China's Environmental "Reset"... State of IPOs... Earnings Recap

Insights on markets, industries and the global economy [Goldman Sachs] [BRIEFINGS] July 25, 2016 China's Path to a Low Carbon Economy China's economic growth over the last three decades has been transformational, lifting hundreds of millions of people out of poverty and fundamentally reshaping the global economy. That rapid industrial growth has created significant environmental challenges, as China suffers widespread air, water and soil pollution and other environmental concerns. But after taking a leadership role at the Paris climate conference late last year to set new targets for reducing carbon emissions, and by making clean energy financing a key part of the agenda for the G20 summit in Hangzhou in September, Goldman Sachs Vice Chairman Mark Schwartz believes "China has pressed a reset button." Environmental reforms, he says, are now among China's highest priorities as it makes the transition to a low carbon economy. [Watch video] SHARE: [twitter] [facebook] [LinkedIn] [email] Low Carbon China: Milestones in Sight Key markers on the path to a low carbon China may be nearer than expected. New analysis from Goldman Sachs Research estimates China's coal consumption peaked in 2014, earlier than the 2016-2020 peak predicted in government forecasts. Renewable energy sources such as solar, wind and nuclear power are rapidly gaining market share in China, and GS Research predicts they will surpass the government's 2020 and 2030 targets for increasing the mix of energy consumption that comes from sources other than fossil fuels. Briefly... on the State of IPOs Even though markets are near all-time highs, IPO activity has been notably more muted. Is this just cyclical or reflective of a longer-term trend? Goldman Sachs' Stephen Pierce, global head of Equity Capital Markets, and Pete Lyon and David Ludwig, co-heads of Equity Capital Markets in the Americas, discuss the state of the IPO market globally and what's driving companies to go public. What has contributed to the lackluster IPO market over the last year? David Ludwig: The IPO market is typically highly correlated to the macroeconomic environment and the broader stock market, which has been volatile and more challenging for investors for almost a year. When volatility and risk aversion are high, investors may be less willing to put capital to work against new opportunities. Since last summer, there have been big swings in the market sparked by fears of a global economic slowdown, falling oil prices and Brexit. At the same time, we have seen central bank stimulus, improving employment numbers and healthier corporate earnings and buybacks buttress the market. A robust private funding market is also helping companies, especially in the technology, healthcare and consumer sectors, raise more money in the private markets at attractive valuations. That allowed more companies to stay private for longer. What's the IPO outlook for the second half of the year? More of the same or will activity pick up? Stephen Pierce: We are seeing real signs of improvement. Deal volumes have accelerated on a global basis. Although still down from year-ago levels, global IPO volumes were up 144 percent in the second quarter relative to the first quarter. Goldman Sachs has led large transactions across regions and business sectors, including Line, US Foods, Philips Lighting and MONETA Money Bank. The venture-backed technology IPO sector is also showing signs of life, with GS-led Twilio and Acacia Communications highlighting strong investor interest. Not only are IPOs pricing well with quality investors, but they are trading well in the secondary market. Transactions that price and trade well provide issuers confidence to launch transactions, and also increase investor interest in participating in future deals. Our backlog continues to build, and if markets continue to show stability we expect to see strong activity in the second half of the year. How do issuers and shareholders think about going public in a more challenging environment? Pete Lyon: When markets are more dynamic, investors naturally become more selective about IPOs -- both in terms of company quality but also some additional conservativism over what initial price to pay before a liquid trading market has developed. Those issuers that have been successful in this environment have recognized how investors are approaching the market and have appropriately structured and priced their deals. While this means initial valuation discounts are likely higher, issuers that have chosen to go public made that decision because going public is the right next step for their business -- and recognize that the amount of the company sold in the IPO could only be a small percentage and may create significantly more value in the public markets over time. Goldman Sachs Announces 2Q Earnings The second quarter of 2016 was characterized by a relatively stable global market environment for most of April and May, followed in June by uncertainty surrounding the EU Referendum in the UK and the potential ramifications of Brexit. Against this mixed backdrop, Goldman Sachs announced net revenues of $7.9 billion, net earnings of $1.8 billion and earnings per diluted share of $3.72. "We achieved solid results by continuing to serve our clients across our diversified franchise and by managing our business efficiently," said Chairman and CEO Lloyd Blankfein. On a conference call to discuss the results, Chief Financial Officer Harvey Schwartz reiterated the firm's commitment to clients. "Being in the position to deliver for our clients and our shareholders requires ongoing investment and a long-term perspective," he said. [Listen to conference call] [Read announcement] SHARE: [twitter] [facebook] [LinkedIn] [email] Goldman Sachs Media Highlights Institutional Investor - July 18 [Goldman Sachs Asset Management among Institutional Investor's top US money managers] Wall Street Journal - July 20 [Goldman Sachs part of Series B round for Brazil-based trucking start-up] The Glass Hammer - July 20 [Melissa Barrett on mentorship and work-life balance] Wall Street Journal - July 21 [Goldman Sachs raising PE fund of $5 billion to $8 billion] The Telegraph - July 22 [Andrew Wilson on investing through Brexit uncertainty] Business Insider - July 22 [Edith Cooper on what Goldman Sachs looks for in a resume] [Subscribe] The data provided in this newsletter is for information purposes only and should not be construed as investment or tax advice nor as a recommendation to buy, sell, or hold any particular security. Goldman Sachs believes the data in this newsletter is accurate, but does not verify its accuracy independently and does not warrant or guarantee that it is accurate or complete. Goldman Sachs has no obligation to provide any updates or changes to the data. No investment decisions should be made using this data. To the extent this newsletter includes material from the Goldman Sachs Securities Division, please click [here] for information relating to Securities Division material and your reliance on it. [My Profile] | [Unsubscribe] © 2016 Goldman Sachs, All rights reserved. 200 West Street, New York, NY 10282, USA [GS.com] | [Careers Blog] | [Privacy and Security] | [Terms of Use] [Twitter] [LinkedIn] [YouTube]