By Samuel Shen and Julie Zhu
SHANGHAI/HONG KONG (Reuters) - China's Ant Group is expected to double its market value on debut, as unmet demand from mom-and-pop investors and an impending inclusion in major global indexes could offset worries about tighter regulations, fund managers said.
The fintech giant will be listed in Hong Kong and Shanghai's Nasdaq-style STAR Market on Thursday following its record $37 billion IPO, which attracted from retail investors alone a bid value equivalent to Britain's GDP.
The IPO values Ant (HK:6688) (SS:688688), a spinoff from Jack Ma's Alibaba (NYSE:BABA) Group (HK:9988), at about $315 billion. The combined market cap of JPMorgan (N:JPM), Morgan Stanley (N:MS), Citigroup (N:C) and Goldman Sachs (N:GS) is $548 billion.
"Ant will be the market's icon," said fund manager Zhang Yingbiao from Shenzhen Longteng Huijin Fund Management Co, which bought Ant's IPO shares via a bidding process.
The stock is expected to more than double in Shanghai on its debut due to its "uniqueness", but the listing could "suck blood and steal the limelight" from the rest of the market with heavy first-day turnover, he said.
Ant, China's dominant mobile payments firm that also offers loans, insurance and asset management, presents itself mainly as a technology vendor for financial institutions, but financial regulators say the firm remains under their purview.
The Hangzhou-based giant is benefiting from the richer valuations the market affords to tech firms than to financial institutions, analysts say.
For many fund managers in China, Ant stock is a "must-have" given its "huge growth potential", said Zhong Daqi, founding partner of Guangzhou Zeyuan Investment Management Co, which expects Ant to rise as much as 150% on debut in Shanghai.
Large issuances typically curb a stock's first-day rally on STAR, where debut gains average about 160%, but a long queue of retail investors who missed out during the Ant IPO process could test that, Zhong noted. The Shanghai tranche of the IPO was heavily skewed toward strategic and institutional investors.
"Ant represents the future of banking, and is a disruptive force," said Zeng Qiang, a retail investor who plans to buy shares on the secondary market.
"It's no longer a catfish. It's a whale."
INDEX HOPES, REGULATORY WORRIES
Expectations that Ant shares will be included in major stock indexes are further burnishing their appeal.
Global index publisher FTSE Russell expects to include Ant's Hong Kong-traded shares in relevant FTSE indexes at the close of Nov. 11 in "fast entry".
MSCI intends to add Ant's Hong Kong and Shanghai-listed shares to relevant indexes as of end-Nov. 30.
Ant will likely also be added to other indexes over the next several weeks, such as Hong Kong's Hang Seng and China's CSI indexes, said Brendan Ahern, Chief Investment Officer at Krane Funds Advisors.
Its market debut comes against the backdrop of the U.S. presidential election, which could increase market volatility, and tighter regulatory scrutiny.
Just ahead of Ant's listing, Chinese finance regulators held talks with Ant leaders, including billionaire founder Ma, as China unveiled new draft rules for online micro-lending, widely seen as targeting Ant's aggressive expansion.
Ant's growth potential could be capped by increasing regulatory scrutiny and saturation of the payment market, said Zhang Long, fund manager at Eastern Zeging (Xiamen) Asset Management Co. "Market expectation is too high for Ant."