Alec Hogg: Communist China stops world’s biggest IPO
Yesterday, while much of the investment world's attention was focused elsewhere (see below) those with peripheral vision were reminded Communist China tolerates free enterprise only because of its superior ability to create wealth and jobs. The Party's blocking of the imminent Ant Group listing was also a warning to Naspers that its 31% investment in Tencent carries considerable "China" risk. Naspers's price dropped 4% on the news.
Much of South East Asia had been abuzz ahead of Thursday's proposed listing in Shanghai and Hong Kong of the Ant Group, fintech arm of Chinese giant AliBaba. The IPO was billed the biggest in history with a projected valuation of $280bn. Many Chinese have joined in the action, helped by funders willing to provide up to 20 times leverage to those borrowing to apply for shares.
Ant Group owns AliPay which forms half of the duopoly (with Tencent's WeChat) dominating Chinese payments. There is little reason to carry cash in Chinese urban areas as virtually all financial transactions are handled electronically. AliPay's share in this vast and growing market made its proposed IPO so popular the company did not bother to underwrite its fund raise, nor secure cornerstone shareholders – relying solely on demand from retail investors.
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