Market Round-Up

The Nasdaq stock market is proving to be an attractive option for Japanese start-ups as they are lured in by higher valuations and greater funding opportunities compared to the country’s domestic market. Historically, only a dusting of Japanese firms populated the Nasdaq exchange, mostly Japanese conglomerates with a dual listing in Japan and the US. However, this has since changed, as the second largest stock exchange has seen a record number of Japanese start-ups go public, with seven set to list in a few months’ time and a further 10 to 20 planning to follow suit next year. 

Sluggish economic growth, an ageing population and the risk-adverse nature of Japanese investors are seen as the main factors pushing start-ups out of Japan. In contrast, American institutional investors are perceived to have greater risk appetite, being much more eager to invest capital in new and unproven firms. Therefore, this could be said to be boosting the appeal of listing in the US, where higher valuations can be obtained. Furthermore, Japanese start-ups can expect to capitalise on the sharp drop in Chinese IPO (Initial Public Offering) activity on the Nasdaq, hoping that investor attention will turn towards them instead. 

The performance of these listings will signal whether US stock exchanges could become the new home for many aspiring Japanese enterprises, or if this is simply a short-lived trend.

Britain’s largest defence and aerospace company has recently been awarded a £3.95bn contract to commence the development of a new class of attack submarines for the US, UK and Australia as part of the Aukus Pact. The contract is expected to cover expenses until 2028, by which point BAE Systems is set to have completed the design for the SSN-Aukus submarines. The contract facilitates the possibility for BAE Systems to generate new revenue streams, as it will likely receive further funding to put the design in action, with projections estimating that construction on the nuclear submarines will begin towards the end of the 2020s. The first SSN-Aukus vessel is planned to be rolled out by the late 2030s. 

Fellow defence firms, Babcock and Rolls-Royce, are also set to benefit from this endeavour, with the latter supplying the submarines’ nuclear reactors and the former providing design input. The deal highlights the tailwinds that the defence sector has been experiencing, as a result of the rise in armament spending by governments who feel unsettled by growing geopolitical tensions. BAE Systems looks well poised to benefit from this trajectory, with its sophisticated and extensive range of arms and military gear attracting a diverse customer base, from the Czech Republic to Saudi Arabia. 

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned. Investments and income arising from them can fall as well as rise in value. Past performance and forecasts are not reliable indicators of future results and performance.