Latest / The Emerging Markets Podcast with Fexingo: Developing Economies, Growth, and Investment / How the SpaceX IPO Is Reshaping Emerging Market Tech Investing
Transcript
- Lucas: So SpaceX is set to price its IPO today at a valuation of one point eight trillion dollars. That's bigger than the entire market cap of the S&P 500's average company, bigger than Meta or Tesla. And what's interesting to me is how this is quietly reshaping capital flows in emerging markets this week. Luna: I was just looking at the EM numbers. EEM is up four and a half percent in the last five days, VWO up nearly two percent. But Chinese tech — BABA, JD, BIDU — they're all down four to six percent. That's a stark divergence. Lucas: Exactly. KWEB, the China internet ETF, is only up point seven percent on the week, while the broader EM indexes are ripping. So what's happening is a classic crowding-out effect. SpaceX is the biggest IPO in history, and it's sucking up a huge amount of investor attention and actually capital. Luna: So investors are selling their Chinese tech positions to buy SpaceX. That explains the divergence. Lucas: Right. And look at the numbers. Alibaba down six point one percent, JD down two point eight, Baidu down four point six, Pinduoduo down four point four. These are significant moves in a week where EM as a whole is up. The rotation is real. Luna: But SpaceX is a US company. Why would it affect Chinese stocks specifically? Lucas: Because the investor base for high-growth tech is the same global pool. Hedge funds, mutual funds, sovereign wealth funds — they have allocation limits. If they want to own a piece of SpaceX at one point eight trillion, something else has to go. And Chinese tech, which has faced regulatory headwinds and slowing growth, is the natural sell. Luna: So this is like a portfolio rebalancing event, not a fundamental shift in Chinese tech. Lucas: That's my read. The fundamentals of Alibaba or JD haven't changed this week. But the opportunity cost of holding them just went up. SpaceX is a unique asset — it's the dominant player in space, with Starlink, and a huge government contracts business. There's no public company quite like it. Luna: And there's a broader context here. The trade-weighted dollar index hit 120.1 this week, up from 119.36. A strong dollar typically hurts EM assets. But this week, EM stocks are up despite the dollar. So the SpaceX IPO is actually overwhelming that macro headwind. Lucas: That's a great point. Normally, a stronger dollar means capital flows out of EM. But here, the SpaceX IPO is creating so much excitement that it's actually pulling money into EM broadly — just not into Chinese tech. The EM ETF EEM is up four and a half percent, Brazil's EWZ up two point four, Korea's EWY up thirteen point six percent. Luna: Thailand's EWT up four point five percent too. So ex-China EM is having a great week. Lucas: And the yuan has been stable at 6.77 per dollar. If the yuan were weakening, that would add to the pressure on Chinese stocks. But it's not. So the sell-off in Chinese tech is really about rotation, not currency or macro. Luna: Do you think this rotation lasts beyond the IPO? Once SpaceX starts trading, does the effect fade? Lucas: It depends on how SpaceX performs. If it pops and continues to rally, it could keep drawing capital away from EM tech for months. If it trades flat or dips, the rotation could reverse quickly. But I think the bigger story is that SpaceX is legitimizing space as an investable sector, and that has long-term implications for EM. Luna: Meaning countries like India, which has a growing space program, or even Brazil, which has satellite launch capabilities. Lucas: Exactly. India's space agency ISRO has been launching satellites for years, and there are private Indian space startups. If the SpaceX IPO creates a 'space bubble' of sorts, capital will flow not just to US space companies, but to EM space-adjacent plays too. India's ETF INDA is up one percent this week, not huge, but it could be a slow build. Luna: And it's not just space. The AI angle is relevant too. SpaceX's Starlink provides internet connectivity, and AI models need bandwidth. So there's a synergy. Lucas: Right. And that's why this IPO is so consequential. It's not just a company going public. It's a signal that the space economy is maturing. And for EM investors, the question is: which countries and companies are best positioned to ride that wave? Luna: Let's talk about what listeners can do if they want to track this. What should they watch for in the coming weeks? Lucas: First, watch the Chinese tech names. If BABA and JD stabilize and start to recover while SpaceX trades flat, that tells you the rotation is over. Second, watch the dollar. If it keeps rising above 120, that's a headwind for all EM. Third, watch India's INDA and any space-related ETFs that might launch. The space theme is just getting started. Luna: That's a solid framework. And speaking of getting started, if you've been following our episodes and the way we break down these connections has made something click — maybe helped you think differently about how capital moves — we do have a small way listeners can support the show. It's at buy me a coffee dot com slash fexingo. Totally optional, but it helps keep us ad-free and focused on the analysis. Lucas: Yeah, we appreciate everyone who listens. And we're not going anywhere. So back to the SpaceX story — one more thing I want to highlight. The IPO is expected to price tonight, and the hype is enormous. But there's a risk: SpaceX is still a private company with limited disclosure. The valuation of one point eight trillion is based on secondary market trades and optimism. If the first earnings report disappoints, the stock could correct hard, and that would hit EM tech as well. Luna: Because if SpaceX falls, the rotation reverses, and money flows back into Chinese tech? Lucas: Exactly. And that's why the next few weeks are critical. The correlation between SpaceX and EM tech is now a thing. Investors need to watch it. Luna: It's a fascinating dynamic. We'll be tracking it. Thanks, Lucas. Lucas: Thanks, Luna. And thanks to our listeners. See you next time.