China pulls Ant Group’s $34 billion IPO
Ant Group’s shocking suspension of massive stock offerings and Joe Biden’s eventual presidency in the US are a new tailwind for the Chinese stock market as investors rush to buy up the fastest recovering economy from the coronavirus pandemic..
Chinese regulators torpedoed the $ 37 billion initial public offering of the fintech giant, which was to become the largest public listing in the world after the founder Jack Ma publicly criticized the country’s financial supervisors and banks.
As trillions of dollars locked in IPOs return to the market, investors looking for a place to hold that money have pushed Chinese e-commerce companies like Meituan and JD.com to record highs this week..
Even after Friday’s losses, the Hang Seng TECH Index rose 8.2% over the week, its biggest weekly gain since early July..
Sean Taylor (Sean Taylor), director of investment in Asia for German asset manager DWS, said the IPO failure was overwhelming, but the fight for subscriptions showed the depth of the investor pool in Asia.
«This shows that there is a huge, huge demand to buy stocks when they think they have upside potential. I expect some of this money to return to the markets», – he said.
New enthusiasm for Chinese stocks is not limited to Hong Kong.
In the first five trading days of November, foreign investors bought Chinese Class A shares worth 21.42 billion yuan ($ 3.24 billion), according to the Hong Kong Stock Exchange. Investors have been seen to be betting on a revival of domestic demand and government policies through companies such as spirits manufacturer Kweichow Moutai Co Ltd and LONGi Green Energy Technology Co Ltd.
These investors were net sellers in August and September and made only tiny purchases in October under the Stock Connect scheme, which gives offshore investors access to shares of Chinese companies traded on the mainland..
Early signs that the Democratic nominee Joe Biden can remove the incumbent president Donald Trump, also pushed the yuan and stocks.
If elected, Biden is expected to take a less confrontational approach to Sino-US relations, removing the obstacle to Chinese stocks, which nevertheless outperformed their rivals this year as the world’s second largest economy recovers..
The CSI300 blue-chip index is up more than 19% this year, up from less than 9% growth for the S&P 500.
Morgan Stanley analysts said the company maintains a preponderance in China in emerging markets as corporate earnings continue to recover in China.
New capital inflows will be key to prop up valuations of Chinese companies, which are already close to all-time highs, as many companies rush to go public, he said. Shen Yi (Shen Yi), CEO of Shanghai ShenYi Investment Co.
The Chinese Class A stock market saw 325 new listings, worth a record 542.5 billion yuan in the first 10 months of 2020, more than three times the value of new listings in the same period a year earlier, according to a report from analysts at Shenwan Hongyuan Securities..
«Speed … too high and not enough fresh money coming into the market», – Shen said. «It all depends on the direction of cash flows in this market».