A chart worth discussing
“Europe has one of the lowest rates of air conditioning penetration globally.”
Other charts worth pointing out
Quarterly U.S. Apple App Store spending – year-on-year change
Food manufacturing company stock exposure to GLP-1 usage
U.S. GLP-1 users
Restaurant spending by generation
Food spending by retailer type
U.S. Treasuries – Outstanding vs. percentage of non-U.S. ownership
Global federal reserve gold weights – total vs. percentage of total reserves
Long-term interest rate movement relative to Federal Open Market Committee meetings
Canadian exports targeted by U.S. tariffs – destination breakdown
45-day correlation between high beta and low volatility stocks
Defaults by credit rating
China’s IPO Rush Is Showing Strain With Pace Nearing 2023 Frenzy
China’s high-powered market for initial public offerings is showing signs that its breakneck pace could be difficult to sustain.
Fueled by enthusiasm for all things artificial intelligence, companies are raising money at the fastest rate since 2023, with volumes at levels just before cooling measures back then ushered in a multiyear lull. Recent high-profile deals have struggled to hold on to initial gains, while a robust IPO pipeline has reanimated liquidity concerns. And some highly anticipated deals may be taking longer to come to market than previously thought.
Since the beginning of July, proceeds have exceeded 119 billion yuan ($17.7 billion), more than the 114 billion yuan in the third quarter of 2023. Three years ago, that milestone marked a turning point in China’s IPO market. As Beijing pledged to boost capital markets, regulators also moved to curb the IPO frenzy to address concerns about liquidity drain. The measures effectively applied brakes to earlier reforms that had made it easier for companies to list.
Investor enthusiasm has so far been buoyant enough to absorb the barrage of offerings. But as momentum in tech begins to fade, the market’s ability to take on fresh supply is being tested.
“Since the AI trade rolled over in June, liquidity has been draining from the market,” said Yang Tingwu, fund manager at Fujian Tongheng Investment. “Mutual funds, quants and retail investors alike have little capacity nor appetite to add, and state-backed funds have largely been net sellers. In a market without incremental inflows, this level of IPO issuance is hard to digest.”
China’s stock market, along with Hong Kong, has emerged as the engine of fundraising for the AI buildout, with companies racing to sell shares as they look to expand capacity and compete with mostly US competitors. With deals such as CXMT Corp.’s near-record share sale, IPO proceeds this year have surpassed $30 billion for the first time since 2023, according to data compiled by Bloomberg.
So far, there’s been no official communication to indicate that authorities are preparing a clamp down on IPOs. And in contrast with the wave of 2023 deals, many of the largest offerings are tied to strategic sectors such as semiconductors and AI, which have heavy capital needs. Authorities have also made it clear that they will continue to support high-quality tech firms including homegrown large language models to list.
Still, signs of fatigue are emerging. Nearly a third of this quarter’s listings have lost more than half their value from post-debut peaks. Unitree is down 45% from its intraday high recorded during its blistering first day of trading.
Regulators may already be signaling discomfort with the pace of activity. Local media reported that exchanges recently met with brokerages to discuss the quality of IPO filings. Authorities have so far haven’t reacted to the reports.
This week’s fun finds
Relationship manager Lauren (centre) organized a Middle Eastern meal for her EdgePoint colleagues this week. Lunch included fresh falafel, heavenly hummus and savoury salads. Thanks for bringing us all together!
Why some people mow a lawn better than others
You’ve probably done something like mow a lawn or vacuum a rug hundreds of times without thinking much about it. Some part of your brain works out a route that’s usually good enough to get the job done. People are actually pretty good at this, and better than you’d guess for a problem that is hard for computers. We wanted to see it for ourselves, so we built a lawn and asked people to mow it.
