Ant Group to close HK institutional book early amid 'overwhelming' demand for IPO-sources

Ant Group will close institutional order books of the Hong Kong portion of its record-setting dual IPO ahead of schedule due to strong demand, sources with direct knowledge of the matter said. The institutional book of the $17.2 billion Hong Kong listing was due to close on Thursday, but that deadline will be accelerated to Wednesday at 5.00 p.m. in each region, three sources said.

The book was oversubscribed just one hour after the launch on Monday, two separate sources said, demonstrating investor frenzy for the initial public offering (IPO) of the Chinese fintech giant that has stoked heavy demand for cash and sent Hong Kong money market rates to five-month highs. Ant Group declined to comment on the planned early closure of the Hong Kong institutional book.

It is looking to raise to $34.4 billion in Hong Kong and Shanghai, with the, offered split between the two cities, giving it a valuation of about $312 billion. The sources asked not to be identified as they were not authorized to comment on media.

Ant, which operates China's biggest mobile payments platform Alipay, is an affiliate of e-commerce giant Alibaba Group Holding. It will offer 41.76 million shares, or 2.5% of its total shares in Hong Kong, to retail investors whose demand to buy the stock is expected to be strong.

Hong Kong operates a 'clawback' system where heavy oversubscription from small investors can result in them getting a greater share. The prospectus shows the total amount will be increased to 167.1 million shares, or 10% of the deal if the initial retail allocation is more than 20 times oversubscribed.

MONEY MARKET RATES CLIMB The city's brokers are readying billions of dollars of margin financing to lend to customers to buy the stock.

Retail investors need to finalize and pay for the shares they have bid for by Friday, according to Ant's prospectus. The cash will be locked up until allocations are announced on Nov. 4 and brokers expect it could tie up more than HK$1 trillion ($129.03 billion) in retail funds. Investors not given shares will have their cash returned.

A record HK$677.7 billion worth of cash was locked up for the Nongfu Spring IPO that raised $1.1 billion in September. "The demand is overwhelming ... It will smash all previous records," Francis Lun, Hong Kong-based chief executive of GEO Securities, said about retail demand for Ant.

Hong Kong's money markets tightened on Tuesday as demand for cash to buy Ant shares pushed up Hong Kong dollar rates. The one-week Hong Kong Interbank Offered Rate jumped nearly 40 basis points to 0.51054%, its highest since late May. Spot week Hong Kong dollar forwards also hit their most expensive since May.

"Given the size of the IPO...every man and their dog will be trying to get in, and that means a lot of money is going to be locked up which causes a tightening and squeezes the HIBOR up," said Khoon Goh, head of Asia research at ANZ Bank in Singapore. "But once it's over, and whoever is lucky gets their hands on it, the rest of them will have their money returned...the HIBOR will drop."

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