SinoInsight 1
The China Securities Regulatory Commission approved Foxconn Industrial Internet Co.’s IPO application on May 11. According to Foxconn’s A-share prospectus, the company is looking to raise 27.3 billion yuan ($4.3 billion) for eight major projects.
OUR TAKE
We are not optimistic about how much Foxconn can eventually raise at its IPO.
First, Chinese “unicorns” have performed disappointingly after being listed on the Hong Kong Stock Exchange, with some stock prices falling by half. For instance, Ping An Good Doctor’s share prices fell below its issue price on the second day of its listing. In other words, “unicorns” are being overvalued and the markets are not confident in their profitability.
Second, Foxconn is an OEM company that is heavily dependant on exports to the United States. Given Sino-U.S. trade tensions, Foxconn’s prospects are not clear.
SinoInsight 2
State media reporting of China’s first domestically manufactured aircraft carrier sea trials on May 13 was short, neutral, and relatively low-key. Missing from the reporting was the usual triumphant nationalistic tone.
Meanwhile, the Liaoning maritime safety bureau had announced on May 10 that a navigation ban in the Bohai Sea and northern area of the Yellow Sea would be extended from May 4 to May 18. Observers suspect that the navigation ban extension is due to the aircraft carrier encountering problems during its trial test.
OUR TAKE
The Chinese Communist Party had previously used the aircraft carrier Liaoning as part of a propaganda drive to ramp up nationalism. However, CCP nationalism has been deflated of late ever since ZTE met with a crippling U.S. ban. On May 13, President Donald Trump tweeted that he was working with Xi Jinping to find a way for ZTE to “get back into business, fast.” Trump’s “maximum pressure” strategy on China appears to be working.
The CCP regime could find itself in a crisis if it cannot find a way to rebalance Sino-U.S. trade.