Alibaba returns with a vengeance

Editorial | Mary Ma 27 Nov 2019

Mainland e-commerce behemoth Alibaba has made good on a promise to return to Hong Kong for a listing, and trading on its first day back saw a steady start despite the conspicuous absence of its founder, Jack Ma Yun, at the launch ceremony.

In place of Ma was new chairman Daniel Zhang Yong.

Bestowed an auspicious code of 9988, the company's stock opened 7.4 percent higher than its official initial public offering price, and that held steady throughout the day. The gains only narrowed slightly to 6.59 percent at the close of trading.

That was modest by standards here, which has seen cruel twists as some stocks skyrocketed at launch only to crash later.

Although it's only a secondary listing, Alibaba's choice of Hong Kong for a backup domicile will definitely deepen and broaden the stock market here. Oversubscribed by more than 40 times, Alibaba is the world's biggest IPO exercise this year, easily overshadowing the May record set by Uber in a New York float.

Before Alibaba picked the SAR as its alternate home, local investors had few e-commerce players to choose from, with Tencent the standout exception. Alibaba's presence may help to end Tencent's virtual monopoly status here.

With regulators here relaxing the restrictive rules that had formerly put Alibaba off an earlier listing, it is hoped that more companies of the same ilk would be coming here too - provided they meet all the other stringent listing requirements aimed at protecting small investors.

The Hangzhou-based e-commerce company originally considered launching its primary IPO in Hong Kong six years ago, but decided to move on to New York for a listing after failing to persuade regulatory authorities in the SAR to rewrite the rules.

In hindsight, it was a mistake for the Securities and Futures Commission not to have said a figurative open sesame to enable an entry for Alibaba back then.

The overwhelming subscription of its shares by local and international investors has confirmed widespread confidence not only in the stock but also in Hong Kong's status as an international financial center.

Ma has long been considered the group's soul. The heavy subscription shows investors' interest in the group has not been undermined by his exit stage left from the Alibaba scene. He remains on board until the next general meeting.

Then, what should investors expect as far as the company's share price is concerned?

Bear in mind that Hong Kong is only Alibaba's second home. Since there isn't any barrier stopping investors from buying shares in other exchanges, Alibaba's share price in Hong Kong is bound to move in tandem with its Wall Street counterpart, with only a very small price difference anticipated between the Hong Kong and US siblings.

As US stocks have been at their all-time highs for a while now, Alibaba would have to move along with others if a correction takes place in New York.

It would be ill-advised to buy Alibaba shares for immediate returns. Investors should rather view the stock as a long-term investment.


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