Alibaba seizes a brief window of opportunity

by BLOOMBERG/ pic by BLOOMBERG

IF THERE were any doubts remaining that the Hong Kong market is having a hot moment, Alibaba Group Holding Ltd may have just laid them to rest.

China’s biggest Internet company is seeking to raise as much as US$15 billion (RM61.95 billion) selling shares in the city and will have a listing hearing next week, Lulu Yilun Chen of Bloomberg News reported last Friday, citing a person familiar with the matter.

It’s barely a week since Alibaba was said to be deciding between launching a sharply reduced US$10 billion sale and delaying the deal until next year. That’s quite a turnaround, and you can see why.

A host of positive factors have combined to make this an opportune time for Hong Kong’s biggest first-time share sale since 2010. The benchmark Hang Seng Index has extended its rally, climbing more than 9% from an August low.

Alibaba, meanwhile, posted results a week ago that beat estimates including a 40% surge in September-quarter revenue. The company’s shares have climbed 36% in New York this year.

Finally, signs that the US and China are moving toward an initial trade deal have spurred a global rally.

Time is of the essence, there are many “ifs” surrounding what would be the only first phase of a trade deal, as Bloomberg Opinion’s David Fickling wrote last Friday. A single tweet from US President Donald Trump (or the Chinese side) could be enough to spoil the optimism in markets.

For Alibaba, an IPO in Hong Kong represents a hedge in uncertain times. By coming closer to home, a symbol of China’s growing economic power would be demonstrating loyalty to Beijing at a time of heightened hostility toward the nation’s companies in the US, as we’ve noted.

Examples of that less hospitable climate abound. The US is making efforts to stop the global expansion of Huawei Technologies Co Ltd, and scrutiny of China-linked acquisitions has increased. Chinese stocks traded on American exchanges even face the threat of being removed under Republican Senator Marco Rubio’s Equitable Act, which would impose increased disclosure requirements on foreign companies that don’t make audits available.

For Hong Kong, Alibaba’s plans are an unalloyed positive. If the company raises US$15 billion, the Hong Kong stock exchange will vault over New York and Nasdaq to become the world’s biggest IPO fundraising venue this year (though it may yet be eclipsed by Saudi Arabia once the listing of Aramco goes ahead).

The market has gained in the face of persistent protests and the city’s slump into a technical recession, with sentiment helped by the successful US$5 billion flotation of Budweiser Brewing Co APAC Ltd in September. Last Friday was the city’s biggest day for stock debuts this year as six companies started trading.

The rush suggests that companies know this is a potentially brief window of opportunity. Alibaba is familiar with the art of building up a marketing buzz and getting people to buy in a short, specified time frame. A bumper result from its annual Singles’ Day shopping extravaganza today would be the perfect teaser for its share sale.

Expect an even more frenetic Nov 11 than usual. — Bloomberg


This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.