Jack Ma
Ant is controlled by Alibaba founder Jack Ma © Bloomberg

Ant Group started small. Its name comes from its commitment to serve individuals and small businesses. But there is nothing modest about the Chinese fintech company’s Hong Kong and Shanghai dual listing. The initial public offering is expected to raise $30bn. Ant’s IPO will be the biggest of the year — perhaps of all time.

Ant Financial Services Group, as it was formerly known, is controlled by Alibaba founder Jack Ma. It is reported to be seeking a valuation anywhere between $200bn and $300bn. That is larger than most global banks. It is three to four times the size of Goldman Sachs’ equity value.

There is every chance Ant, which was formed when the popular Alipay payments app was split from Alibaba, will succeed. A Hong Kong listing will allow the company to enjoy the surge of mainland Chinese funds into markets and the liquidity of foreign investors. Listing on Shanghai’s Star market — China’s answer to the Nasdaq — will win brownie points with President Xi Jinping.

The timing could not be better. Ant reported full-year revenues of more than Rmb120bn ($17bn) and net profit over $2.5bn last year. Profits in the first half of 2020 have exceeded the whole of 2019 at more than Rmb21bn.

So far, Ant has also managed to emerge relatively unscathed from the pandemic, even if its quest to become a global name has run into trouble. A large chunk of Ant’s overseas business relies on the $127bn of annual Chinese tourist spending. That came to a halt as the pandemic deterred international travel. For the group as a whole, however, rising online spending will offset the decline.

Ant is right to ride the wave of successful Chinese tech listings. Chinese regulators are encouraging investors to buy equities — not that they need any urging. Funds are overflowing as Beijing boosts support and loosens regulations. The retail allotment of listings such as JD.com’s were oversubscribed by 170 times. 

At $200bn, Ant’s valuation would be equal to about 25 times expected earnings, according to analyst forecasts, a discount to US rival Paypal’s 48 times. Its payments business — which accounts for nearly two-thirds of China’s $7tn market — could justify that valuation alone. Higher margin insurance and loans businesses are an extra boost.

There is a glut of new Chinese stock listings. But even if a market backlash comes, Ant should remain one of the stocks able to keep returns positive.

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