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Alibaba Group Holding Ltd (BABA) Stock Affiliate Ant Financial Marching Into the U.S.

Alibaba's Ant Financial is on the move

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Tech stocks have been on a tear this year, and Alibaba Group Holding Ltd (NYSE:BABA), whose stock is up over 40% year-to-date, is no exception. The Chinese tech giant now boasts a market capitalization north of $300 billion.

Another Look at Alibaba Group Holding Ltd (BABA) Stock Affiliate Ant Financial
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Alibaba reported its fourth-quarter earnings on May 18, disappointing on earnings but reporting higher-than-expected revenue. Following this, analysts raised price targets for BABA stock: from $132 to $141 at Barclays, and from $138 to $160 at Raymond James.

Although I discussed Alibaba last month, it has been over two months since I covered its payment arm, Ant Financial (which owns Alipay). Ant Financial has been very active this year, investing in the Philippines and South Korea and buying Moneygram International Inc (NASDAQ:MGI), the world’s second-largest money transfer service. Much has been going on in recent months. Last month the Financial Times reported that the Alibaba affiliate’s IPO has been delayed until late 2018 at the earliest.

When Ant Financial goes public, Alibaba gets 37.5% of the proceeds. CLSA analysts value Ant at $75 billion, making this a windfall even for a $300 billion company such as BABA.

What has Ant Financial been up to recently?

Ant Financial Now Has the World’s No. 1 Money Market Fund

Yu’e Bao, Ant Financial’s money market fund, is now the world’s biggest. With over $165 billion in assets under management, it recently overtook the JPMorgan Chase & Co. (NYSE:JPM) U.S. government money market fund.

Although Yu’e Bao is only four years old, it already has served over 325 million Chinese. The fund, whose name literally means “leftover treasure” in Chinese, began as a way for Alipay users to invest their cash balance.

By linking borrowers and lenders, Ant Financial, which wasn’t encumbered by banking regulation, could offer depositors higher rates of return than Chinese state-owned banks.

But there is concern over a credit bubble in China, which could pose problems for the fund, which invests in high-yielding off-balance sheet loans. Recently, the Chinese central bank urged the Alibaba affiliate to reduce the maximum amount people could invest in the fund.

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