Brookfield Brief
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Brookfield Brief

Overheated Capital Markets Creating a New Billionaire Every Week

In response to the COVID-19 pandemic, central banks around the world have taken extreme measures to prime the economy with more liquidity as a backstop to stabilize debt markets. The result: overheated equity markets.

Markets have seen a massive rally since their March lows. The S&P 500 jumped 31% by May, the Dow 30%, and NASDAQ 34% with no immediate end in sight.

Although Hong Kong’s Hang Seng TECH Index (dubbed the ‘Nasdaq of the East’) had a rough first day on Monday, in Mainland China, the markets are a vastly different story. China’s IPO market is making a new billionaire every week. At least 24 people have become billionaires this year through June from the country’s raging market appetites for initial public offerings, including former teachers, accountants, and software developers.

A trend that has gone global beyond just mainland China are the legions of retail investors coming out of the woodwork. Markets were already overheated prior to central banks firing up the liquidity engines amid the pandemic. While parts of the economy have slowed, in an unexpected turn of events, retail investors jumped into the market with both feet looking for quick returns. The rampant speculation in America was made apparent as retail investment bets drove rallies in stocks like now-bankrupt Hertz and others.

Nowhere else is retail investor euphoria greater right now than in Asia. Shanghai is now the most popular listing venue in the world. 118 Companies have gone public this year in Shanghai and Shenzhen raising over $20B through June. Prior to this rally, Chinese investors have been doing financial gymnastics to get out of the Yaun for the past five years to park their wealth with hundreds of billions of dollars leaving the country in the past two years alone according to Bloomberg data. Chinese investors may be looking for safer ground in recent IPO’s.

However, as we said the retail market euphoria is global. Stuck at home and armed with trillions of stimulus dollars in the United States - investors opened 260,500 retail investment accounts in March on E-Trade alone. How many accounts are being opened on other platforms? Robinhood data shows that retail investors have over 14 million positions in S&P 500 stocks alone. You can use this link to track how many Robinhood users hold a particular stock over time. There hasn’t been a retail investment spree like this since DotCom. Only this time the frenzy is being amplified by online communities across social networks. Only time will tell how this fiasco will end.

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Brookfield Brief

Brookfield Brief

Bringing you the most relevant tech and business news you need every week direct to your inbox. We read and subscribe to all the best news outlets so you don’t

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