Chinese investors snap up mutual funds with Ant Group share allocations even before mega listing has kicked off

About 10 billion yuan worth of five mutual funds were sold within an hour of going on sale on Friday morning

Investors will count on Ant’s fintech businesses, including microlending, wealth management and insurance products, as growth drivers: analyst

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Most of China’s small investors are not qualified to trade on Star Market, where Ant is set to be listed, because of asset thresholds. Photo: EPA-EFE

Published: 5:00pm, 27 Sep 2020Updated: 10:39pm, 27 Sep 2020

Chinese investors have begun booking their bit of Ant Group’s mega initial public offering, snapping up new mutual funds picked by the digital payments juggernaut as strategic buyers, even before the flotation has kicked off.

About 10 billion yuan (US$1.5 billion) worth of five mutual funds that have been allocated shares from Ant’s mainland tranche were sold within an hour of going on sale on Friday morning. Two of the funds will not be accepting public subscriptions any more, after their caps for the IPO were reached on Saturday, according to mainland Chinese media.

The funds, which will be managed by five different money managers, including China Asset Management and China Universal Asset Management, have been capped at 12 billion yuan each. As much as 10 per cent of their assets will take part in the IPO and will be subject to an 18-month lock-up period.

Ant, which is launching dual listings in Shanghai and Hong Kong, is seeking to raise about 48 billion yuan from the mainland tranche of its offering, a placeholder amount which may deviate from the actual amount after the company’s presentation to investors. The combined size of the flotation might exceed the US$25.6 billion Saudi Aramco raised last year in what was the world’s most valuable IPO yet.

The mutual funds give China’s 148 million individual investors indirect access to the country’s biggest unicorn and its IPO, which will probably become the world’s biggest-ever listing. Most of the country’s small investors are not qualified to trade on Shanghai’s technology-heavy Star Market, where Ant Group is set to be listed, because of asset thresholds.

While buying shares on the Star Market requires a minimum of 500,000 yuan in assets in stock accounts, subscription to the funds that will invest in Ant Group can start from 1 yuan through Alipay, Ant’s flagship digital payments app. And even for qualified individual Star Market investors, the chances of successfully subscribing to the IPO shares are low, as the oversubscription rate for new shares is often more than 1,000 times.

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