The Hong Kong Stock Exchange has finally seen the largest IPO of the year so far, and it is one for which people have been waiting a long time.
Alibaba's shares debuted in Hong Kong on Tuesday. They traded up as much as 7.6% before closing the day 6.6% higher.
The Chinese internet giant raised HK$87.5 billion ($11.2 billion) at HK$176 per share. An oversubscription rate of 42 times for the retail tranche meant that allotment for retail investors was increased to 10% of the share capital from an original 2.5%.
HKEX is probably even happier than Alibaba today. “We thank Alibaba for returning home after five years,” said Charles Li, chief executive of HKEX. “Especially since Hong Kong has been having a difficult time of it.”
Alibaba brings a new spirit of optimism into a rather pessimistic Hong Kong market. The Hang Seng has been dramatically turbulent since June thanks to local social unrest and the uncertainty brought about by the trade war between China and the US.
Many companies that had considered listing on HKEX have been waiting for Alibaba to list first.
“Hong Kong stocks have remained highly volatile with short-term surges and plunges, a trend often seen during an economic crisis. Despite this, Alibaba has still chosen to launch its IPO on the HKEX,” Toby Wu, senior analyst at eToro, wrote in an email. “With more mainland funds having long-term holdings of Hong Kong stocks, this increases the overall liquidity and sets an example for other potential technology stock listings in Hong Kong.” The Hang Seng is up about 3% since Alibaba started its roadshow on November 15.
HKEX had a tough first half. The five biggest IPOs from January to June only raised HK$28.5 billion, and generally priced at the lower end of the pricing range. The number of investors who subscribed for an IPO is also significantly down on the same period in last year, according to a report from Deloitte.
But after the two huge flotations of Budweiser and ESR, along with that of Alibaba, the HKEX is looking much healthier. “It will hugely benefit the liquidity of Hong Kong's stock market,” said Li. “We can see a bright future amid the return of Alibaba, together with giants like Tencent trading on HKEX.”
“We will see more liquidity, and Alibaba will be available for mainland investors through Stock Connect,” he added.
On its first day, Alibaba has already surpassed Tencent to become the largest company on the HKEX by market cap. Li emphasised that Alibaba is not a “saviour” of Hong Kong's stock market, but it is definitely a lucky star for the exchange after such a tumultuous year.