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
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’s blockbuster Shanghai share sale gathers momentum, as overseas investors clamour for China exposure
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.
And while Ant is China’s largest digital payments provider, accounting for 50 per cent of market share, investors will count on its financial technology businesses, including microlending and the online sales of wealth management and insurance products, as the main drivers of growth.
“The digital payments business has entered a period of stable growth, and there’s more potential for the marketing of wealth management and insurance products on its digital platforms,” said Wang Jian, an analyst at Guosen Securities. “The combination of its large customer base and room for expansion for the industry will bring growth potential to the company.”
Ant had 710 million active users by June. It might trade at a price-to-earnings ratio of as much as 60 times, valuing the company at about 2.5 trillion yuan on its Star Market debut, according to Zhongtai Securities. Its net income will probably surge 145 per cent from a year earlier in 2020 and rise 26 per cent in 2021, the brokerage said.
The valuation multiple for Star Market is 90 times, six times as expensive as that of companies listed on the Shanghai exchange’s main board, according to bourse data. Star Market currently has 179 listings.
Ant Group is only a step away from trading on the mainland exchange, with just registration with the stock-market regulator pending after the listing was approved by the Shanghai exchange last week. The offering and listing dates have not been decided yet.
Hong Kong to vet Ant’s IPO application early next week, as it plays catch-up with Shanghai
In its latest prospectus posted on the website of the Shanghai exchange, the digital payments behemoth estimated that its gross profit for the first nine months this year could increase by as much as 73 per cent from a year earlier, because of a boom in China’s digital economy and a decrease in costs.
