Ant IPO Gets Back To Where It All Began

Key News

Asian equities were mixed on light volumes in advanced of today’s US Fed decision.

Hong Kong and Mainland China’s recent rallies paused overnight, though both markets ended the session higher than their morning lows to mitigate intra-day losses. Mainland and regional media noted the strong statement on policy following the unexpectedly early Politburo meeting.

Although it is not hard to understand the Politburo statement’s focus on boosting the consumption of automobiles, electronic products, and household appliances, “activating” the mainland market is harder to interpret with speculation that raising dividend payout ratios could be the incentive.

Bloomberg News’ article that Ant Group will restructure its ownership, which will pave the way for a Hong Kong IPO, garnered interest overnight, though the “news” is nothing new. This reminded me of the Allman Brothers Band’s song Back Where It All Began. Ant’s initial IPO marked the start of China internet’s downdraft in December 2020. As such, we ask whether a renewed IPO could mark the bottom of the previous trend and the start of a new uptrend? The common narrative that Ant’s IPO was pulled due to Jack Ma teeing off on regulators is now known to be false. Ant’s IPO included pre-regulation data and metrics, which, following the implementation of said regulations, would have been adversely affected. For instance, Ant needs to hold a piece of the loans it originates, which is no different than banks today, though lowers their margins compared to when they were just a “technology” company. We can assume Ant’s original IPO prospectus had a much higher margin rate than the company now exhibits as a financial holding company. If Ant is worth $850 billion less today, isn’t that what investors would have lost in Ant’s stock if regulators hadn’t stopped the IPO?

Today’s pause and short-term profit-taking highlight the necessity for government officials to roll out the policies promised in the Politburo readout. Mainland investors bought today’s dip with a healthy net buy of $997 million worth of Hong Kong stocks via Southbound Stock Connect with Hong Kong-listed ETFs as the major recipients of the buying, more so than individual stocks.

Western media is out of sorts on news that Foreign Minister Qin Gang will be replaced by former Foreign Minister Wang Yi. Qin Gang was not removed from the State Council, which gives credence to rumors of health issues that surfaced several weeks ago. Regardless, Wang Yi has a strong rolodex and relationships. PBOC Governor Yi Gang stepped down due to China’s mandatory retirement age of 65 and the reform-minded Pan Gongsheng will replace him.

The Hang Seng and Hang Seng Tech indexes fell -0.36% and -0.91%, respectively, on volume that decreased -38.43% from yesterday, which is 78% of the 1-year average. 232 stocks declined while 243 advanced. Main Board short sale turnover declined -31.52% from yesterday, which is 82% of the 1-year average, as 18% of turnover was short turnover. Growth and value factors were mixed as small caps outpaced large caps. The top-performing sectors were materials, which gained +1.37%, healthcare, which gained +0.45%, and consumer staples, which gained +0.39%. Meanwhile, utilities fell -1.13%, energy fell -0.98%, and consumer discretionary fell -0.88%. The top-performing subsectors were household products, consumer services, and materials. Meanwhile, media, autos, and technical hardware were among the worst-performing. Southbound Stock Connect volumes were light/moderate as Mainland investors bought a healthy net $997 million worth of Hong Kong stocks and ETFs, with Tencent as a moderate/large net sell, Meituan as a small net sell, and Kuiashou as a small net sell.

Shanghai, Shenzhen, and the STAR Board fell -0.26%, -0.52%, and -0.29%, respectively, on volume that decreased -16.89% from yesterday, which is 88% of the 1-year average. 1,880 stocks advanced while 2,807 declined. Growth and value factors were mixed as small caps outperformed large caps. The top-performing sectors were healthcare, which gained +0.75%, real estate, which gained +0.47%, and materials, which gained +0.36%. Meanwhile, communication services fell -2.35%, technology fell -1.27%, and consumer discretionary fell -1.13%. The top-performing subsectors were environmental protection, real estate, and steel. Meanwhile, internet, computer hardware, and cultural media were among the worst. Northbound Stock Connect volumes were moderate/light as foreign investors bought a net $72 million worth of Mainland stocks overnight, with Foxconn as a small net buy, and Kweichow Moutai and Citic Securities as moderate net buys. CNY was off -0.24% versus the US dollar, closing at 7.15 CNY per USD. Meanwhile, the Asia Dollar Index was off -0.06% versus the US dollar. Treasury bonds rallied along with copper and steel.

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