HONG KONG STOCKS: Shein IPO Venue Switch Could Have Broader Market Implications
May-28 08:03
Chinese eCommerce firm Shein is said to be switching focus for their IPO listing from London and to Hong Kong after the company failed to gain the approval of Chinese regulators, and in particular the CSRC, according to Reuters sources.
- The newsflow is notable for several reasons: Firstly, a Shein IPO in London would have been the largest since Glencore in 2011 and the most significant listing since Deliveroo's volatile IPO in 2021 (who are now destined to leave the market this year after DoorDash announced their plans to buy the company). As such, Shein's switch in focus is detrimental to London's standing as a global financial hub and means the city misses out on another sizeable float.
- Secondly, this redirects focus to the HK market. A Shein IPO here of similar size would equate to a $5-9bln raise on a $50-90bln valuation and could almost double the already-strong YTD fundraising on the exchange (running at just under $10bln).
- With a placement seen as likely later this year (although subject to regulatory approval), focus may shift to potential distortions in HKD cash demand: Sizeable demand for securities can help narrow the HKD forward discount, which has proved sensitive in recent years to a pick-up in capital markets activity, as the uptick in cash demand in turns adds upward pressure to HIBOR. This could relieve pressure on USD/HKD spot, which is pressing toward the weak-side of the trading band after recent HKMA intervention.
- Lastly, the valuation of a Shein IPO is seen as highly sensitive to global 'de minimis' rules. Their business model relies on duty exemptions given their high volume, low price strategy - keeping focus on EU and US rulings over parcel levies and trade tension sensitivities.
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STIR: SFRM5 Blocked
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Latest block trade lodged at 08:47:06 London/03:47:06 NY:
- SFRM5 1K lots blocked at 95.885, looks like a seller.
SWAPS: German ASWs A Little Narrower As Bonds Struggle
Apr-28 07:55
The weakness in outright bonds/uptick in European equities leaves German ASWs narrower early this week.
- Spreads vs. 3-month Euribor are 0.2-0.9bp narrower on the day, with Schatz leading the narrowing.
- However, the Schatz spread has failed to breach Friday’s low, while longer dated variants have traded through their respective Friday lows.
- Zooming out, a slightly more conducive risk tone has started to counter the widening theme seen in the second half of March/early April.
- A reminder that early March saw fresh cycle lows for long-dated spreads, following the German “whatever it takes” fiscal moment.
- That was before a lack of an immediate ramp up in issuance and the well-documented increase in global trade/U.S. policy uncertainty weighed on wider risk sentiment, helping drag ASWs away from lows.
- The impending, meaningful uptick in German issuance should continue to play into long end ASW spread dynamics over the medium-term (it should move back to the fore in H225/H126), although positioning and swings in broader risk appetite need to be accounted for as well.
SNB: Tweak to Threshold Factor is Neutral for MonPol Stance
Apr-28 07:49
SNB adjusts the remuneration of sight deposits, lowering the threshold factor from 20 to 18, effective as of 1st June 2025.
- This is considered neutral for monetary policy purposes, as it offsets increases to minimum reserve requirements.
Full SNB release here.
- What this effectively means is that more sight deposits are remunerated at a discount to the the SNB policy rate (rather than at the policy rate).
- The SNB is conducting this move in order to ensure monpol remains effective and the transmission mechanism isn't hampered by minimum reserve requirements rising (which they're expected to continue to do over the coming three years).
- The move follows recent previous adjustments to reduce the threshold factor that were implemented in October 2024 and February 2025.
- As such, no notable response in EUR/CHF, still below the overnight high of 0.9438.
