By Scott Murdoch
HONG KONG (Reuters) – An initial public offering from Alibaba’s <9988.HK> Ant Group by year-end would give equity capital markets in Hong Kong a timely boost after a new security law cast in doubt the city’s future as a global financial centre, analysts said on Thursday.
With new deals worth $4.17 billion in the first half, Hong Kong’s exchange accounted for 7.6% of the global IPO market, though down from a share of 11%, and deals worth $7.91 billion, in the same period last year, Refinitiv data showed.
The fall in value ranked Hong Kong as the fourth most active exchange after the Nasdaq, mainland China’s new Star Market and the Shanghai stock market.
A listing by Ant Group, the fintech arm of the Chinese e-commerce giant, would add diversity and reinforce Hong Kong’s reputation as a global financial centre, said Hao Hong, head of research at Bocom International.
“Hong Kong investors don’t have that much opportunity to invest in these Chinese tech companies,” Hong told Reuters.
“Seventy percent of the Hong Kong market is finance and property. That isn’t to say they are not good companies, but it isn’t that representative of where the economy is going in the future.”
Aequitas Research analyst Ke Yan, who publishes on the SmartKarma platform, said an Ant listing would “make Hong Kong equity market the top choice for access to leading Chinese tech and media companies.”
The comments followed a Reuters report on Wednesday that cited two sources with direct knowledge as saying that Ant planned a Hong Kong float as soon as this year, and targeted a valuation of more than $200 billion.
The company denied the report.
The sources said Ant was considering listing 5% to 10% of its stock, in what would be the world’s largest IPO this year, based on the estimated valuation.
Ant’s listing would also bring a lucrative payday for investment banks in Hong Kong.
Alibaba’s $12.9-billion secondary listing in Hong Kong last year generated almost $32 million in fees for banks, the company’s U.S. filings showed.
Equity capital markets deals make up almost 40% of the regional investment banking wallet, versus 25% globally, a Reuters calculation from Refinitiv data shows.
Mandates to lead Ant’s deal will be coveted, not just for the fees generated, but also for the prestige that accompanies a high-profile transaction.
Alibaba is known to be close to Credit Suisse <CSGN.S> and CICC which sponsored the secondary listing last year.
Morgan Stanley <MS.N> was ranked number one in the Asia Pacific ECM league tables in the first half, Refinitiv shows, ahead of Goldman Sachs <GS.N> and JPMorgan <JPM.N>.
Hong Kong’s new security law took effect last week.
(Reporting by Scott Murdoch; Editing by Clarence Fernandez)