Markets traded slightly higher this week although there was some mid-week anxiety over interest rates. In a complete flip-flop the angst this week was over sharply lower U.S. interest rates that could signal slowing growth rather than higher interest rates creating inflation worries.
The yield on the 10-year US Treasury currently traded briefly down to 1.25% which was lower than at any other point since Feb 19 of this year. Lower interest rates are good for equity prices, but when the pace of the downside move picks up steam, equity investors take pause.
Coronavirus case and vaccination trends continued to be positive with no signs yet of re-openings leading to higher case counts. Alberta posted a remarkably low 23 new cases yesterday with a miniscule positivity rate of 0.39%. Israel, the U.K. and the U.S. continue to provide solid evidence that the link between rising case counts compared to deaths and hospitalizations has been sharply blunted due to vaccines.
As noted by RBC in our morning comments this week, China said it would tighten rules for companies listed overseas or seeking to sell shares abroad in a move that could hinder attempts by domestic firms to raise money in the United States. China’s move toward restricting such listings highlights the diverging opinions in Beijing and Washington over the future of technology, data protection and security. With widening viewpoints on a range of issues, both American and Chinese companies could get caught in the middle. The measures could also have far-reaching implications for a raft of China’s tech giants that are planning IPOs offshore, and for the global investment firms that hold stakes in them. IPO bankers and investors who own U.S.-listed shares of Chinese companies wonder whether the new guidelines proposed by China are only about data, or if they represent a sea change that could lead to companies pulling potential U.S. listings.
Either way, a freeze of the Chinese IPO pipeline seems to be the current state of play, bankers think any Chinese company that was planning a U.S.-listed IPO in the coming months is likely being shelved for now. Chinese companies have raised more than $75B from U.S. IPOs since 2012, according to Dealogic data. Year to date, some 36 companies from China have gone public in the U.S., the same number as the whole of 2020, according to Dealogic data. According to the Wall Street Journal, China’s move comes as the U.S. also tightens rules governing foreign companies listed on its stock exchanges. Congress passed a bill last year that requires the audit papers of U.S.-listed foreign companies be open for U.S. regulatory inspection. Failing to comply for three consecutive years will result in delisting from U.S. exchanges. Both Washington and Beijing have long seen economic engagement as the cornerstone of the two countries’ ties. However, the relationship has become unpredictable over the years and that even the drive to make money in each other’s markets may no longer work as a unifier.
U.S. President Joe Biden signed a new executive order aimed at cracking down on anti-competitive practices in Big Tech, labor and numerous other sectors. The sweeping order, which includes 72 actions and recommendations that involve a dozen federal agencies, is intended to reshape the thinking around corporate consolidation and antitrust laws. Biden’s administration laid out the case that the biggest companies in the tech sector are wielding their power to box out smaller competitors and exploit consumers’ personal information. “Capitalism without competition isn’t capitalism. It’s exploitation,” Biden said at the White House in a speech before signing the directive.
Through its tech-related actions, Biden’s order aims to make the case that the biggest companies in the sector are wielding their power to box out smaller competitors and exploit consumers’ personal information. The order calls for regulators to enact a slew of reforms, including increasing their scrutiny of tech mergers and putting more focus on maneuvers such as “killer acquisitions,” in which firms acquire smaller brands to take them out of the market.
This weeks RBC cyber security article:
I also came across an article this week on teaching your kids or grandkids about financial literacy:
Have a great weekend.
Andy, Sacha and Mike
What we were reading this week: