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HONG KONG – Summer may be over, but the financial world is ablaze with an impending historic debut on November 5 of groundbreaking proportions.
Chinese financial technology giant Ant Group is not about to list on the London or New York stock exchanges. But it is about to break all initial public offering (IPO) records with its IPO in Hong Kong and Shanghai.
On Friday (October 30), individual investors in Hong Kong and Shanghai bought at least $ 3 trillion (S $ 4.1 trillion) in group shares, enough money to buy JPMorgan Chase & Co 10 times more.
The offers in Hong Kong were so intense that a brokerage platform reportedly closed briefly after being overwhelmed by orders, while demand from the retail side in Shanghai exceeded the initial offer by more than 870 times.
The closely watched event will strengthen Hong Kong’s position as the IPO hub of Asia and inject a lot of vitality into the Hang Seng Index, which has lost some ground since the beginning of the year due to the global coronavirus pandemic and disruption of the market that has caused.
Ant Group, a financial services component created out of billionaire Jack Ma’s Alibaba empire, is on track to break world records by raising around $ 34.4 billion in the world’s largest initial public offering, topping $ 1. 25 billion raised in 2014 by its former parent, Alibaba. Group Holding, and the $ 29.4 billion raised last December by Saudi Aramco.
This double listing will make Ant one of the most valuable technology companies in the world. It will also make him a model for Chinese fintech companies hoping to follow in his footsteps.
“Hong Kong’s advantage for massive listings will likely be reinforced, not reduced, by the increasing number of Chinese tech IPOs in recent years,” said IG analyst Margaret Yang.
Since tensions between the United States and China escalated in 2018, the Hong Kong stock market has welcomed prominent Chinese tech companies Alibaba, JD.com, Xiaomi and Meituan.
“This trend may continue as Beijing tries to promote an ‘insider circulation’ strategy to get rid of trade, technology and even the US financial market,” said Ms Yang, adding that these additions have helped cushion the index. reference of external headwinds.
Ant seeks to raise around $ 17.2 billion in Shanghai and the same in Hong Kong, with prices set at 68.8 yuan and 80 Hong Kong dollars respectively per share. The Hangzhou-based group’s valuation is estimated to reach $ 313 million.
Ma, who withdrew from Alibaba last year and controls Ant with more than 50 percent of its voting rights, told a financial forum in Shanghai in late October that this is the first time such a large IPO has been listed outside. from New York. .
This is something that “we would not have dared to think about five, not even three years ago,” he said then.
Market watchers say the overwhelming demand for Ant from both domestic and foreign investors gives confidence to other private unicorns.
And the repatriation of China-listed corporations, triggered first by Beijing’s desire to exert greater control over China’s foreign companies and their often wealthy founders, and then driven by deteriorating ties between the United States and the United States. China has provided a much-needed moral boost to the Hong Kong market. said Brock Silvers, chief investment officer at Kaiyuan Capital.
“If the bilateral relationship continues to deteriorate, especially in a second Trump term, the trend may extend from large caps to mid-caps. It would be good news for Hong Kong, especially if that trend can outlast economic recessions. “he added. he said.
On the Shanghai side of the Ant deal, investors include China’s national pension funds and fund managers linked to China’s state-owned firms, lenders and insurers.
Foreign investors include Singapore’s GIC and Temasek Fullerton Alpha, the Canada Pension Plan Investment Board and the Abu Dhabi Investment Authority.
Alibaba will buy 51.1 billion yuan worth of shares to keep its stake in about a third of Ant, while Ma and members of Ant’s top management will collectively own about 39.5 percent of the latter.
When asked about the nuances of Shanghai’s participation in this gigantic deal, Silvers said that many Chinese “local champions” opt for double listing on the mainland or Hong Kong for various reasons.
The listings on the mainland please the Chinese authorities as the companies are under the mainland’s regulatory control. These quotes also expand the shareholder base and help companies raise capital in renminbi.
But many companies also value the hard currency exposure and fundraising that Hong Kong offers.
So for now, these double quotes may reduce US leverage resulting from New York’s primacy in global finance, Silvers said.
“Hong Kong has apparently gone from being a western ‘window to China’ to being a ‘window to the West’ of China,” he said.
And as Ms. Yang pointed out, foreign investors may still prefer to trade on the Hong Kong exchange rather than Shanghai due to its ease of access, liquidity, currency exchange, and settlement convenience.
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