Pre-market: Didi’s delisting could spell the end of Chinese stocks on Wall Street
“The repatriation of Didi to [Hong Kong] is a very disturbing indicator of the broader economic relationship between the United States and China, “Brock Silvers, chief investment officer at Kaiyuan Capital in Hong Kong, told me.” Beijing essentially forced Didi’s hand. “
Shortly after its initial public offering of $ 4.4 billion in the United States in late June, Chinese regulators banned Didi from app stores in China, claiming it violated data privacy laws and posed cybersecurity risks. The course of its action collapses.
The decision to target Didi was widely seen as a punishment for his decision to go public abroad, and the company has become a prime example of China’s efforts to limit the power of big tech companies.
“Didi’s repatriation appears to be the start of a trend, and the market should expect others to follow,” Silvers said. “Equity investors may not wait for the other shoe to drop.”
Investors in such stocks have been on the alert for months. The S & P / BNY Mellon China Select ADR Index, which tracks major Chinese companies listed in the United States, has fallen 40% this year.
Two developments this week further underscore the fact that financial ties between the United States and China are unraveling.
The United States’ Securities and Exchange Commission on Thursday finalized rules that would allow it to de-register foreign companies that refuse to open their books to regulators in the country. China has for years rejected US audits of its companies, citing national security concerns.
“The Chinese founders previously sought to [New York] for a number of reasons, including looser listing standards, often higher multiples, and a home beyond the Beijing Financial Zone. [and] regulatory control, ”said Silvers. “That calculation has changed quickly, and companies today – especially established market leaders or those in certain technology sectors – are likely to face increasing pressure to list on exchanges controlled by China.
Omicron fears weigh on November jobs report
November appears to have produced another solid month of job gains as the US economy continued to recover from the pandemic.
The latest: Economists polled by Refinitiv expect to learn Friday that 550,000 jobs were created last month. This would mark the biggest gain since July.
Such a reading could reinforce the Federal Reserve’s resolve to accelerate the pace at which it ends its bond-buying program in times of crisis. President Jerome Powell said earlier this week that the Fed was considering shutting it down faster to keep inflation under control.
“A strong impression of the payroll could further strengthen the Fed’s recent hawkish hub,” said Jim O’Sullivan, chief US macroeconomic strategist at TD Securities.
But strategists will scrutinize more than the number to assess the state of the labor market.
The labor force participation rate, which tracks the number of working-age people looking for jobs, will be carefully monitored as economists track persistent labor shortages, while data on wage growth could indicate greater pressure on prices.
The arrival of the Omicron variant of the coronavirus will also weigh on the report, although its first effects do not appear in the publication.
Mark Zandi, chief economist at Moody’s Analytics, told me it’s too early to tell how severe the impact will be.
“Future waves of the virus will surely hurt job growth, but there is no way of knowing how much depends on the size and severity of the wave,” he said. “My feeling is that the economic damage from each new wave of the virus will be less than the previous wave, as vaccines and other healthcare responses become more effective and economies become more adept at navigating through. waves, but of course it’s not difficult to construct darker scenarios. “
Amid virus uncertainty, what goes down can go up
Scientists are rushing to determine if the Omicron variant is more transmissible and if it can escape vaccines. In the meantime, Wall Street does not know what to think.
The most recent: the S&P 500 rose on Monday then sold out on Tuesday and Wednesday before surging again on Thursday.
The churn rate was particularly visible in the travel industry. Shares of Delta Air Lines, the largest US carrier, plunged more than 7% on Wednesday before jumping 9% on Thursday. Marriott fell 3% on Wednesday, then rose 6% in yesterday’s session.
The VIX, which measures the volatility of the S&P 500, has jumped 91% since early November this week before falling back slightly, while the CNN Business Fear & Greed Index is in “extreme fear” territory.
After that ? Investment advisers say cold heads should prevail for now, but markets remain vulnerable on any account of the news about the variant’s impact on public health or the economy.
“In this uncertain environment, we are advising investors to avoid a precipitous withdrawal of risky assets, which could hurt long-term returns,” Mark Haefele, chief investment officer at UBS Global Wealth Management, told clients earlier this week.
The U.S. Jobs Report is released at 8:30 a.m. ET.
Also today: November’s ISM non-manufacturing index will shed light on the health of the US service sector. It arrives at 10 a.m. ET.
Coming next week: Will consumer prices in America continue to rise at the fastest rate in three decades?