Instacart goes public, BlackRock launches climate action focused ETF on SGX and Jokowi sees US role in Indonesia's transition economy.
IPOs are centre stage this week as the recovery in US equity capital markets continues. Delivery platform Instacart went public yesterday and Softbank’s semiconductor unit?Arm started trading?on Nasdaq last Thursday with a 25% first-day pop. Several Southeast Asian companies are also considering listing in the US, banking on strong investor appetite for emerging market growth, says Reuters.?
This pickup comes as Bloomberg reports on a $188 billion reduction in foreign holdings of Chinese stocks and bonds since a December 2021 high. However, the FT’s Martin Wolf argues that it is too soon to call “peak China”.?
BlackRock launched an exchange-traded fund focused on climate action on the Singapore Exchange, with an initial US$426 million raised from the likes of insurer Prudential and Singapore state investor Temasek. This is the largest equity ETF by assets in Singapore and BlackRock’s third climate action ETF to launch this year following Japan and US listings. ?
Meanwhile, Indonesian president Joko Widodo, who has long courted electric vehicle companies like Tesla to tap his country’s nickel supply, sees a key role for the US in driving the Southeast Asian giant’s transition economy ahead of talks with?Washington.?
Elsewhere, banks operating in California?are facing a new bill that mandates reporting of scope 3 emissions, which for them incorporates financed emissions. California has long been a pioneer in environmental regulation, but the proposed law will have to overcome significant opposition if it is to pass –?so watch this space.?
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Instacart IPO puts spotlight on its evolution into ad seller?
Instacart, a US-based grocery delivery company, went public on Nasdaq on Tuesday, with shares priced at $30 which surged as much as 43% after its trading debut Tuesday. The company, incorporated as Maplebear Inc, closed trading Tuesday up 12%, at $33.70 per share, giving it a market value of $9.3 billion. The $660 million IPO, the fourth largest in the US this year, is good news for both the food delivery industry and other startups that aim to capitalise on consumer data. Instacart is now testing public investors’ appetite for a new ad division with higher-margin operation that capitalises on a trove of shopping data. Advertising now accounts for about 30% of Instacart’s revenue and offers bigger margins than its core business of taking a cut of shopping purchases, according to filings.?
China records $188 billion decline in foreign ownership of stocks and bonds?
According to Bloomberg, foreign holdings of Chinese equities and debt have fallen by about $188 billion from a December-2021 peak through the end of June 2023, not counting for an additional outflow of $12 billion from onshore shares in August 2023. These outflows?coincide with an economic slowdown. Foreign fund participation in the Hong Kong stock market has dropped by more than a third since the end of 2020. While the MSCI China Index is down about 7% in 2023, the broader MSCI Emerging Markets Index is up 3% as investors shift focus to other places like India and parts of Latin America. In addition to widespread talk of decoupling and derisking, another reason for this slump has been the AI boom that has boosted stock markets from the US to Taiwan but less so mainland China. At the same time, a strategy of stripping China out of emerging market portfolios is fast gaining traction, with launches of funds that exclude China reaching a record annual high in 2023.?
We shouldn’t call ‘peak China’ just yet: Martin Wolf?
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The economic future of China is uncertain, but it could become the world's largest economy if it doubles its GDP per capita, which would match that of Poland. China's past growth suggests this is plausible, but challenges like an aging population, structural imbalances and a reliance on credit-fuelled investment must be addressed. The outcome also hinges on policy decisions, including China’s?willingness to prioritise growth and tackle economic issues. However, the country possesses strengths such as a vast talent pool, a dynamic entrepreneurial spirit and advanced technology in various sectors, including electric vehicles and information technology. What happens next will depend more on Chinese choices than on western wishes.?
More Southeast Asia firms consider US IPOs??
Several Southeast Asian companies are considering listing in the US, banking on strong investor appetite for emerging market growth in the absence of Chinese IPOs. Companies like Carsome, Funding Societies, Gushcloud International and Thai insurtech firm Sunday are planning New York listings, according to Reuters. Southeast Asian companies have only raised around $101 million via IPOs in the US this year, much lower than last year’s $919 million, but bankers expect the pace to pick up in the next year as companies look for new sources of capital after relying on private funds for the past few years. Southeast Asia is particularly attractive for investors seeking emerging market exposure because of the region’s strong economic growth and expanding population, analysts say.?Meanwhile, US IPOs offer companies a deep pool of capital and global investor base.?
BlackRock lists Singapore’s largest-ever equity ETF at record US$426 million to drive climate action?
Last week BlackRock launched a new Asia-focused climate action fund in Singapore, attracting an initial US$426 million, making it Singapore’s largest equity ETF by assets on record. Listed on the Singapore Exchange, the ETF has backing from investors including insurers Prudential and Singlife and Singapore state investor Temasek. BlackRock says the fund gives investors access to ‘best in class’ companies across Asia Pacific that are committed to reducing carbon emissions. These are usually large firms that?are?assessed to have outperformed their peers based on factors including approved science-based targets, management of climate risks and green business revenue. BlackRock’s latest ETF adds to a suite of transition-investing products worth over US$100 billion that it began to roll out last year.??
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Jokowi sees key role for US in Indonesia’s transition economy?
Indonesian leader Joko Widodo will make a keenly awaited critical-minerals trade deal a top priority for his upcoming talks with US president Joe Biden, along with pushing ahead a landmark Just Energy Transition Partnership (JETP) deal, highlighting the nation’s efforts to reap the economic benefits of a green transition. Indonesia does not have a free-trade agreement with the US but has sought to ensure its exports can be covered by the Inflation Reduction Act passed by US Congress last year — a move that would extend incentives and boost Jakarta’s ambitions to play a key role in the electric vehicle and battery supply chain. Indonesia also hopes for US support when it comes to the JETP, announced last year at the G20 Summit in Bali with the aim of providing affordable financing to clean up the country’s coal-dependent power grid. Nearly a year on, however, the world’s largest climate finance deal has hit delays and faces disagreements over issues like governance, data and funding.?
Banks brace for California law mandating emissions disclosure?
Major banks are bracing for a new climate law in California that would make it compulsory for them to calculate and disclose carbon emissions tied to lending. Both houses of California’s state legislature passed the Climate Corporate Data Accountability Act, which would require public and private companies with more than $1bn in annual revenues that conduct business in the state to disclose emissions. Starting in 2027, companies would need to report scope 3 emissions associated with a company’s suppliers and customers. For banks, the legislation therefore requires reporting on “financed emissions” – carbon polluting associated with their borrowers – drawing concerns from the industry. Banking industry groups are opposed to the bill, warning that these requirements would result in doubling up of information, given the breadth of their clientele.?