The Omicron variant weighed heavily on markets, with no clear trend emerging throughout the week. Stocks ended the week down, with safe haven sovereign bonds catching a bid as a small ‘flight to safety’ emerged. Many countries (no more so than here in Ireland) saw the reintroduction of restrictions in a bid to get ahead of any potential impact from the new variant. From a purely economic perspective, the new restrictions will weigh most acutely on the hospitality sector which was due to rely heavily on the pre-Christmas run in to compensate for an already disrupted year. It is likely we will see the initial impact, particularly in Europe, in high frequency data in the coming weeks.
In company specific news, the decision of ride-hailing group ‘Didi’ to delist from New York in favour of Hong Kong raised a few eyebrows. Following on from the reigning in of some Tech giants earlier in the year, it looks like Beijing will ‘encourage’ US listed Chinese companies to move a bit closer to home. The regulatory and political interference is apparent from both sides, with the data warehousing implications complicating matters even further. Chinese companies gain access to US markets by utilising ‘Variable Interest Entities’ to circumvent listing rules, in what is a nice throwback to some of the strategies employed by Enron – as we look back to the collapse of the Energy giant 20 years ago this week. There is a growing consensus that this will be the start of wider trend in relation to the location of Chinese listings, with a number of firms under pressure in early trading this morning as a result.
Indeed, investors have much to weigh up as we move towards the end of 2021.