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The air conditioning paradox is that the same technology that cools air may cause hotter temperatures longer term. Air conditioning accounts for 4 per cent of greenhouse gas emissions. But higher temperatures and increasingly frequent heatwaves around the world mean ever more people are resorting to the systems to keep them cool.
A key beneficiary of this trend has listed in Hong Kong. Shares of Chinese appliance maker Midea Group rose 10 per cent during morning trade on its debut on Tuesday. Midea raised $4bn in the offering, which was already priced at the top end of the marketed range, making the listing the biggest in the city in more than three years. Midea’s listing was eight times oversubscribed by institutional investors, an even higher multiple than that for its allotment for retail investors, reflecting strong demand across investor types.
Midea would have found the public markets less welcoming had it listed five years ago. Sales of household electrical appliances, including air conditioners, were thought to have peaked in 2019. Air conditioner usage rates are high in Asia, including in China where Midea is the largest appliance maker and has long been a household name. Investor expectations for growth in this segment were subdued.
Rising temperatures and growing demand in markets outside China have changed that in recent years. Earnings hit a record last year, with overseas sales accounting for more than 40 per cent of total sales. Demand from markets such as India have been growing rapidly with air conditioner sales expected to hit a record high this year.
In Japan, where more than 90 per cent of homes already have air conditioning, shipments of air conditioners surged nearly a fifth in July to 1.3mn units, rising for the fourth consecutive month as high temperatures arrived earlier than usual this year.
There is also potential for further growth at home. As consumer spending remains weak, Beijing has kicked off a trade-in policy for a wide range of products such as cars and home appliances, which encourages people to replace outdated goods with newer models by providing subsidies.
Meanwhile, Midea has been investing in industrial robots and logistics automation. Demand for these technologies is expected to grow in China, where a rapidly ageing population has been shrinking its workforce. More than 400mn or 28 per cent of the total population is estimated to be over the age of 60 by 2040.
The result is that a listing that would have got a decidedly cool reception a few years ago now has several long-term growth options to keep investors’ fires burning.
