13 Jul 2020 19:30 IST

Ant will surf wave of Chinese cash into Hong Kong

A surging influx of mainland money is helping China Inc tap markets in erstwhile British colony

The Ant Group can hitch a ride to Hong Kong on the back of Chinese bulls. Jack Ma’s fintech outfit is eyeing a listing in the city valuing it at over $200 billion, Reuters reported on Wednesday, citing people familiar with the matter. As Beijing moves to crush political unrest, mainland money has flooded the exchange, juicing a rally despite U.S. sanction threats. That’s a relief for Ant, its Chinese peers, and the local financial industry.

Since Chinese authorities imposed a tough new national security law last week, residents have been on edge. Yet local capital markets have been more than sanguine: the benchmark Hang Seng index has rallied over 7 per cent since the start of July, outperforming the S&P 500. The local currency, pegged to the greenback, has strengthened even as the White House prepares to sanction financial institutions in Hong Kong, and perhaps undermine its currency peg too.

Booming Chinese market

Secondary listings from Chinese outfits like JD.com and NetEase have helped prop up markets this year. A surging influx of mainland money is focused on buying Chinese names. Large-cap tech and consumer companies in the People’s Republic are in high demand, thanks to tentative signs of economic recovery in China. Web giant Tencent’s stock is up 45 per cent this year, for example, hitting a record high on Wednesday. In the first five trading days of July, average daily turnover on the Hong Kong bourse topped $27 billion, nearly two-thirds more than June’s daily average. Trading by investors in Shanghai and Shenzhen using the so-called Stock Connect channel accounted for more than a fifth of that, and that doesn’t measure trading by mainland-based entities in Hong Kong.

Chinese investor clout has been growing in Hong Kong for years. A 2018 survey conducted by the exchange operator found that they are the biggest foreign investors by trading value, surpassing the United States and United Kingdom – and most of them are institutional investors.

Ant says the report about its IPO plans is incorrect. Betting that Hong Kong’s financial system can remain immune to U.S. pressure forever is risky. But for now Chinese support is holding open a window to tap Hong Kong markets. For China Inc, it’s better to list now than later.