Shares in listed Chinese companies which include Ant Group as a major shareholder rose Monday following announcements by Jack Ma, Ant’s founder, and CEO, that he is stepping down from control of the fintech company.
Hong Kong shares listed by Ma’s Alibaba, jumped 7%
Longshine Technology Group Co Ltd, Jilin Zhengyuan, Shanghai Golden Bridge Infotech Co, Orbbec Inc, and Hundsun Technologies all saw shares rise. These companies have stakes that Ant indirectly controls, ranging in size from 20% to slightly over 5%.
Ant stated that Jack Ma, the founder of the company, will be leaving control.
This overhaul seeks to end a two-year-old regulatory crackdown.
Redmond Wong from Saxo Markets Hong Kong said Jack Ma’s surrender of control over Ant and the other businesses will remove any uncertainties, and open the door to further development and expansion of the company.
Wong stated that the government should have lifted some concerns regarding the group, as it was likely that an agreement with authorities would be reached. Investor sentiment toward the China Internet sector will likely improve.”
Guo Shuqing (head of China’s Banking and Insurance Regulatory Commission) stated in an interview published by China’s official news agency Xinhua on January 7th that the rectifications of 14 platforms companies’ financial business have been completed “basically”, although there are still some issues to resolve. Guo didn’t name these companies.
Guo said that authorities will soon adopt “normalized regulations” and encourage platforms companies to comply.
Ant’s $ 37 billion IPO was canceled in the final minutes of November 2020. This led to a restructuring of the financial technology company and speculation that the Chinese billionaire would need to relinquish control.
Alexander Sirakov (Managing Partner at Aquariusx), a Shanghai-based investment consulting firm, stated that investors can now stop guessing, and could finally give a risk premium for Ant.
Morgan Stanley stated in a January 8 research note that it will elevate Alibaba to the “top pick” stock in China’s Internet industry by 2023. It cited easing regulations as one of its reasons.
Analysts have suggested that Ant could relinquish control to allow it to restart its initial public offering (IPO). However, the listing regulations will likely cause Ant further delays.
China’s A-share market is a waiting game. Companies must wait for three years to be listed after they have been changed in control. Two years in Shanghai’s Nasdaq-style STAR marketplace and one year in Hong Kong are required to wait.
Ant stated on Sunday that it does not plan to launch an IPO.
On December 30, the CBIRC approved Ant’s capital rise to 18.5 billion Yuan ($2.68 Billion) over 8 billion in its most recent restructuring.
Reuters, citing reliable sources, reported that Chinese authorities were poised to impose a $1 billion fine on Ant Group. This move could set the stage for the end of Ant Group’s nearly two-year-old regulatory overhaul. Continue reading
Professor of Finance, Shanghai Jiaotong University Li Nan said that Ant still faces many problems after the change in control.
Li stated that Ant’s key problem is the incorporation of loans (Huabei, Jiebei), wealth management, and insurance into the payment platform (Alipay), which evades the required risk management regulation such as capital and liquidity ratios, as well as loan loss reserves ratios.
She said that the leverage was still too high even after Ant’s capital rise.