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Friday, October 30, 2020 – 3:25 pm
Individual investors in Hong Kong and Shanghai placed orders worth at least US $ 3 trillion for shares of Jack Ma’s Ant Group, enough money to buy JPMorgan ten times over. Bidding was so intense in Hong Kong that a brokerage platform briefly closed after being overwhelmed by orders. Demand from the retail side in Shanghai exceeded the initial supply by more than 870 times.
The stampede is fueling predictions of a first-day outbreak when Ant will go live on November 5, even as skeptics warn of risks including the US elections, stricter regulations in China, and rising Covid infections. -19 worldwide.
Whether Ant raises or not, the Chinese financial technology giant’s $ 35 billion initial public offering represents a huge vote of confidence in a company that could end up shaping the future of global finance. It also underscores China’s ability to raise large amounts of capital without turning to US markets, a victory for Beijing in its attempt to reduce its vulnerability to the threat of US financial sanctions.
Chen Wu, a 35-year-old software developer, was among those fighting for a portion of Ant’s offering this week. His brokerage allowed a small number of clients to increase their bets using 33x leverage, distributing allocations on a first-come, first-served basis.
“When it was published at noon, I refreshed my page over and over, clicked and clicked,” Wu said Tuesday after landing a block of HK $ 5.7 million (S $ 1 million) of Ant shares, equivalent to to more than 80 percent of your existing equity portfolio. “I got it around 12:01 pm and the quota was sold out in minutes. I was lucky.” Ant is certainly benefiting from the unusually optimistic mood among retail investors globally, but it’s not just the family crowd that is driving demand. Reputable money managers, including Temasek Holdings, T. Rowe Price Group and UBS Asset Management, are also seeking assignments. Institutions and strategic investors can take about 96 percent of the supply in Shanghai and 97.5 percent in Hong Kong, according to Ant’s prospectus, although the figures may change due to take-back and footing provisions.
Retail investors are likely to continue to have a significant impact once trading begins, especially in Shanghai, where people generate the vast majority of daily turnover. Around 5.16 million retail accounts placed a record 19.05 trillion yuan (S $ 3.88 trillion) of orders for Ant shares in the city’s Star Market, where merchants must have a minimum of 500,000. yuan on your bills.
In Hong Kong, the retail side attracted more than HK $ 1.3 trillion in orders at 11 a.m. local time on Friday, or 394 times the initial supply, the South China Morning Post reported, citing people familiar with the affair.
Many investors in the city took advantage of historically low interest rates to widen their bets with borrowed money. Futu Securities, the brokerage that suffered a brief interruption due to a flood of orders Tuesday, said its margin quota for Ant was exhausted in about 20 minutes. Banks and brokerages have so far provided around HK $ 519 billion in margin loans to retail bettors, according to the Hong Kong Economic Journal.
“There has been unprecedented investor interest,” said Jasper Chan, deputy director of corporate finance at Phillip Securities, which allocated all of the HK $ 20 billion it set aside for Ant margin loans on the first day they became available. Chan said that the demand for the IPO has been wider than usual due to the small minimum lot size of 50 shares, which is equivalent to about 4,040 Hong Kong dollars.
Yuki Chung, a 30-year-old university teaching assistant in Hong Kong, said she plans to bid for HK $ 500,000 in Ant shares, 90 percent of which will be financed with borrowed money. “The margin rates that banks offer can be less than 1 percent, which is definitely very attractive,” he said. “Everyone is participating in the IPO, so I feel like I should too. I don’t want to lose.” Others fear putting too much faith in a rally. Elle Lam, a 28-year-old media professional who has invested in several Hong Kong IPOs this year, plans to order just one batch of 50 Ant shares, using the rest of her available cash to bid for the next issue of the Hong Kong government. of bonds linked to inflation.
“People are certainly too excited,” Lam said. “I think Ant’s valuation is too expensive, so the profit on debut day could be limited.” The IPO price translates to a multiple of about 36 times estimated earnings for 2021, topping average valuations for both global payments companies and large Hong Kong-listed tech stocks, according to Bloomberg Intelligence.
Still, rich valuations haven’t been a deterrent for Hong Kong IPOs of late. Bottled water giant Nongfu Spring, which debuted in the city last month after receiving orders for 1,148 times the number of shares it initially reserved for retail investors, is now valued at about 55 times estimated earnings after skyrocketing 65%. from your offer price.
“I think Ant can go up 30% to 40% on the first day,” said Wu, the software developer who went into debt to buy shares. “I’m not too concerned with acting.”
BLOOMBERG
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