Digital-payments giant Ant Group is poised for the “largest stockmarket flotation of all time” next week, says James Dean in The Times. It is set to raise “at least $34.4bn” from a dual listing on the Hong Kong and Shanghai stock exchanges. This would not only be more than the $29.4bn raised by Saudi Aramco last December, but could also see the firm valued at $313bn, around the same as JP Morgan. The flotation will also turn Alibaba founder Jack Ma into the world’s 11th richest person, with a fortune of $72bn, thanks to his controlling interest of 8.8% in Ant.
The “frenzy of interest” has been so great that the book for the Hong Kong listing was oversubscribed an hour after the launch on Monday, says Hannah Boland in The Daily Telegraph. Ant’s impending listing has even caused the Hang Seng index to fall based on fears of a liquidity squeeze as investors rush to sell existing stocks in order to free up cash to buy its shares. Enthusiasm has been further stoked by the fact that Ant Group’s reported profits jumped by more than 70% year-on-year in the third quarter.
A bet on China’s middle class
Investors pinning their hopes on Ant Group “might not be entirely crazy”, says The Wall Street Journal. After all, “hundreds of millions” of Chinese consumers now use Ant to access “payment services, banking, loans, insurance and the like”. This is a bet that China’s middle class will continue its “inexorable” expansion. Jack Ma has a long record of understanding consumers’ needs; witness the success of his online-shopping platforms. What’s more, Chinese protectionism means that foreign payment-processing firms such as Visa and Mastercard have only recently been allowed to offer services to Chinese people in China.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Simply fending off foreign competitors may not be enough, says Robyn Mak on Breakingviews. If Ant Group wants to justify its valuation of 24 times 2022 earnings, it will need to expand further. This may prove difficult as it already accounts for a quarter of Chinese financial transactions related to online credit, insurance and wealth management. And while the company has benefited from implicit support from Beijing, this can change – as it found out when Chinese regulators imposed new rules on Ant’s “once-booming” money-market fund, drastically slowing its rate of growth.
It’s not only Chinese regulators that Ant Group’s investors should be worried about, says Lex in the Financial Times. Other countries, including India, are cracking down on Chinese apps, hampering overseas growth. Ant Group’s “tight ownership structure” and “complex” balance sheets, especially its many long-term investments in other companies, are other potential risks. Up until now this “hinterland” has helped Ant Group, with the disposal of the local services group Koubei preventing it from falling “deeply into the red” two years ago. However, there is no guarantee that its other investments will be so successful.
-
House prices rise 2.9% – will the recovery continue?House prices grew by 2.9% on an annual basis in September. Will Budget policies and ‘higher-for-longer’ rates dent the recovery?
-
Nvidia earnings: what to expectNvidia announces earnings after market close on 20 November. What should investors expect from the semiconductor giant?
-
Investing in a dangerous world: key takeaways from the MoneyWeek SummitIf you couldn’t get a ticket to MoneyWeek’s summit, here’s an overview of what you missed
-
DCC: a top-notch company going cheapDCC has a stellar long-term record and promising prospects. It has been unfairly marked down
-
How investors can use options to navigate a turbulent worldExplainer Options can be a useful solution for investors to protect and grow their wealth in volatile times.
-
Invest in Hilton Foods: a tasty UK food supplierHilton Foods is a keenly priced opportunity in an unglamorous sector
-
HSBC stocks jump – is its cost-cutting plan already paying off?HSBC's reorganisation has left questions unanswered, but otherwise the banking sector is in robust health
-
Lock in an 11% yield with SabreTips Sabre, a best-in-class company is undervalued due to low profits in the motor insurance industry. Should you invest?
-
Byju’s – the startling rise and fallIndia’s educational technology start-up Byju's attracted big-name backers and soared to vertiginous heights during Covid. It has now plummeted. What happened?
-
Shares in luxury goods companies take a hit – will they recover?Luxury goods companies have run into trouble, and the odds of a rapid recovery have receded. What next?
