Financial Industry Participants Expect Successful Alibaba Group IPO But Aren't Ready to Invest

ConvergEx Group Survey Predicts Defining Moment for Chinese Companies That Seek Global Capital

02 Jul, 2014, 11:04 ET from ConvergEx Group

NEW YORK, July 2, 2014 /PRNewswire/ -- ConvergEx Group, a leading provider of global brokerage and trading-related services, has released the results of its Alibaba IPO Survey, exploring financial industry sentiment about the forthcoming initial public offering (IPO) of Alibaba Group.

While more than half (52%) of survey respondents expect an appreciation of 10% or more in the first month, and almost two-thirds (64%) see Alibaba as a good long-term investment, fewer than half of those surveyed (43%) say they plan to buy shares, and less than one-third (30%) are currently invested in Chinese companies.

"Alibaba is one of the most-discussed IPOs in years, and could become the biggest IPO of all time. Yet our survey reveals real questions that go beyond confidence in the company's fundamentals or the ability of U.S. market structure to handle an IPO of this size," said Nicholas Colas, ConvergEx Group chief market strategist. "Market participants clearly recognize Alibaba's potential, but are they fully comfortable with investing in a Chinese company? For other Chinese companies seeking access to global capital, Alibaba will represent either a real breakthrough or a major setback."

For buy-side survey participants, willingness to buy Alibaba correlated closely with their current ownership of Chinese equities: 60% of those who own Chinese shares plan to buy Alibaba as well, while just 38% of non-owners plan to buy Alibaba, either at or after the IPO.

For more information on the Alibaba IPO Survey, click here.

Expecting Appreciation
Respondents to the survey overwhelmingly expect some level of appreciation in Alibaba stock in the first month of trading. Key findings:

  • Expecting appreciation – Total 88%
    • Will appreciate up to 10% – 36%
    • Will appreciate between 10% and 20% – 33%
    • Will appreciate 20% or more – 19%
  • Expecting depreciation – 12%

Looking at the Long-Term
Survey participants like the long-term (3-5 year) potential for investment in Alibaba. Key findings:

  • Good/Very Good potential – Total 64%
    • Very Good – 15%
    • Good – 49%
  • Neutral – 32%
  • Poor – 3%
  • Very Poor – 1%

Not Choosing China
The majority of respondents do not currently own shares of Chinese companies. Key findings:

  • Yes, own shares – 29%
  • No, don't own shares – 67%
  • Don't know – 4%

Buy-side respondents only

  • Yes, own shares – 44%
  • No, don't own shares–56%

Deal or No Deal?
The majority of respondents are not planning to buy shares in Alibaba. Key findings:

  • Do not plan to buy shares – 57%
  • Plan to buy after the IPO – 25%
  • Plan to buy at the IPO – 11%
  • Plan to buy both at and after IPO – 7%

Buy-side respondents only

  • Do not plan to buy shares – 51%
  • Plan to buy after the IPO – 20%
  • Plan to buy at the IPO – 18%
  • Plan to buy both at and after IPO – 11%

Biggest IPO ever? No problem.
Respondents were confident that U.S. equity market structure can support the high levels of trading expected during Alibaba's first few days of trading. Key findings:

  • Confident/Very Confident  – Total 77%
    • Confident – 47 %
    • Very Confident – 30%
  • Neutral – 15%
  • Not Confident – 8%

The ConvergEx Group Alibaba IPO Survey was performed by ConvergEx via an online survey of financial industry participants, resulting in 322 respondents. The survey was conducted from June 24 to June 27, 2014, and has a margin of error of ± 10% and a 90% confidence interval. Respondents included buy-side firms (asset managers, hedge funds), sell-side firms (banks, broker-dealers), trading venues, service providers and other financial industry participants.

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SOURCE ConvergEx Group