Alibaba IPO shrinks cash pool in Hong Kong

Ava Szajna-HopgoodNews

Alibaba Group’s impending initial public offering is shrinking cash levels in Hong Kong.

The city has spent the past months contending with political protests, with Alibaba’s proposed $13.4 billion (£10.5 billion) listing sending short-term borrowing costs back to the decade-high rates seen in July.

READ MORE: Jack Ma says $38bn Singles Day “missed expectations” as Alibaba gains approval for HK listing

Large-scale IPOs often temporarily use up cash in Hong Kong’s relatively small banking system, but sources speaking to Reuters said Alibaba’s listing is having a much bigger impact due to its size and the impact of the protests on the city’s economy.

“Timing wise, it’s not good for the liquidity to get sucked out of the system as there’s a bit of capital outflow happening due to the protests,” said a Hong Kong-based senior banker at a European bank speaking to Reuters.

Earlier this week Alibaba founder Jack Ma said the retailer’s Single Day event “hasn’t even reached my expectation” despite breaking records, with its gross merchandise value rising 26 per cent on last year’s results.

The world’s largest retailer is poised to carry out a $13.4 billion (£10.5 billion) listing on the Hong Kong Stock Exchange, after gaining approval for what would be this year’s biggest listing earlier this week.

Increasingly violent protests in the city have complicated its listing, with even senior police stating that Hong Kong is “on the brink of total collapse”.

On Wednesday Alibaba began kicked off a week-long campaign to sell 500 million shares to investors, with the final pricing set for November 20.

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Ava Szajna-HopgoodNews

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