Ant Group IPO: Larry Fink is on the line and he is not pleased
Updated 11:06, 19-Oct-2020
Andy Mok


Editor's note: Andy Mok is a research fellow at the Center for China and Globalization. The article reflects the author's opinions, and not necessarily the views of CGTN.

"Mr President, it's Larry Fink from BlackRock and he doesn't sound very happy."

Sitting in the Oval Office, an apprehensive Trump picks up the phone.

"Don, Fink here. What the hell do you think you're doing?"

"Larry, um, I mean Mr Fink, what seems to be the problem?"

"Your China knuckleheads are going to cost me big. What the hell are they doing, trying to derail the Ant Group IPO? And that twerp Rubio too!"

"Well, sir, you know we need to look tough on China…"

"We are the biggest asset manager on the planet. You're f**king with the wrong guy, Trump. It's not just about me though. The only place with any real growth and yield is China. The U.S.'s pension liabilities are a time bomb and we're just one Tom Friedman column away from having American seniors calling for your head. I'm giving you 48 hours to fix this."


While this dialogue is imaginary, the dynamics it illustrates are very real.

The upcoming Ant Group IPO is expected to value the company at $280 billion in what may be the world's biggest public offering. According to Bloomberg, this would make the company bigger than Bank of America Corp. and three times the size of Citigroup Inc., while its IPO would top Saudi Aramco's record $29 billion raise.

In a sign of the unusually powerful demand for its shares, Hong Kong stock brokers are providing retail investors with as much as 20 times leverage to partake in the offering.

While Ant Group has compelling fundamentals and an impeccable pedigree, it is what the company represents that is also driving such strong demand.

Employees work inside the Ant Group Co. headquarters in Hangzhou, east China, September 28, 2020. /VCG

Employees work inside the Ant Group Co. headquarters in Hangzhou, east China, September 28, 2020. /VCG

China's decades of economic growth has long mesmerized investors all around the world. Many believe that the opportunities were due to China's vast size and low costs. But the COVID-19 pandemic has revealed the truth. The crafting and effective implementation of innovative, comprehensive and detailed rules within the CPC-led political system are the other critical pieces.

Perhaps because of this, it is only in China that a city like Shantou, a special economic zone (SEZ) in Guangdong Province, that grew its GDP by around 300 times since the beginning of reform and opening up in 1978 can be considered a laggard – Shenzhen, another original SEZ, grew its GDP 13,000-fold during that same period.

As a comparison, the U.S.'s GDP in 1978 was $2.35 trillion. In 2019, it increased nine times to $21.43 trillion. Had the U.S. performed like the "laggardly" Shantou, its economy today would be around $700 trillion.

But as staggering as these growth statistics have been, perhaps the real growth opportunities are in financial market opening and reform and are only now beginning to materialize as the physical economy reaches stability and maturity.

For example, according to Matt Colvin, a portfolio manager at BlackRock, "We're able to find industries and business models in the onshore China equity market that simply don't exist elsewhere.

"There are over 1,500 companies that trade over $10 million a day. So when we have conviction in a company, we're able to establish a position very quickly in our portfolios," he adds.

China's financial market is estimated to be $45 trillion with unparalleled long-term growth prospects. Companies like Ant Financial are well-positioned to benefit from and contribute to the development of this key tertiary sector of the economy.

But for companies like BlackRock, with $7.4 trillion in assets under management, this is a profoundly game-changing opportunity. Not only are there historic growth opportunities for the firm itself, but with a looming collapse of the U.S. pension system, China can be a lifeline for its clients and the hundreds of millions of Americans that they represent.

According to BlackRock Chair and Head of Asia Pacific Geraldine Buckingham, lower interest rates will persist for significantly longer than many have anticipated. With yields at historic lows, the pressure is growing on unfunded pension liabilities. As this reality becomes increasingly alarming, American politicians would do well to take heed.

In the U.S., there are only a handful of constituencies to whom a president is truly accountable. The investment community is one of them. Perhaps Larry Fink has already warned Trump on the political consequences of attempting to interfere with the Ant Group IPO. If not, he should make that call soon.

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