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Emerging Markets Daily - January 29
GameStop Frenzy Hits Asia, Kuaishou IPO Demand Sizzles, EM Debt Concerns Rise, Strong China Earnings, and Record-Breaking Saudi IPO Season Looms
The Top 5 Emerging Markets Stories - January 29
GameStop Frenzy Spreads to Asia - Singapore Straits Times/Reuters
“Asia's retail investors, emboldened by the meteoric rise of US videogame retailer GameStop, are taking on short sellers and making their brokers nervous enough to cut off margin lending.”
“In South Korea, small investors known as ‘ants’ have borrowed so much money to dabble in stocks that at least half a dozen brokerages have stopped offering them leverage.”
“GameStop's global impact is the latest manifestation of a day-trading mania driven by amateur investors that is boosting the price of assets ranging from cryptocurrencies to new stock market listings,” Reuters/Singapore Straits Times report.
Retail Investors Storm Kuaishou Technology IPO - Reuters
“China’s Kuaishou Technology raised $5.4 billion from its IPO, the top of the range, with offers from retail investors reaching a mammoth $162 billion, nearly half of it backed by margin loans, three people with knowledge of the matter said.”
“Combining retail and institutional demand, the offering saw total bids worth over $370 billion, more than the gross domestic product of Hong Kong, for the 8.9% of the online video site on offer. The shares were priced at HK$115 ($14.83), two of the sources said, making the company worth $60.9 billion.”
“The huge demand comes amid growing fears about an asset bubble, with amateur investors boosting the price of assets ranging from cryptocurrencies to new stock market listings.”
“Those concerns, triggered by a sharp surge in U.S. videogame retailer GameStop and a few other stocks, have led some brokerages globally to raise margin requirements or stop offering leverage for buying securities.”
“Retail investors bid for more than 1,200 times the amount of Kuaishou shares on offer for them as the book closed on Friday, said the sources, who declined to be named as the information had not yet been made public,” Reuters reports.
EM Record Borrowing Sparks Debt Concerns - Wall Street Journal
“Developing economies borrowed at a blistering pace at the start of the year after a record 2020, prompting questions among investors about whether they are building up debt problems for the future.”
“Governments and companies in developing countries have sold close to $100 billion of bonds so far in January, using the cash to plug budget deficits and shield themselves from the economic impact of the coronavirus pandemic, according to data from Dealogic. In all of 2020, they borrowed $847 billion.”
“‘We’ve never seen a busier start, in terms of issuance year to date—by a large margin,’ said Stefan Weiler, a regional head of emerging-debt capital markets at JPMorgan. ‘From an issuer perspective, it’s hard to see market conditions improving.’” The Wall Street Journal reports.
China Earnings Set for Strong Showing - Bloomberg
“Hundreds of Chinese companies are set to report an improvement in annual earnings, offering investors a stronger fundamental backdrop after stocks sank this week.”
“Among the 1,200-odd firms listed in mainland China that issued preliminary results in January, 75% have said earnings rose last year, according to data compiled by Bloomberg as of Thursday. Firms in the communication services and health care sectors are set to report the biggest growth, followed by consumer staples and technology. Listed companies have until Sunday to announce significant changes in earnings.”
“Evidence of China Inc.’s resilience to the slowest economic growth in four decades due to the coronavirus, capped by a stronger-than-expected fourth quarter, may offer relief to investors. The CSI 300 Index, which tracks some of the biggest firms in China, rose 0.5% Friday after a three-day, 4.4% decline which raised worries that a near-term peak has been reached. That lost momentum came as the central bank withdraws liquidity and a central bank adviser warned of asset bubbles,” Bloomberg reports.
Saudi Stock Exchange Expects Record IPO Year - Bloomberg
“The Saudi stock exchange expects to host more initial public offerings than ever in 2021, seizing on strong demand from local investors that supported several deals last year.”
“After 22 issuances across different platforms in 2020, ‘I think we will break that record this year,’ Khalid Abdullah Al-Hussan, the chief executive officer of the Tadawul exchange, said in an interview on the sidelines of the Future Investment Initiative conference in Riyadh.”
“Four companies went public last year on the main market of the Saudi exchange, raising a combined $1.5 billion, according to data compiled by Bloomberg. That was more than the $1.3 billion worth of IPOs in Germany, though far behind the listing of oil giant Saudi Aramco in 2019.”
“‘We have a very very healthy pipeline in all our platforms, and there is a good focus on Nomu and the main market,’ Al-Hussan said, referring to the parallel market for smaller listings in Riyadh. ‘So we see a good pipeline -- even better than 2020,’” Bloomberg reports.