are Kuaishou-W (01024.HK) and Jingdong Group (09618. HK) jd.com Logistics (02618.HK), Baidu Group -SW (09888.HK), Bilibili-SW (09626.HK) and Xiaopeng Automobile -W (09868.HK) that have returned from the US stock market. However, it is worth noting that in addition to Xiaopeng Automobile's market praise for the concept of new energy vehicles, the remaining large Internet technology stocks have not performed well, with a cumulative decline of more than 34% since listing.
summary
The five largest IPOs in the world in 2021 are Rivian, china mobile, China Telecom, Kuaishou and South Korean e-commerce coupang, with Chinese companies accounting for three, showing that Chinese companies are still quite economically dynamic.
As can be seen from the performance of the IPO markets in the three places, winning funds still love American companies. The overall performance of the Asian capital market on the other side of the ocean is not as good as that of the US stock market, and the performance of Chinese-funded enterprises is far behind, mainly because of the peak of large Chinese Internet technology stocks at the beginning of the year, and then the strengthening of regulatory measures, which has changed the way the market values large domestic Internet companies.
With the implementation of regulatory measures, the uncertainties about the prospects of these large Internet companies are gradually dissipating, but compared with the pre-regulation, the valuations of these companies should be lowered, because the optimistic conditions that previously supported their positive growth have been compromised.
As for how big this discount is, the market is actually not clear (including international investment institutions that have many resources to probe the bottom line of large Internet companies), neither historical references, nor clear guidance for forecasting the future – even these companies themselves do not know how to be affected next, and can only operate in compliance with existing requirements.
In the next few quarters, the market will revise its expectations according to the actual performance of these large Internet companies, and when the performance exceeds expectations, the valuation of these companies will be improved, and vice versa, all depending on the gap between the assumptions and the actual situation.
The same is true of the performance of the IPO market, as previously analyzed, nearly half of the funds in the US stock market IPOs are used for SPAC. Unlimited liquidity makes the cost of dollar funds low, and it does not matter how SPAC idle funds are used. However, the Fed's hawkish stance has recently become firmer, and liquidity may be tightened faster than expected, which will lead to an increase in the cost of funds and higher yield requirements for funds on investment targets.
The three major U.S. stock indexes have repeatedly hit record highs, the room for further growth is limited, while the risk of decline is increasing, and everyone knows that the U.S. stock market will eventually fall, only the exact point of time. Therefore, at the high level of US stocks, funds will become vigilant and unlikely to blindly chase higher, and the valuation changes in the secondary market will be transmitted to the primary market, and investors will become cautious about the evaluation and valuation of new stocks.
At this time, the implementation of regulatory measures has released uncertainties, the stock price has been adjusted in place, and the latest performance shows that the situation is not as bad as expected, and it is expected to regain the favor of profit-seeking capital.
That is to say, the US stock market with high popularity in 2021 is actually accumulating risks, while the Chinese stocks/Chinese stocks with declining valuations are increasing their discounts.
However, due to too much uncertainty in the US stock market, the author believes that more Chinese stocks will choose to return to the Hong Kong stock market or even the A-share market, and those funds that have survived or even profited from the test of us stock adjustment will be transferred to the market with low valuation and better profit prospects - China, which has a strong economic vitality, the A-share market and the Hong Kong stock market with low valuation may be able to regain the favor of international funds.
In short, 2022 will be a new beginning, with the change of the situation, including the valuation of US stocks, liquidity will be tightened, the formation of a new development model of domestic Internet companies, changes in industrial form, etc., the global new stock market will present a different scene.
This article originated from Caihua Network
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