May 19, 2024 4 min read

Asia Tea Time - Cup 56 ☕

This week I talk a potential Shein IPO, how to think about splitting your investments between stocks and ETFs, and Lawrence taking office.

Macro in Asia

Fashion giant Shein to focus on London IPO instead of New York

Fast fashion behemoth Shein is shifting its focus to an IPO in London as tensions with the US make a New York listing unlikely, according to a report in the FT.

Why it’s happening

China and the US have not been getting along all that well. Shein? Well, it’s Singapore-domiciled but because most of its suppliers are in China, it just can’t shake the perception that it’s actually Chinese.
Of course, that doesn’t tend to go down well with American lawmakers or the country’s financial regulators.
Shein had confidentially filed for a New York IPO in November last year, according to two sources familiar with the matter. Looks like there’s been no word out since then on where they’re at with that.

Why it matters

The New York stock markets – the New York Stock Exchange (NYSE) and the Nasdaq – are the two biggest in the world. They’re the go-to for any company globally that wants to IPO and get their company in front of global investors.
With China-US relations still pretty tense, Shein’s listing was seen as a test of whether a blockbuster IPO from a supposedly-Chinese company could fly with US regulators.
It could also be a big coup for the London Stock Exchange, which has seen a lack of big listings for a while now.

What’s next?

See where this listing talk goes in the next few months with both London regulators (who are pushing hard) and US regulators (who are more like “nah”).

Tim’s Take

Shein’s whole process to IPO seems like a less intense version of the whole furore surrounding TikTok.
While fast fashion is arguably much less of a national security risk than the boatloads of data TikTok has on Americans, the sentiment of American regulators is still the same; limit Chinese listings.

💡

Recently, news came out that Zeekr Intelligent Technology – a Chinese premium EV firm owned by Geely – was looking to raise US$441 million in a New York IPO.

If it does go through, that would be the largest New York IPO from a Chinese company since 2021.

It’s a sign of the times, though, and a piddling amount. It’s also a far cry from the whopping US$25 billion that Chinese tech giant Alibaba raised in its 2015 New York IPO.

We saw that whole wave of Chinese secondary listings in Hong Kong during the pandemic years but now that the city’s stock market is in the doldrums, London makes more sense for a global audience.

The only problem with the London market is the fact that it has been losing out to New York in the fight for global fundraising for a while.

Semiconductor firm and British-headquartered Arm Holdings opted for a US listing last year in the latest sign that the US markets are just too big to ignore.

For China’s companies, though, if the business isn’t too contentious for US lawmakers and regulators, then they’ll likely keep their options open by looking to US stock markets in order to raise those much-needed funds.

Tim’s money tip of the week

I’ve always been a big fan of having our “core” long-term investment holdings in broadly-diversified exchange-traded funds (ETFs). But I also realise that owning stocks is something that we all like to do (me included).

However, we should distinguish why we hold stocks. It’s either a) we like the business and are willing to hold on to it long term as long as the business thesis holds or b) we’re punting on something speculative like meme stocks – think GameStop or AMC.

The former is having an investing thesis and having cash flows (hopefully!) behind it. The latter is really more of a gamble on whether it will shoot up. Alternatively, we could lose big amounts of money if it crashes in a day or two.

If we can accept those core principals before doing anything, then you can take calculated risks on how much money we want to put behind each.

Of course, for investing (which I’ll stick to here), owning a broadly-diversified stock portfolio should mean holding around 25-30 individual stocks.

Ideally, these should be global in nature and across various sectors. Remember total returns, too. That is the price return + dividends.

Typically, over the long term, total returns can be compounded at a much faster rate than just dividends that are really high.

So, when investing outside of ETFs, understand your risk, your time horizon, your style (are you into dividends or growth stocks?), and your position sizing.

Taking all these into account will ensure you have a much healthier long-term relationship with stocks.

Story of the week

Singapore had its first transition of power in two decades as former Prime Minister (PM) Lee Hsien Loong handed over the reins to new PM Lawrence Wong.

The latter was sworn in earlier this week and will be taking office in a time of global uncertainty. It marks an extraordinarily chill transition for the ruling PAP but PM Wong will now be in the spotlight like never before as the leader of the one of the world’s richest countries.