By Michael Every of Rabobank
Pollyannas, Politicians, And Politburos
Indicative of the globalized financial economy we all live in (for now?), the central foci for most markets is the confluence of US politicians (and regulators), the Chinese Politburo (and regulators), and market Pollyannas, who always take a Panglossian approach: “All is for the best for markets in the best of all possible worlds for markets - because markets.”
Following the drama of the China Securities Regulatory Commission (CSRC) de facto banning US IPOs by Chinese firms --sparking Bloomberg to write the headline ‘Xi Jinping’s Capitalist Smackdown Sparks a $1 Trillion Reckoning’-- China’s Politburo Friday said it was not against such IPOs entirely – but wants tighter supervision and control of data (and of ride-sharing apps.) “Who’s a pretty boy, then?” said the Pollys – who always expect a cracker. However, within hours the US SEC responded with its own ban on IPOs of Chinese firms unless they provide disclosures of political risk and detailed financial information. The CSRC reply: “Chinese and US securities regulators should step up communication on the supervision of US-listed Chinese companies in a spirit of mutual respect and win-win cooperation to seek solutions and foster policy predictability within an institutional environment.”
Pollys loved the win-winnery. But will the Politburo reverse what it said? If not, US politicians will harrumph and the SEC will stand firm; and like the Norwegian Blue, Chinese US IPOs may then have snuffed it, no matter how beautiful their plumage. “But,” squawk Pollys, “This must be good for Hong Kong!” As things stand, yes. Unless the same White House that just warned about the political dangers for...