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ZEN SOO
Tue, October 27, 2020, 5:34 PM GMT+7·5 mins read
HONG KONG (AP) — Stella Su, who lives and works in Shanghai, has used an ATM only once in the past year. Instead of cash, in recent years she has done almost all her business using the digital wallet Alipay –- shopping in a mall, buying stuff online or transferring money to friends.
“Now when I go out, I don’t even need to carry my wallet, all I need is my phone,” said Su, one of over a billion Alipay users in China and abroad.
Alipay, operated by Ant Group, is the world’s largest and most valuable financial technology (fintech) company and one of two dominant Chinese digital wallets in China, the other being rival Tencent’s WeChat Pay.
Thanks to the huge scale and potential of China’s fintech landscape, Ant Group is poised to raise about $34.5 billion in the world’s largest share offering, beating Saudi Aramco’s previous record of $29.4 billion. Ahead of the IPO, the company will be valued at about $280 billion.
To tap both Chinese and global investors, Ant Group is listing its shares both in Shanghai and Hong Kong. It is due to begin trading in Hong Kong on Nov. 5. The Shanghai debut has yet to be announced.
Even before announcing its IPO plans, Ant Group was the world’s most valuable fintech company, with a valuation of $150 billion after a 2018 fundraising round.
“Ant Group is much more than PayPal which only processes financial payments. It has a lot of businesses in other areas and with other services that would help 1.3 billion people in China,” Jackson Wong, asset management director at Amber Hill Capital Ltd., said in an interview. “We are betting that Ant Group will be able to grow at a very high pace in the future.”
Alipay and WeChat Pay have helped make Chinese society virtually cashless, at least in big cities, with consumers and merchants alike relying on digital payments using their phones.
“Think of Alipay as Visa, MasterCard, Citibank, Fidelity… all rolled up into one,” said Shaun Rein, founder and managing director of China Market Research Group in Shanghai. “On the Alipay platform, you pay for things, you buy insurance, you buy wealth management. Your whole life revolves around Alipay.”
Walk into a supermarket in China and one would be hard-pressed to find a customer digging around for loose change to pay for groceries. Instead, cashiers scan a QR code on a customer’s smartphone to deduct money from their Alipay or WeChat Pay digital wallets. The transaction takes seconds.
In restaurants, groups of friends often split the bill by transferring money to each other using their digital wallets, similar to how the Venmo app is used in the U.S.
“Ant Group is so valuable because Alipay is used on a day to day basis by a billion people on all of their purchases,” said Rein. “The scale of fintech in China dwarfs the regular financial transaction potential in the United States.”
Alipay evolved from e-commerce giant Alibaba, which was founded by Jack Ma in 1999 to help match buyers and sellers in China's fast growing market. When Alibaba launched consumer e-commerce platform Taobao to rival eBay in China, Alipay was introduced as a payments method to boost users' trust in the platform. Today, Alipay's reach extends to almost every aspect of life related to money.
Ma's foresight has made him the wealthiest person in China, with a fortune estimated at $58.8 billion according to the Hurun Research Institute, which follows the country’s wealthy.
Alipay was created in 2004 to serve as an escrow service between buyers and sellers on Alibaba’s e-commerce consumer platform Taobao. It held funds from buyers to be released to sellers after goods were received. Alipay's revenue mostly comes from transaction fees charged to merchants. Users can link their bank cards directly to Alipay to top up their wallets, and transfers can also be withdrawn from users' bank accounts.
Alibaba, which currently owns a third of Ant Group, spun off Alipay in 2011. The company was later rebranded as Ant as the company expanded the range of its financial services.
One of those is Zhima Credit – -a private credit-scoring system that rates the trustworthiness and creditworthiness of its users based on data such as whether users pay their bills on time via Alipay.
Zhima Credit scores can help people take out small loans from Ant Group’s consumer credit services Huabei and Jiebei to finance such things as iPhone purchases or school expenses. Such loans are hugely popular in China, where credit card usage is low and most people have no official credit history and are unable to borrow from banks.
Ant Group's money market fund, called Yu’e Bao -– one of the world’s largest –- lets people put idle cash in their Alipay wallets to work and reap returns on investments as small as 100 yuan ($15).
“In the past, wealth management products offered by banks had many requirements, maybe a minimum of 50,000 yuan (about $7,500),” said Chen Zhoumin, who works in a bank in Zhengzhou, a city in central China's Henan province. “But Alipay has made it very convenient to invest money, because it made wealth management accessible and convenient.”
To compete with Yu’e Bao, banks have begun providing more flexible investment products with lower capital requirements, said Chen, who often invests idle cash in Yu’e Bao since it's easy to do.
“Digital wallets like Alipay and WeChat have revolutionized payments in China,” he said. “Now, there’s also less worry that we might get counterfeit notes, or that our wallets may get stolen or robbed since everything is done digitally now.”
—
AP journalist Alice Fung in Hong Kong and researcher Chen Si in Shanghai contributed to this report.
finance.yahoo.com
Ant IPO By the Numbers: It’s Bigger Than Finland’s GDP
David Scanlan
Tue, October 27, 2020, 5:25 PM GMT+7·4 mins read
Ant IPO By the Numbers: It’s Bigger Than Finland’s GDP
(Bloomberg) -- There’s no shortage of superlatives for Ant Group Co.’s initial public offering. Here’s a look at some of the key metrics, and why billionaire Jack Ma seems to be such a fan of the number eight.
IPO: $34.5 Billion
Ant’s $34.5 billion IPO blows past the previous record, set last year by Saudi Aramco at $29 billion. Ant’s money raise will likely jump another $5.2 billion once bankers sell additional shares to meet demand in what’s known as the greenshoe option. This chart of the 10 biggest IPOs also reflects the growing economic clout of Asia. The top five are all from Asia or the Middle East, and eight of the 10 are from the region, including Ma’s online giant Alibaba Group Holding Ltd. and Japan’s SoftBank Group Corp.
Valuation: $315 Billion
Ant’s IPO puts the company’s valuation at dizzying heights. At about $315 billion, Ant is worth more than the gross domestic products of Egypt, Chile or Finland. For corporate comparisons, it’s bigger than JPMorgan Chase & Co., the biggest U.S. bank. Ant is larger than payment rival Paypal Holdings Inc., media giant Walt Disney Co. and dwarfs Bank of America Corp. It’s three times bigger than tech giant IBM Corp. and four times larger than Goldman Sachs Group Inc.
Wealthy Eight
Ma appears to be a big fan of the number eight, which is often associated with wealth in China. Eight is pronounced “ba” and rhymes with the word for “prosperity” or “getting rich” in Mandarin. As a result, couples often try to get married in August, the 8th month, while eight is a popular number for street addresses and apartment floors. The 2008 Beijing Summer Olympics opening ceremonies began at 8 p.m. on Aug. 8.
Ant is knee-deep in eight. The stock ticker in Shanghai will be 688688; in Hong Kong it’s 6688. Six is also considered a lucky number in China. The shares were priced in Shanghai at 68.8 yuan and at HK$80 in Hong Kong. Ma’s Alibaba Group, which owns about a third of Ant, trades under the ticker 9988 in Hong Kong.
The eight focus seems to be working for Ma. Alibaba has soared since its Hong Kong listing last year, up 69%, trouncing the Hang Seng index, which is down 8% over that period.
76 Billion Shares
Ant’s IPO was expected to attract investors from all over the world and that’s borne out in the demand for shares. Institutional investors put in orders for 76 billion shares, more than 284 times the initial offering, according to the Shanghai filing. Brokers were willing to lend individual investors credit worth 20 times their investment so they could load up on the shares. Ant is planning to stop taking investor orders for the Hong Kong leg a day earlier than scheduled as the share sale has already been heavily subscribed, according to people familiar with the matter.
$71.6 Billion Fortune
Ma, the former English teacher who co-founded Alibaba with $60,000, is poised to become the world’s 11th-richest person after the Ant IPO.
Ma’s 8.8% stake is worth $27.4 billion based on the stock pricing in Hong Kong and Shanghai. That will lift the 56-year-old’s fortune to $71.6 billion on the Bloomberg Billionaires Index, exceeding that of Oracle Corp.’s Larry Ellison, L’Oreal SA heiress Francoise Bettencourt Meyers and individual members of the Waltons, whose family own Walmart Inc.
$396 Million Fees
The banks working on the IPO are looking at a nice windfall.
Ant is set to raise as much as $19.8 billion in Hong Kong if it fully exercises an over-allotment option. The fintech giant disclosed in a filing that it will pay an underwriting commission of as much as 1% of the total deal size, or $198 million. That’s below the average 1.45% paid by companies raising over $1 billion in the city, according to data compiled by Bloomberg. Add in the 1% fee paid by investors via brokers, and the amount jumps to about $396 million.
(Updates with bank fees at end)
finance.yahoo.com
China Brokers Test Goldman With Best IPO Ranking in Decades
Bloomberg News
Tue, October 27, 2020, 4:39 PM GMT+7·5 mins read
(Bloomberg) -- Chinese brokerages are having a bumper year for equity dealmaking, with Ant Group’s multi-billion-dollar initial public offering poised to boost their showing in the global ranking to the best in at least two decades.
China International Capital Corp. is leading the push thanks to a bevy of Chinese deals, an economy that’s shrugging off the pandemic and a liberalization of local capital markets. CICC is set this year to vault above U.S. stalwarts Goldman Sachs Group Inc. and Morgan Stanley once Ant completes what’s set to be a record $34.5 billion IPO in Hong Kong and Shanghai, according to data compiled by Bloomberg.
As a group Chinese securities firms will take up nearly half of the top 50 underwriting spots as they’re enlisted by local companies seeking to capitalize on the nation’s recovery from the coronavirus pandemic. A flaring up of tensions between the world’s two superpowers that’s increased scrutiny of Chinese names in the U.S. has also prompted a wave of additional listings in Hong Kong by firms including Netease Inc. and JD.com.
“The robust pipeline in China compared to elsewhere in the world has sent leading Chinese brokers to the top of the charts,” said Wang Jiyue, a former banker and the author of The Star Market Way, a chronicle of China’s new Nasdaq-like trading venue.
Twenty-four of the world’s top 50 underwriters this year are from China, up from 15 in 2019. Together they held a combined market share of about 31%, compared with 18.5% last year. That’s the biggest share in records going back two decades.
CICC has a prominent role in Ant’s offerings on the mainland and in Hong Kong. It along with Chinese rival CSC Financial Co. are jointly leading in Shanghai, while a number of U.S. investment banks are on the Hong Kong deal, including Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley.
Chinese brokerages will continue to raise their profile, said Stephanie Tang, head of private equity for Greater China at law firm Hogan Lovells. “Some of the banks see themselves as quite important bridges between the Chinese market and the international market.”
Bouncing Back
China has firmly beaten back the spread of the coronavirus, with the economy rebounding by 4.9% in the third quarter and its stock market recently topping $10 trillion in value. Business in the financial hub in Shanghai is largely back to normal, with traders and bankers in the office and traveling to see clients as Europe and the U.S. still struggle.
Authorities have also relaxed regulations for the onshore market since last year, including extending an IPO registration system from Shanghai’s STAR board to Shenzhen, waiving limits on valuations, and removing quotas for foreign investors.
IPO deals in the Asian nation jumped about 60% this year, double the rise seen in the U.S., according data compiled by Bloomberg. Chinese companies have raised more than $98 billion from first-time share sales at home and offshore this year, on pace to exceed the 2010 record after Ant completes its IPO, according to data compiled by Bloomberg.
At the same time, more Chinese companies are bringing back listings to Hong Kong, giving brokerages from the mainland a better chance to compete with well-entrenched global banks in the Asian financial center.
“Many IPOs in Hong Kong are from mainland Chinese companies in which Chinese brokers have more participation,” said Shen Meng, director of Beijing-based boutique investment bank Chanson & Co. “American brokers, which dominated the Hong Kong IPO market previously, are only taking part in a few ultra-big deals now.”
Despite their showing on the league tables, China’s brokerages are still minnows compared with their Wall Street peers. The 131 registered firms in the nation have the combined assets of Goldman Sachs.
Zou Yingguang, a managing director at Citic Securities, said at a conference last week that China must set up its own top investment bank to enhance its competitiveness and clout in global markets. Goldman Sachs derived 40% of its revenue from overseas markets, while China’s top five brokerages only got an average 10% from their international operations, he said.
“While Chinese brokers have made progress, they still lag far behind in asset scale and innovation ability,” he said.
Chinese regulators have called for the creation of an “aircraft carrier-sized” brokerage to take on the foreign competition expected with the opening up of the nation’s financial markets. The state owners of the country’s two biggest securities firms, Citic Securities Co. and CSC Financial, have held talks on a potential merger, which would create a $100 billion firm.
In the meantime, continuing reform of the local market may extend the nation’s IPO boom and further boost local brokerages. The China Securities Regulatory Commission said this month it plans to expand the registration-based IPO mechanism to all first-time offerings “at an appropriate time.”
“The registration-based IPO reform has galvanized the market,” said Dong Chen, deputy president of Changchun-based Northeast Securities Co. “In the domestic market, foreign banks are no match for Chinese brokers in winning mandates.”
(Adds data on IPOs in 10th paragraph.)
finance.yahoo.com
Tue, October 27, 2020, 5:34 PM GMT+7·5 mins read
HONG KONG (AP) — Stella Su, who lives and works in Shanghai, has used an ATM only once in the past year. Instead of cash, in recent years she has done almost all her business using the digital wallet Alipay –- shopping in a mall, buying stuff online or transferring money to friends.
“Now when I go out, I don’t even need to carry my wallet, all I need is my phone,” said Su, one of over a billion Alipay users in China and abroad.
Alipay, operated by Ant Group, is the world’s largest and most valuable financial technology (fintech) company and one of two dominant Chinese digital wallets in China, the other being rival Tencent’s WeChat Pay.
Thanks to the huge scale and potential of China’s fintech landscape, Ant Group is poised to raise about $34.5 billion in the world’s largest share offering, beating Saudi Aramco’s previous record of $29.4 billion. Ahead of the IPO, the company will be valued at about $280 billion.
To tap both Chinese and global investors, Ant Group is listing its shares both in Shanghai and Hong Kong. It is due to begin trading in Hong Kong on Nov. 5. The Shanghai debut has yet to be announced.
Even before announcing its IPO plans, Ant Group was the world’s most valuable fintech company, with a valuation of $150 billion after a 2018 fundraising round.
“Ant Group is much more than PayPal which only processes financial payments. It has a lot of businesses in other areas and with other services that would help 1.3 billion people in China,” Jackson Wong, asset management director at Amber Hill Capital Ltd., said in an interview. “We are betting that Ant Group will be able to grow at a very high pace in the future.”
Alipay and WeChat Pay have helped make Chinese society virtually cashless, at least in big cities, with consumers and merchants alike relying on digital payments using their phones.
“Think of Alipay as Visa, MasterCard, Citibank, Fidelity… all rolled up into one,” said Shaun Rein, founder and managing director of China Market Research Group in Shanghai. “On the Alipay platform, you pay for things, you buy insurance, you buy wealth management. Your whole life revolves around Alipay.”
Walk into a supermarket in China and one would be hard-pressed to find a customer digging around for loose change to pay for groceries. Instead, cashiers scan a QR code on a customer’s smartphone to deduct money from their Alipay or WeChat Pay digital wallets. The transaction takes seconds.
In restaurants, groups of friends often split the bill by transferring money to each other using their digital wallets, similar to how the Venmo app is used in the U.S.
“Ant Group is so valuable because Alipay is used on a day to day basis by a billion people on all of their purchases,” said Rein. “The scale of fintech in China dwarfs the regular financial transaction potential in the United States.”
Alipay evolved from e-commerce giant Alibaba, which was founded by Jack Ma in 1999 to help match buyers and sellers in China's fast growing market. When Alibaba launched consumer e-commerce platform Taobao to rival eBay in China, Alipay was introduced as a payments method to boost users' trust in the platform. Today, Alipay's reach extends to almost every aspect of life related to money.
Ma's foresight has made him the wealthiest person in China, with a fortune estimated at $58.8 billion according to the Hurun Research Institute, which follows the country’s wealthy.
Alipay was created in 2004 to serve as an escrow service between buyers and sellers on Alibaba’s e-commerce consumer platform Taobao. It held funds from buyers to be released to sellers after goods were received. Alipay's revenue mostly comes from transaction fees charged to merchants. Users can link their bank cards directly to Alipay to top up their wallets, and transfers can also be withdrawn from users' bank accounts.
Alibaba, which currently owns a third of Ant Group, spun off Alipay in 2011. The company was later rebranded as Ant as the company expanded the range of its financial services.
One of those is Zhima Credit – -a private credit-scoring system that rates the trustworthiness and creditworthiness of its users based on data such as whether users pay their bills on time via Alipay.
Zhima Credit scores can help people take out small loans from Ant Group’s consumer credit services Huabei and Jiebei to finance such things as iPhone purchases or school expenses. Such loans are hugely popular in China, where credit card usage is low and most people have no official credit history and are unable to borrow from banks.
Ant Group's money market fund, called Yu’e Bao -– one of the world’s largest –- lets people put idle cash in their Alipay wallets to work and reap returns on investments as small as 100 yuan ($15).
“In the past, wealth management products offered by banks had many requirements, maybe a minimum of 50,000 yuan (about $7,500),” said Chen Zhoumin, who works in a bank in Zhengzhou, a city in central China's Henan province. “But Alipay has made it very convenient to invest money, because it made wealth management accessible and convenient.”
To compete with Yu’e Bao, banks have begun providing more flexible investment products with lower capital requirements, said Chen, who often invests idle cash in Yu’e Bao since it's easy to do.
“Digital wallets like Alipay and WeChat have revolutionized payments in China,” he said. “Now, there’s also less worry that we might get counterfeit notes, or that our wallets may get stolen or robbed since everything is done digitally now.”
—
AP journalist Alice Fung in Hong Kong and researcher Chen Si in Shanghai contributed to this report.
Here's why Ant Group is about to shatter IPO records
Stella Su, who lives and works in Shanghai, has used an ATM only once in the past year. Instead of cash, in recent years she has done almost all her business using the digital wallet Alipay –- shopping in a mall, buying stuff online or transferring money to friends. “Now when I go out, I don’t...
David Scanlan
Tue, October 27, 2020, 5:25 PM GMT+7·4 mins read
Ant IPO By the Numbers: It’s Bigger Than Finland’s GDP
(Bloomberg) -- There’s no shortage of superlatives for Ant Group Co.’s initial public offering. Here’s a look at some of the key metrics, and why billionaire Jack Ma seems to be such a fan of the number eight.
IPO: $34.5 Billion
Ant’s $34.5 billion IPO blows past the previous record, set last year by Saudi Aramco at $29 billion. Ant’s money raise will likely jump another $5.2 billion once bankers sell additional shares to meet demand in what’s known as the greenshoe option. This chart of the 10 biggest IPOs also reflects the growing economic clout of Asia. The top five are all from Asia or the Middle East, and eight of the 10 are from the region, including Ma’s online giant Alibaba Group Holding Ltd. and Japan’s SoftBank Group Corp.
Valuation: $315 Billion
Ant’s IPO puts the company’s valuation at dizzying heights. At about $315 billion, Ant is worth more than the gross domestic products of Egypt, Chile or Finland. For corporate comparisons, it’s bigger than JPMorgan Chase & Co., the biggest U.S. bank. Ant is larger than payment rival Paypal Holdings Inc., media giant Walt Disney Co. and dwarfs Bank of America Corp. It’s three times bigger than tech giant IBM Corp. and four times larger than Goldman Sachs Group Inc.
Wealthy Eight
Ma appears to be a big fan of the number eight, which is often associated with wealth in China. Eight is pronounced “ba” and rhymes with the word for “prosperity” or “getting rich” in Mandarin. As a result, couples often try to get married in August, the 8th month, while eight is a popular number for street addresses and apartment floors. The 2008 Beijing Summer Olympics opening ceremonies began at 8 p.m. on Aug. 8.
Ant is knee-deep in eight. The stock ticker in Shanghai will be 688688; in Hong Kong it’s 6688. Six is also considered a lucky number in China. The shares were priced in Shanghai at 68.8 yuan and at HK$80 in Hong Kong. Ma’s Alibaba Group, which owns about a third of Ant, trades under the ticker 9988 in Hong Kong.
The eight focus seems to be working for Ma. Alibaba has soared since its Hong Kong listing last year, up 69%, trouncing the Hang Seng index, which is down 8% over that period.
76 Billion Shares
Ant’s IPO was expected to attract investors from all over the world and that’s borne out in the demand for shares. Institutional investors put in orders for 76 billion shares, more than 284 times the initial offering, according to the Shanghai filing. Brokers were willing to lend individual investors credit worth 20 times their investment so they could load up on the shares. Ant is planning to stop taking investor orders for the Hong Kong leg a day earlier than scheduled as the share sale has already been heavily subscribed, according to people familiar with the matter.
$71.6 Billion Fortune
Ma, the former English teacher who co-founded Alibaba with $60,000, is poised to become the world’s 11th-richest person after the Ant IPO.
Ma’s 8.8% stake is worth $27.4 billion based on the stock pricing in Hong Kong and Shanghai. That will lift the 56-year-old’s fortune to $71.6 billion on the Bloomberg Billionaires Index, exceeding that of Oracle Corp.’s Larry Ellison, L’Oreal SA heiress Francoise Bettencourt Meyers and individual members of the Waltons, whose family own Walmart Inc.
$396 Million Fees
The banks working on the IPO are looking at a nice windfall.
Ant is set to raise as much as $19.8 billion in Hong Kong if it fully exercises an over-allotment option. The fintech giant disclosed in a filing that it will pay an underwriting commission of as much as 1% of the total deal size, or $198 million. That’s below the average 1.45% paid by companies raising over $1 billion in the city, according to data compiled by Bloomberg. Add in the 1% fee paid by investors via brokers, and the amount jumps to about $396 million.
(Updates with bank fees at end)
Ant IPO By the Numbers: It’s Bigger Than Finland’s GDP
(Bloomberg) -- There’s no shortage of superlatives for Ant Group Co.’s initial public offering. Here’s a look at some of the key metrics, and why billionaire Jack Ma seems to be such a fan of the number eight.IPO: $34.5 BillionAnt’s $34.5 billion IPO blows past the previous record, set last year...
Bloomberg News
Tue, October 27, 2020, 4:39 PM GMT+7·5 mins read
(Bloomberg) -- Chinese brokerages are having a bumper year for equity dealmaking, with Ant Group’s multi-billion-dollar initial public offering poised to boost their showing in the global ranking to the best in at least two decades.
China International Capital Corp. is leading the push thanks to a bevy of Chinese deals, an economy that’s shrugging off the pandemic and a liberalization of local capital markets. CICC is set this year to vault above U.S. stalwarts Goldman Sachs Group Inc. and Morgan Stanley once Ant completes what’s set to be a record $34.5 billion IPO in Hong Kong and Shanghai, according to data compiled by Bloomberg.
As a group Chinese securities firms will take up nearly half of the top 50 underwriting spots as they’re enlisted by local companies seeking to capitalize on the nation’s recovery from the coronavirus pandemic. A flaring up of tensions between the world’s two superpowers that’s increased scrutiny of Chinese names in the U.S. has also prompted a wave of additional listings in Hong Kong by firms including Netease Inc. and JD.com.
“The robust pipeline in China compared to elsewhere in the world has sent leading Chinese brokers to the top of the charts,” said Wang Jiyue, a former banker and the author of The Star Market Way, a chronicle of China’s new Nasdaq-like trading venue.
Twenty-four of the world’s top 50 underwriters this year are from China, up from 15 in 2019. Together they held a combined market share of about 31%, compared with 18.5% last year. That’s the biggest share in records going back two decades.
CICC has a prominent role in Ant’s offerings on the mainland and in Hong Kong. It along with Chinese rival CSC Financial Co. are jointly leading in Shanghai, while a number of U.S. investment banks are on the Hong Kong deal, including Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley.
Chinese brokerages will continue to raise their profile, said Stephanie Tang, head of private equity for Greater China at law firm Hogan Lovells. “Some of the banks see themselves as quite important bridges between the Chinese market and the international market.”
Bouncing Back
China has firmly beaten back the spread of the coronavirus, with the economy rebounding by 4.9% in the third quarter and its stock market recently topping $10 trillion in value. Business in the financial hub in Shanghai is largely back to normal, with traders and bankers in the office and traveling to see clients as Europe and the U.S. still struggle.
Authorities have also relaxed regulations for the onshore market since last year, including extending an IPO registration system from Shanghai’s STAR board to Shenzhen, waiving limits on valuations, and removing quotas for foreign investors.
IPO deals in the Asian nation jumped about 60% this year, double the rise seen in the U.S., according data compiled by Bloomberg. Chinese companies have raised more than $98 billion from first-time share sales at home and offshore this year, on pace to exceed the 2010 record after Ant completes its IPO, according to data compiled by Bloomberg.
At the same time, more Chinese companies are bringing back listings to Hong Kong, giving brokerages from the mainland a better chance to compete with well-entrenched global banks in the Asian financial center.
“Many IPOs in Hong Kong are from mainland Chinese companies in which Chinese brokers have more participation,” said Shen Meng, director of Beijing-based boutique investment bank Chanson & Co. “American brokers, which dominated the Hong Kong IPO market previously, are only taking part in a few ultra-big deals now.”
Despite their showing on the league tables, China’s brokerages are still minnows compared with their Wall Street peers. The 131 registered firms in the nation have the combined assets of Goldman Sachs.
Zou Yingguang, a managing director at Citic Securities, said at a conference last week that China must set up its own top investment bank to enhance its competitiveness and clout in global markets. Goldman Sachs derived 40% of its revenue from overseas markets, while China’s top five brokerages only got an average 10% from their international operations, he said.
“While Chinese brokers have made progress, they still lag far behind in asset scale and innovation ability,” he said.
Chinese regulators have called for the creation of an “aircraft carrier-sized” brokerage to take on the foreign competition expected with the opening up of the nation’s financial markets. The state owners of the country’s two biggest securities firms, Citic Securities Co. and CSC Financial, have held talks on a potential merger, which would create a $100 billion firm.
In the meantime, continuing reform of the local market may extend the nation’s IPO boom and further boost local brokerages. The China Securities Regulatory Commission said this month it plans to expand the registration-based IPO mechanism to all first-time offerings “at an appropriate time.”
“The registration-based IPO reform has galvanized the market,” said Dong Chen, deputy president of Changchun-based Northeast Securities Co. “In the domestic market, foreign banks are no match for Chinese brokers in winning mandates.”
(Adds data on IPOs in 10th paragraph.)
China Brokers Test Goldman With Best IPO Ranking in Decades
(Bloomberg) -- Chinese brokerages are having a bumper year for equity dealmaking, with Ant Group’s multi-billion-dollar initial public offering poised to boost their showing in the global ranking to the best in at least two decades.China International Capital Corp. is leading the push thanks to...
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