Most Hong Kong stocks are mainly finance and real estate, and technology giants are extremely rare. Ali’s listing in Hong Kong will change from “one of them” to “only”, and the marginal benefit may be far greater than the listing of US stocks.

This article is from the cooperative media business weekly, INSIDE authorized reprint

I already have more than NT$1 trillion in cash on hand. Is it still necessary to sell ancestral products? This is the case with Alibaba. The Chinese e-commerce leader will go to Hong Kong for a second time, sitting on a huge sum of money but still selling shares to raise money, which is not only the external environment, but also the result of market competition.

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More spare tires for the outside world, please Beijing better; raise funds for purchases and increase competitiveness

The listing of Alibaba in Hong Kong, raising more than 10 billion US dollars, will surpass Uber as the world’s largest listing since 2019. However, Ali was listed in New York five years ago. At that time, he had raised $25 billion. Now he has a wealth of assets. Why do he have to go to Hong Kong for a second listing?

The primary reason is the big environment. The trade war has not stopped, and Chinese technology companies are constantly being suppressed by the United States. The most recent case is TikTok. Originally it was going to go public in the US, but the United States recently launched a national security investigation of the company. The Financial Times said that the vibrato will be listed in Hong Kong in the first quarter of 2020.

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As the highest-value company in China, Ali is hard to keep eyeing. In fact, on the official website of the US State Department, Ali is one of the five Chinese technology companies that “serve technology for the party state system.” Among the five companies, Huawei and ZTE have been sanctioned by the White House.

In this situation, Ali can’t be prepared without rain. If the future is not sanctioned in New York, the spare tires listed in Hong Kong will come in handy.

Another political factor is to be in touch with Beijing. Ali’s revenue and customers are mostly in China. This time, they went to Hong Kong for a second time. Bloomberg analyzed that Ali’s move was “showing loyalty to Beijing.”

However, if you want to pay attention to Beijing, you can go directly to the A-share market. Why do you go to Hong Kong in a circle? This is because the land stocks cannot absorb Ali’s behemoth.

Ali’s listing in Hong Kong exceeded $10 billion, which is more than 1.3 times the total amount of IPO from January to September this year. If Ali goes to the mainland stock market, the amount of funds will be revised down. Only when he goes to Hong Kong to list, can he fully realize the potential of Ali’s gold absorption.

In addition to the location, the timing of Ali’s listing in Hong Kong is also carefully selected. Hong Kong “News” analysis, Ali elections listed between November and December, is to avoid the brokerage annual and quarterly settlement time, so that they have the funds to buy Ali stock. Especially after the “Double Eleven”, Alibaba’s performance reached a new high. At this time, going public in Hong Kong will highlight its standing in Hong Kong stocks.

In addition to the major environmental factors, Ali’s listing this time is also the result of market competition. In the US stock market, Nasdaq, the technology leader is more than the river, Ali is only one of them. Most Hong Kong stocks are mainly finance and real estate, and technology giants are extremely rare. Ali’s listing in Hong Kong will change from “one of them” to “only”, and the marginal benefit will be far greater than that of the US stock market.

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In addition, US stocks are now at an all-time high. Since this year, Ali’s share price has risen by more than 30%, far surpassing the US stock market’s S&P 500 index. In the future, it has relatively limited upside in US stocks. Hong Kong stocks are currently in a historically low level. In the future, if Ali is listed in Hong Kong, there is still room for growth in stock prices.

More importantly, the listing will help improve Ali’s competitiveness. At the end of September 2019, Ali’s free cash flow was RMB 30.5 billion (about NT$ 130 billion), and the cash on the balance sheet was more than RMB 230 billion (about NT$ 1 trillion). At first glance, this number is amazing, but in fact its silver bullet is not as plentiful as imagined.

This is because recently, many opponents such as the United States and the United States have been constantly challenging Ali in the fields of e-commerce and take-away. In the face of competition, Ali also began to buy money: from the $ 2 billion acquisition of the Netease platform koala, 700 million US dollars to participate in Netease cloud music financing, 3.3 billion US dollars to increase the stake in the rookie network. These transactions are taking off in US$100 million. Together with capital expenditures, Ali’s cash demand is not small.

This time, Ali can raise more than 10 billion US dollars, equivalent to 7 months of free cash flow. This will be of great help to its future acquisitions and R&D. This is the most direct benefit of Ali’s going to Hong Kong to sell shares.

Due to the three major interests, the HKEx no longer seeks stability and changes its rules to welcome it.

For the Hong Kong Stock Exchange, the listing of Ali is not only a regret that it missed five years ago, but also has three major interests. One is to let the HKEx jump to the global fundraising champion in 2019; the second is to attract more funds into Hong Kong stocks; Drive more unicorns to go public in Hong Kong. This also raises a question: Is the stock market going to be stable, or is it an opportunity?

The HKEx has been striving for stability in the past. Five years ago, it refused to accept “the same rights and different rights”, which led to the loss of Ali. After that, it revised the rules and even stayed at the second listing, making the new company easier to go public. In recent years, many new ventures have been listed in Hong Kong, and there is no shortage of rubbish, but as long as there is a gold like Ali and Tencent, it is enough to make up for it.

The change in the Hong Kong Stock Exchange also makes sense for Taiwan. In the first seven months of this year, the number of IPOs in Taiwan stocks has decreased by 40% compared with the same period of last year. This is related to the strict control of listed companies by the authorities. The Financial Management Committee advocates that the capital market should be “quality and weight”. The benefit of this is to guarantee quality at the cost of missing a new company that may be red.

There is no right or wrong choice, only a different price to pay. The HKEx cannot afford to lose the price of Ali, from seeking stability to seeking opportunities. For Taiwan stocks that are “heavy and not heavy”, in the era of global competition in the capital market, are we still willing to pay the price of the Star of Mistakes? This is the reflection of Ali’s second listing on Taiwan.