Biden victory rally soothes market pain as Hong Kong investors look beyond Ant Group IPO stumble

Brokers optimistic that market gains sparked by Biden’s victory will consolidate and compensate for missed windfall
‘Ant IPO is only a one-off,’ market is now very positive on the macroeconomic conditions over the medium term: Royston Securities

Ant Group

Ethan Paul

Published: 5:58pm, 9 Nov, 2020

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Some investors and brokers are optimistic that stock market gains sparked by the US presidential election outcome will continue apace over the coming weeks, erasing the pain of missing out on the anticipated windfall from Ant Group’s record-breaking stock sale.

The Hang Seng Index jumped 1.2 per cent on Monday on the back of Joe Biden’s triumph over the weekend, bringing the gains over three days to 4.4 per cent. The local market has not had a stronger back-to-back rally since the benchmark put on an 8.4 per cent run in four days through July 6, according to Bloomberg data.

Ant Group halted its record-breaking US$39.67 billion initial public offering on late November 3, sending the market down by 0.2 per cent the following day. Investors poured about US$3 trillion into its retail offerings in Shanghai and Hong Kong.

“Over the short-term, there is very bullish sentiment for investing on the mainland, due to the uncertainty over the US presidential election results are resolved,” said Alan Li, portfolio manager at Atta Capital. “The IPO suspension will have quite a bit of long-term impact, but you will not be able to see it over the short-term.”

Optimism surrounding Biden’s presidency helped drive the Hang Seng Index to a four-month high, a bullish trend that permeated across most Asian stock and currency markets. Global stocks reached a new height during Asian trading hours, according to Bloomberg data, and could swell further in European and US trading.

The Ant IPO has inadvertently played an important role in the market rebound, according to Kenny Wen, a wealth management strategist at Everbright Sun Hung Kai. Investors were able to latch on to the rally with the IPO refunds from the Chinese fintech giant.

“The suspension brought liquidity back into the market, and because markets expect a Biden presidency to be good for the US economy and US-China relations, his victory and extra liquidity drove the gains in the Hang Seng Index,” said Wen.

Ant Group to refund US$167.7 billion to Hong Kong investors after IPO is suspended

He believes the rally will end up proving large enough to compensate investors who were banking on a windfall from the Ant Group stock debut. As with most stock market euphoria, a sharp upturn built on sentiment may be hard to sustain, Wen said, adding that a consolidation over the coming weeks could be expected.

Ant said it would refund retail investors by Friday November 6 the HK$1.3 trillion (US$167.7 billion) of cash to more than 1.5 million small investors in Hong Kong. The suspension is likely to cost investment banks who sponsored the listing, including Citigroup, JPMorgan and Morgan Stanley, about US$400 million in advisory fees.

Biden’s win heralds gains for Hong Kong stock traders eyeing new China ties

Kenny Tang Sing-hing, chief executive and co-founder of Royston Securities, expects a Biden administration to prioritise domestic issues while promoting international trade and dialling down tensions with China, all of which should be well-received by the market.

“The Ant IPO is only a one-off, but the market is now very positive on the macroeconomic conditions over the medium term,” Tang said. “This will offset any losses or disappointment from the suspension.”

Tang also noted that the suspension could bring other, hidden benefits to Hong Kong that may prove advantageous for investors over the medium-term. More companies could list in the city due to concerns over regulatory uncertainty in China created by the Ant incident, he added.

Ant is an affiliate of Alibaba Group Holding, the owner of the South China Morning Post.

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