Finance

Some 2021 Asia-Pacific IPOs have seen a sharp reversal in their fortunes since their strong market debuts.
At the top of the list is Chinese short video company and Tiktok-rival Kuaishou, which more than doubled from its issue price during its February debut. The stock has since fallen 77%.
Other stocks that have faltered after a strong debut include Indonesian e-commerce platform Bukalapak and China’s JD Logistics.

A Thai investor checks an electronic board showing stock prices.
Amphol Thongmueangluang | SOPA Images| LightRocket | Getty Images

Some 2021 Asia-Pacific IPOs have seen a sharp reversal in their fortunes since their strong market debuts.
At the top of the list is Chinese short video company and Tiktok-rival Kuaishou, which more than doubled from its issue price during its February debut. It was the only Asia listing among this year’s top five largest IPOs globally by deal size, according to Morningstar.

As of Wednesday’s market close in Hong Kong, however, the stock sat 77% below those first day gains.
Elsewhere, shares of Indonesian e-commerce firm Bukalapak have also tumbled hard after rising almost 25% on day one of trading. The stock is now 57% below those levels, as of Wednesday’s close.
Another Chinese stock that has plunged from its debut gains is JD Logistics, which raised more than $3 billion in its IPO. The stock was 36% below its first day closing price, based on its Wednesday close.

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Those losses follow a number of issues including Beijing’s ongoing crackdown on China’s tech sector, which led to giants like Alibaba and Meituan being slapped with massive fines.
U.S. Treasury yields have also risen as the Federal Reserve signals it will soon begin to normalize monetary policy. Under such conditions, investors tend to avoid stocks in sectors like tech. These stocks could be hurt by rising rates which affect a company’s ability to fund growth and also makes future cash flows less valuable.

The fast-spreading omicron Covid variant has also further weighed on investor sentiment in recent weeks and dampened risk appetite, with questions remaining over the new strain’s potential economic impact.

Not unique to Asia

To be sure, poor post-IPO performances are not unique to the region.
In a December note, Pitchbook’s James Thorne and Jordan Rubio highlighted blockbuster 2021 market debuts elsewhere in the world that have also fallen sharply since going public.
One of those examples was Chinese ride-hailing firm Didi, which announced early this month it will delist from the New York Stock Exchange less than six months after going public. It is also making plans for a Hong Kong debut instead amid reports of political pressure from Beijing.
Other U.S.-listed firms that saw mega IPOs such as Robinhood and South Korea’s Coupang, have also “lost significant value,” they said.
“This lackluster performance has led to a cooling off in the IPO market that has caused some new issuers to delay or downsize their IPO plans. When all is said and done, 2021 could represent a high point of the IPO market that may not be matched for years to come,” said Thorne and Rubio.
New York University’s Aswath Damodaran told CNBC earlier this month that the post-IPO slumps could be due to some investors buying into “the big market delusion.”
Such investors are “not doing their homework” like examining the business models of these companies, with reality usually setting in as the first earnings report is released, the professor of finance at NYU’s Stern School of Business explained.
“It’s a slightly troubling sign, but by itself I don’t think … it’s a red flag. I think it’s more a sign of the kinds of companies you’ve seen going public, many with small revenues, big losses and lots of potential,” Damodaran said.

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U.S. stock index futures were little changed during overnight trading Wednesday after the S&P 500 and Dow Jones Industrial Average closed at new records.
Futures contracts tied to the Dow Jones Industrial Average inched higher, while S&P 500 futures were unchanged. Nasdaq 100 futures were slightly lower.

During regular trading on Wednesday the S&P 500 advanced 0.14% to its 70th record close of the year. This is the second highest number of record closes for the benchmark index during a calendar year, trailing just 1995’s 77 record closing highs.
The Dow rose 90 points, or 0.25%, to also close at a record — its first since November. The 30-stock benchmark saw its sixth straight positive session. The Nasdaq Composite, however, declined 0.1%. Chip stocks came under pressure, with AMD, Xilinx and Nvidia all declining at least 1%.
Travel-related stocks also slid amid ongoing Covid-19 concerns, with the NYSE Arca Airline Index dipping 2.5%.
On the flip side, a number of consumer stocks rose to new all-time highs during the session, including Domino’s Pizza, McDonald’s, Yum Brands, Costco and Procter & Gamble.

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All three major averages are in the green for December. The S&P and Dow are on pace for a second positive month in the last three, while the Nasdaq Composite is on track for a third straight month of gains.

Wednesday’s upward action for the Dow and S&P continued a historically strong period for stocks, which has been dubbed the “Santa Claus rally.” The S&P 500 has notched a gain during the period — the last five trading days of the year followed by the first two session in January — 78.5% of the time since 1928, according to Bank of America.
“Santa has been good to investors this holiday season, and we look for another year of positive returns in 2022,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute.
With just two trading days left in 2021, the major averages are also on track to end the year in the green. The S&P and Dow are up 27.6% and 19.2%, respectively. The Nasdaq’s gained 22.3%, while the Russell 2000 is up 13.9%.
“2021 was a terrific year for the equity markets,” said Anu Gaggar, global investment strategist for Commonwealth Financial Network. “Between federal stimulus keeping the economy going, easy monetary policy from the Fed keeping markets liquid and interest rates low, and the ongoing medical improvement leading to surprising growth, markets have been in the best of all possible worlds,” she added.
Looking forward, Gaggar said 2022’s performance depends on earnings and stock valuations.
Treasury yields creeping higher could prove to be a headwind for 2022, especially among growth-oriented areas of the market. The yield on the U.S. 10-year Treasury broke above 1.5% on Wednesday.
“We expect interest rates to move modestly higher in 2022 based on near-term inflation expectations above historical trends and improving growth expectations once the impact of COVID-19 variants recede,” said Lawrence Gillum, fixed income strategist for LPL Financial. “Our year-end 2022 forecast for the 10-year Treasury yield is 1.75–2.00%.”

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Scott Mlyn | CNBC

Check out the companies making headlines in midday trading Wednesday.
Victoria’s Secret — Shares of Victoria’s Secret jumped 12.2% after the intimate apparel retailer announced a $250 million accelerated share repurchase program. The company also reaffirmed fourth-quarter guidance provided in November, including an up to 3% increase in sales versus last year’s fourth-quarter sales of $2.10 billion.

Didi Global — Shares of the Chinese ride-hailing firm fell 8.2%, continuing a brutal month for the stock. Reuters reported Wednesday that Didi is planning to list its stock in Hong Kong in mid-2022 without issuing more shares or raising additional capital.
Tesla — Tesla shares dipped 0.2% after financial filings published late Tuesday showed CEO Elon Musk sold another 934,090 shares — or about $1.02 billion worth of his holdings — in the electric car company.
Alibaba — Alibaba shares fell 2.4% after Bloomberg reported the Chinese e-commerce giant is considering the sale of its 30% stake in social media company Weibo to state-owned Shanghai Media Group. Weibo shares retreated 4.3%.
American Airlines — Travel-related stocks struggled after rebounding in the previous session, as the omicron Covid variant continued to influence market action. American Airlines slid 2.6%. United Airlines and Alaska Air each pulled back more than 1%.
Cal-Maine Foods — Shares of Cal-Maine Foods fell 5.4% after the egg producer reported weaker-than-expected quarterly results. The company earned 2 cents per share for its latest quarter, well short of the 30-cent Refinitiv consensus estimate. Higher production costs and feed costs bit into profit, Cal-Maine Foods reported.
— CNBC’s Tanaya Macheel and Jesse Pound contributed reporting

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Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York, December 17, 2021.
Andrew Kelly | Reuters

(Click here to subscribe to the new Delivering Alpha newsletter.)
Wall Street investors believe inflation will remain a major roadblock for markets in 2022 and stocks will only see muted returns, according to a new CNBC Delivering Alpha investor survey. 

We polled about 400 chief investment officers, equity strategists, portfolio managers and CNBC contributors who manage money about where they stood on the markets for the rest of 2021 and next year. The survey was conducted this week.
More than half of the respondents said inflation is their biggest worry for 2022. Thirty percent said the Federal Reserve raising rates at the wrong time is their top concern, while 17% said the economic impact of a lingering pandemic is their No. 1 worry.

Arrows pointing outwards

For months, investors have watched a variety of inflation data points show their highest levels in decades. The consumer price index, which measures the cost of a wide-ranging basket of goods and services, surged 6.8% on a year-over-year basis in November, the fastest rate since June 1982.
The Fed signaled it will make aggressive policy moves in response to rising inflation, including accelerating the reduction of its monthly bond purchases. Fed officials also see as many as three rate hikes coming next year.
“There are serious headwinds to worry about,” Brad McMillan, chief investment officer at Commonwealth Financial Network, said in a note. “Inflation is at the highest level in decades. Supply chain problems seem to be insoluble. If these issues keep getting worse, they could derail the recovery.”

The S&P 500 has rallied over 27% this year to a record high as the market climbed a wall of worry from surging inflation to the ongoing pandemic to the rollback of monetary stimulus. For 2022, investors think gains will be much lower.

Arrows pointing outwards

More than 50% of the survey respondents expect the S&P 500 to go up less than 10% in 2022. Nearly 18% think the market will produce another double-digit year, while 10% see a flatline for stocks.
Among different asset classes, equities are still investors’ top choice, according to the survey result.
“While inflation is a concern and source of volatility, it also makes stocks the most compelling choice among the major asset classes,” Tony DeSpirito, chief investment officer of U.S. fundamental active equity at BlackRock, said in a note. “Individual companies will manage through differently, highlighting the importance of a stock-by-stock approach.”

Arrows pointing outwards

In terms of stock preferences, 35% of the respondents said they favor financials and 27% like cyclical names benefiting from the economic recovery. Technology stocks in general became less favorable among investors. More

WHAT IS THE economic impact of Omicron? The latest variant of the coronavirus has let rip at such a ferocious pace that forecasters are still catching their breath, and it will be some time before its economic effects become apparent in the official data, which are published with a lag. But a number of speedier, albeit partial, indicators can provide some insight into how consumers and workers may be adjusting their behaviour.Consider first people’s willingness to go out and about. A mobility index using real-time data from Google and constructed by The Economist includes visits to workplaces, retail and recreation sites, and transport hubs. This measure has been reasonably stable in America, albeit at levels below pre-pandemic norms, and has fallen a little in Britain and Germany in recent days. But underlying those headline figures are bigger differences depending on the kind of activity. The return to the office seems to have stalled. In America and Germany journeys to workplaces fell to about 25% and 16% below pre-pandemic levels, respectively, in the week to December 23rd. In Britain, where the government has issued guidance to work from home, they were 30% lower (see chart 1). By contrast, retail- and recreation-related activity has continued to recover in all three countries. This suggests that people may have become more discriminating about when to leave the house, especially as the festive season began. It might also indicate that people who can easily work from home were doing so, a sign of the economy’s increased adaptability to new variants.Other measures show that the hospitality industry is taking a knock. Fewer people are eating at restaurants than in 2019, according to data from OpenTable, a booking platform. In America and Britain there were 12-15% fewer diners in the week to December 20th than in the same period in 2019 (see chart 2).Omicron also seems to have contributed to travel disruptions. That has been most notable in America and China, where domestic air travel had more or less returned to normal. In the week to December 26th some 3,500 domestic and international flights that started or finished in America were cancelled, according to FlightAware, a data firm—about 2.5% of the total number of flights. That compares with a cancellation rate of 0.7% in the same week in 2019. American airlines have blamed covid-related staff shortages and bad weather for the cancellations. The number of passengers passing through American airports on December 22nd and 23rd slightly exceeded that in the same period in 2019. But only 3.2m made journeys on the 24th and 25th, compared with more than 5m in 2019.These indicators give only a limited view of the economy. But they may well capture the areas that are most likely to be affected by fresh outbreaks of covid-19. Analysts at Moody’s, a rating agency, have revised down their estimates of growth in America in early 2022 partly because of reduced spending on travel. Economists at Pantheon Macroeconomics, a consultancy, expect the pain in Britain to be concentrated in the hospitality, entertainment and travel industries, while other sectors remain unaffected. That points to a smaller overall economic impact this time round, compared with previous waves. But with infections still surging and governments pondering fresh restrictions on activity, the full effect of Omicron could be yet to come. As covid-19 enters its third year, every forecaster knows by now to brace for the unexpected. ■This article appeared in the Finance & economics section of the print edition under the headline “Omicron omens” More

Check out the companies making headlines before the bell:
Cal-Maine Foods (CALM) – The nation’s largest egg producer earned 2 cents per share for its latest quarter, well short of the 30-cent consensus estimate. Sales were better-than-expected, but the bottom line was hit by higher costs for packaging and labor. Cal-Maine shares tumbled 7.1% in the premarket.

Tesla (TSLA) – Tesla rose 1.4% in premarket trading, following news that CEO Elon Musk completed the exercising of all his stock options for next year. That signals the end of recent stock sales by Musk to cover tax bills generated by the exercise of those options.
Alibaba (BABA) – The China-based e-commerce giant is considering the sale of its 30% stake in social media advertising company Weibo (WB) to state-owned Shanghai Media Group, according to a Bloomberg report. Alibaba fell 1% in premarket action, while Weibo edged lower by 0.3%.
Victoria’s Secret (VSCO) – The intimate apparel retailer announced a $250 million accelerated share repurchase program.
Akamai Technologies (AKAM) – Akamai rose 1.2% in the premarket after D.A. Davidson rated the internet content delivery company a “buy” in new coverage. The firm set a price target of $143 per share, compared with Tuesday’s close of $118.45.
Didi Global (DIDI) – Didi was down 2.4% in premarket trading after Reuters reported the Chinese ride-hailing company will use the “listing by introduction” method to list in Hong Kong, as it moves to delist in New York. That method would issue no new shares and raise no capital.

BioNTech (BNTX) – The drug maker’s shares fell 3% in the premarket, potentially extending the stock’s losing streak to 7 days. BioNTech has fallen 16% over the past 6 sessions. Rival vaccine maker Moderna (MRNA) is in a similar slump, falling for the past six sessions and falling 18% over that stretch. Moderna dropped 1.6% in premarket action.
FuelCell Energy (FCEL) – The fuel cell technology company lost 7 cents per share for its latest quarter, wider than the 4-cent loss predicted by analysts. Revenue also fell below analyst forecasts, and the stock slumped 4.6% in premarket trading.

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