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Ant Financial’s IPO drives China’s stock prices

A.Taking part in the largest IPO in history is easy for China’s retail investors. Simply invest in one of five funds on the Alipay smartphone app – for example 10,000 yuan (1250 euros) – and 10 percent of the sum will be invested in the purchase of shares in Ant Financial, the fintech company that owns the Alipay app and which could possibly collect significantly more money this year with an issuing volume of up to the equivalent of 35 billion dollars than the Saudi oil company Aramco when it was first listed at the end of last year.

Ant Financial wants to raise half of the sum on the Shanghai Stock Exchange and the other half in Hong Kong. While the international funds and banks in the international financial center on the island are vying for the shares anyway, the group is likely to ensure sufficient demand on the mainland in other ways due to the lack of alternatives in the corona-torn global economy.

In Shanghai’s stock exchange segment there for technology stocks, the Star Market, only those who have at least 500,000 yuan (62,500 euros) on their broker accounts are actually allowed to invest. This is to ensure that China’s Neuer Markt, which was launched last year in competition with New York’s Nasdaq, does not suffer the same fate as the prices on the classic Shanghai parent stock exchange: Over the years, these have risen up and down like a roller coaster so that after ten years there is just a profit of 24 percent. The price of the American benchmark index, the Dow Jones, almost tripled during this period.

However, so that small Chinese investors can also benefit from the IPO of the provider of the Alipay app, which more than every second Chinese has on their smartphone, they can invest in Ant Financial via funds. The only condition: a holding period of 18 months so that the price of the Ant share does not immediately plummet again if the first want to take their profit straight away.

Just as in some areas in the city center of Shanghai, twelve police officers stand at the intersection and wave out anyone who changes lanes in the car, drives in unauthorized places on a bicycle or disregards the red light as a pedestrian, the Chinese state wants the opportunity to do so Use Ant IPOs to Discipline the Chinese People. In the past, this has been an enthusiastic gambler on the stock exchange, but when buying and selling stocks has rarely been based on fundamental values ​​such as sales development, rather on gut instinct and a good dose of desire for risk.

In a world that is shaped by Corona and the US-Chinese trade war, not only the financial center Hong Kong, but also the stock exchanges on the mainland should finally rise to the top league. The opportunity to do so is favorable. Because China, in which the corona virus presumably broke out in the city of Wuhan in December, has practically paralyzed the country from the end of January and quarantined large parts of it with brutal methods, the pandemic appears to be as good as defeated within the largely closed state borders. As a result, the mainland stock exchanges had one of the best developments of any stock market around the globe.

Calculated from the beginning of the year, the Shanghai lead index Composite is back in positive territory, while the prices in New York and Frankfurt are still clearly in the red. Since the low point of the Shanghai Composite at the end of March, its value has even risen by over a fifth. Things look even better on the stock exchange in southern Shenzhen, where technology stocks are mainly listed. Here is a price jump of almost two thirds since the low point.

It is not just the lack of recreational activity among Chinese retail investors that is driving prices. It is a fact that in the year of the pandemic, many Chinese found themselves trading stocks while being quarantined at home for weeks. The fact that the Chinese, who are actually so keen to travel, hardly dare to go abroad also contributes to the new fascination with the stock market. All observers agree, however, that the decisive factor is a different development: the Chinese economy is clearly on the up. China is likely to be the only large industrialized country to report a gross domestic product at the end of the year that, according to estimates by the International Monetary Fund, has grown compared to the previous year.

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