The stock market plummeted in recent days, with the Shanghai index down 3.78 percent, the Shenzhen Composite down 5.31 percent, and Hong Kong`s Hang Seng Index down 2.78 percent, due to the twin effects of the escalating trade war between China and the United States and the delay in CDR of Xiaomi. A lot of people are wondering if we have been exposed to systemic financial risks, and whether Xiaomi IPO will be the last straw to crush the stock market. This is an issue that requires comprehensive analysis and reflection.
Macroeconomic situation is not optimistic
First, after easing for some time, the Sino-US trade war escalated again, and threatened. U.S. President Donald Trump has announced that he will impose an additional $200 billion tariff on China based on what he previously called a $50 billion tariff on goods; if China does not cooperate, it will impose an additional $200 billion tariff on goods.
The comments not only broke the optimistic expectations of the previous market, but also pushed contradictions and differences to a new high, causing great panic in capital markets, especially in the stock market.
Second, last week is also the world macro-economic Fengshui Ridge. On the one hand, the Fed announced that it would raise interest rates twice before the end of the year, and on the other hand, the European Central Bank announced that it would end its "quantitative easing" (Quantitative Easing) policy by the end of the year.
The former would allow more money to flow from the stock market to the bond market, while the latter would result in monetary tightening, less liquidity and the detriment of the stock market.
Third, China`s macroeconomic indicators for May fell short of expectations, including industrial production and consumer retail sales. The performance of these indicators has also weakened the market`s confidence in macroeconomic and capital markets, and will have a negative impact on the stock market.
The influence of millet IPO on Stock Market
First, millet IPO has a huge "vampire" effect. IPO, Xiaomi, which has the highest profile in 2018, will absorb huge amounts of money in the market, resulting in greater liquidity pressure on the stock market. Prior to Foxconn`s domestic IPO, the domestic market plummeted for three days, confirming the huge "blood-sucking" effect of giant IPO.
So, in addition to Xiaomi`s dissatisfaction with China Securities Regulatory Commission (CSRC) about pricing, raising scale and so on, Xiaomi`s delay in CDR, is due to the CSRC`s concern that Xiaomi`s CDR may be "blood-sucking" too strongly.
Second, the market attention of Xiaomi IPO is far higher than that of conventional IPO;. Therefore, Xiaomi`s sense of mission is significant, and it shoulders the important task of supporting the whole stock market, even the capital market, and confidence.
From the beginning of the year to the present, all kinds of media for Xiaomi IPO continued to report, giving the outside world a high degree of attention. Therefore, the issue of Xiaomi, from pricing to market performance, also let more people pay attention; it has a profound impact on the views of everyone on the follow-up IPO and confidence in the market.
Third, the arrival of a large number of overseas listings of Chinese technology companies in 2018, which has not been seen in the past many years, has raised concerns about whether the market has reached a high or even reached a peak.
Technology stocks in the U. S. stock market have been doing well in the past few months, although some tech giants, such as Facebook, have seen some adjustments a few months ago, but the overall performance has been strong in the near future. And Hong Kong`s stock market has not done well in the near future, causing some investors to worry.
The window period is very short
Chinese Science and Technology companies accelerate the process of listing
First, under the background of a very short window period, Xiaomi decisively gave up CDR, in stages and made every effort to sprint Hong Kong IPO. Xiaomi chose strategic partner Qualcomm, Shun Fung and China Merchants as cornerstone investors instead at the last-minute node on the eve of the prospectus.
On the one hand, these Xiaomi suppliers, supply chain partners and financial partners can bring long-term strategic value to Xiaomi;
On the other hand, these investors are not sensitive to prices, giving a valuation range of $70 billion to $85 billion. These practices are aimed at stabilizing the pricing and performance of the Xiaomi IPO, as well as accelerating the entire process.
Second, other Chinese technology companies, including Meituan-Dianping, are accelerating the listing process, trying to advance the timetable. Recently, in the process of communication with investment banks, Chinese tech giants, including Meituan-Dianping, expressed the attitude of "can be early, can rush", which means that everyone is concerned about how long the window period can last.
Third, it is right for Chinese technology companies to go public as soon as possible; a shorter window has prompted more companies to go public ahead of schedule.
Because by the end of the year, and even in the first half of next year, the market will change and uncertainty will be greater. Once the window period has passed, it is possible to lose the opportunity to go public in the short term.
So questions such as "have we had systemic financial risks" and "will Xiaomi IPO be the last straw to crush the stock market" are far more problematic than they are for the moment.
"over the past period of time, technology stocks in the United States stock market have performed fairly well. Although some tech giants such as Facebook have undergone some adjustments a few months ago, the overall performance has been relatively strong in the near future. So the situation of Tencent Music US stock ipo will undoubtedly inject new hope into the market. "
