After weeks of hype and with demand exceeding the share allocation more than 150-fold, China's largest-ever Internet initial public offering (IPO) will finally list tomorrow, illustrating the insatiable demand for Chinese equities.
Alibaba.com, the online business-to-business marketplace, will be the biggest Internet initial public offering since Google in 2004 when it appears on the Hong Kong market.
Investors have been attracted by the company's rare potential to tap both the mainland's thriving manufacturing and Internet sectors.
Further encouraged by the scorching performance of the Hong Kong bourse in recent months, retail investors queued up to get their hands on the firm's prospectus.
The company has already hinted it will comfortably raise the US$1.5 billion it was aiming for, but the reported scale of the rush for shares has left experienced onlookers flabbergasted.
Demand for the US$375 million retail tranche of shares was US$58 billion, while the institutional tranche -- which saw global giants such as Cisco and American Insurance Group vying for a slice of the company -- attracted US$160 billion of orders for just US$1 billion of shares.
The huge inflow of funds into Hong Kong from hopeful investors across the globe has even been cited as a reason for the intervention by the de-facto central bank to protect the Hong Kong dollar.
The Hong Kong Monetary Authority made the move for the first time in two years because the excessive liquidity heading into the territory, much of it aiming to buy Alibaba shares, was threatening the local currency's peg to the US dollar.
Tony Nafte, a senior economist at CLSA, said the demand is simply a reflection of the wider picture of huge liquidity from the mainland, which China's government has tried to mop up by allowing it to flow to Hong Kong.
"The success [of any IPO] is based on the same principles as the strength of Hong Kong's current market -- [the feeling that] that money flowing in from China, or at least the perception of money heading in from China, will keep pushing the market up," he said. "In this kind of atmosphere, if you put in an IPO, it will do fantastically."
Howard Gorges, vice chairman for South China Securities (
"In the past Wall Street was the place that such listings would go to, now Hong Kong can give a company like Alibaba the same big reception," he said.
"Sophisticated investors, who can understand Alibaba's model, are here, and we have seen that any quality IPO lately has been very highly over-subscribed in Hong Kong," Gorges said.
Alibaba.com, which is part of the wider Alibaba Group, and their backers believe that their business model is robust.
The company's success has been built on providing small and medium size (SME) Chinese manufacturers with a way to sell their products both within China's huge internal market and increasingly across the world, using an English-language version of the site.
In their launch prospectus they said there are 42 million SMEs in China last year. Internet use has risen 23.4 percent annually since 2002, with 137 million users last year, the report added.
Financial performance has also been impressive. Revenue has grown from 359.4 million yuan (US$48.2 million) in 2004 to 1.36 billion yuan last year, although the listing will still value the company at around 100 times its projected earnings for this year.
Such figure are impressive for a business that started just seven years ago in founder Jack Ma's (
But the huge numbers involved have also raised the fear that the listing could mark the high point of a bubble.
"The party is going to come to a bit of a halt. So it is possible that somebody is going to get caught," Nafte said.