Ant Group’s $34bn share sale is set to catapult Shanghai’s bourse to the top of the global rankings in terms of cash raised in 2020, underscoring the rising might of China’s capital markets as tensions with the US simmer.
The payments group’s blockbuster initial public offering, which is split evenly between Shanghai and Hong Kong, will bring the total raised on the mainland Chinese exchange from primary and secondary listings to $52.6bn this year, according to data from Refinitiv.
The figure is up 200 per cent from a year ago and well above the $38bn raised in 2020 on New York’s Nasdaq, excluding special-purpose acquisition vehicles. The offering, which is set to begin trading next week, will put the Chinese exchange on track for its best year since 2007, when companies sold stock worth $55bn.
“Ant has put Shanghai on the map for good,” said one banker working on the group’s IPO, adding that the listing raised the exchange’s standing to a level comparable with Hong Kong. “After this year there will be two IPO markets that matter in Asia.”
The fundraising boom in mainland China comes amid a strong recovery in the world’s second-biggest economy after it controlled the spread of coronavirus. The country’s CSI 300 index is one of the best performing global stock markets this year, returning about 15 per cent.
But the listings bonanza in mainland China’s financial capital has also been stoked by Beijing’s drive to get strategically important technology companies to tap equity markets.
That push has coincided with efforts by the US to cut Chinese companies out of global supply chains as tensions between Beijing and Washington have risen.
Chinese companies in so-called “strategic emerging industries”, such as semiconductors, have raised Rmb490bn ($73.4bn) from equity sales in both Shanghai and Shenzhen this year, according to Gavekal Dragonomics. The research firm estimates that total equity fundraising for these sectors could hit more than Rmb650bn this year.
“There is a lot of encouragement for firms in strategic sectors — particularly semiconductors — to tap the markets,” said Thomas Gatley, an analyst at Gavekal.
Shanghai’s tech-focused Star market, which launched in 2019 and will host Ant’s stock market debut in early November, has been pivotal to this drive.
Semiconductor Manufacturing International Corporation, China’s biggest chipmaker, raised Rmb53.2bn on Star in July in what at the time was the biggest onshore IPO in a decade. SMIC was last month slapped with sanctions that cut it off from important US components.
While share sales in Shanghai have soared this year, analysts point out that Hong Kong — a much more established regional financial hub — still holds significant appeal due to the access the city provides to global investors and US dollar funding.
“Onshore markets are certainly a lot deeper than they were but they’re not infinite, and having Hong Kong as well is going to be important because the amount of capital [companies] want to raise is very large,” Gavekal’s Mr Gatley added.
Chinese tech groups including NetEase and JD.com have raised billions of dollars via secondary share placements in Hong Kong this year as geopolitical tensions between Washington and Beijing have increased. Proposed legislation could force such companies to delist from Wall Street — where many of these groups currently trade — if they do not provide US regulators with access to their audit reports.
Philippe Espinasse, a consultant and former investment banker with Nomura in Asia, said this year’s flurry of big-ticket listings in both Shanghai and Hong Kong hinted at a broader shift in equity markets’ centre of gravity away from Wall Street.
“The more companies get listed in Asia, the more there is a need on the part of investment banks and investors to start paying attention and hire or relocate people,” Mr Espinasse said.
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