Daily Posts

Ant Group’s Term Sheet Released

Upcoming Events

I invite you to join my colleague Nancy Davis on Thursday at 11 am ET for a conversation on how to hedge market volatility stemming from the US election and the uncertain path of stimulus and inflation.

Click here to register!

Key News

Asian equities started the week largely off on weak volumes with Hong Kong closed for Chung Yeung Festival. Hong Kong traders might have enjoyed a nice three-day weekend, but that is not the case for Hong Kong investment bankers as the big news overnight is the release of Ant Group’s IPO term sheets and November 5th being set as the IPO date. Unfortunately, the term sheet came out after the market close.

Asian markets were off on increased coronavirus cases in Europe and the US, China’s naming of three companies including Boeing’s defense unit as possible targets of restrictions after selling arms to Taiwan, and a wait-and-see posture around the US election. It is worth noting that the Boeing release specifically mentioned Boeing Defense. China’s strong appetite for Boeing airplanes might not be affected.

Ant Goup will trade in Hong Kong with the ticker 6688 HK and on Shanghai’s STAR Board with ticker 688688 CH as it raises $17.2B on each exchange for a grand total of $34.4B. In Hong Kong, the company will sell 1.670 billion shares at HKD 80 ($10.32) and 1.670 billion shares in Shanghai at RMB 68.80 ($10.24), valuing the company at $313 billion. If demand indeed exists, the shares raised could be increased to 1.9 billion shares as the “green shoe is filled”.

Mainland markets diverged with the financial and real estate sectors off while staples were led lower by Kweichow Moutai, which fell -4.22% after the company announced Q3 net profit rose only 6% to $1.7 billion. Volumes were light as investors keep cash handy for the Ant IPO and guidance from policy makers’ work on the next Five Year Plan following the closed policy session that began overnight.

A Mainland media source is reporting that Bytedance may spin off the China version of TikTik’s short video business, called Douyin, through a Hong Kong IPO. According to the article, Douyin has 600 million daily active users. Meanwhile, its rival Kuaishou, with only 300 million users, is planning an IPO for Q1 2021.

I had the opportunity to catch Hedgeye’s very thorough analysis of Ant Group this weekend. Their analyst Felix did a very deep dive on the company that is very much worth checking out.

Remember last’s week post on Friday after the close announcements? Chinese dating app Momo announced Friday after the close that Founder Tang Yan will relinquish his CEO title for the title of Chairman as COO Wang Li takes on the CEO role. Momo is often compared to Tinder though it has found difficulty matching its US equivalents’ revenue gains (subtle play on words as Tinder is owned by Match Group). Let’s see if the new CEO can get shares moving in the right direction.

The talk at every sports event this weekend was the article in The Atlantic titled “The Mad, Mad World of Niche Sports Among Ivy League-Obsessed Parents”. While focused on Fairfield County Connecticut, the article could have been written about our national obsession with youth sports, which has become a major for-profit industry. I’m all for youth sports, though raising a well-rounded child is always my priority.

H-Share Update

Hong Kong was closed for Chung Yeung Festival. According to the Google, today’s holiday is meant to be spent remembering deceased relatives. It occurs on the ninth day of the ninth month of the Chinese calendar.

A-Share Update

Shanghai and Shenzhen diverged overnight as the former fell -0.82% while the latter rose +0.52% to close at 3,251 and 2,212, respectively. Volume was off -7% from Friday, which is well below the 1-year average while breadth was off with 1,390 advancers and 2,305 decliners. The 517 Mainland stocks within the MSCI China All Shares Index fell -0.95%. Tech, healthcare, and utilities all gained +0.89%, +0.38%, and +0.31%, respectively. Meanwhile, financials -2.84%, staples -2.11%, real estate -1.35%, and discretionary -0.96%. Northbound Stock Connect was closed today.

Last Night’s Exchange Rates, Prices, & Yields

  • CNY/USD 6.69 versus 6.71 on Friday
  • CNY/EUR 7.94 versus 7.92 on Friday
  • Yield on 1-Day Government Bond 1.10% versus 1.25% on Friday
  • Yield on 10-Year Government Bond 3.19 versus 3.20% on Friday
  • Yield on 10-Year China Development Bank Bond 3.65% versus 3.75% on Friday
  • Copper Price -0.35%