Shares of ant-related companies rise after news of Jack Mac’s divestment; Alibaba jumps

Jan 9 (Reuters) – Shares of listed Chinese companies that count Ant Group as a major shareholder rose on Monday after news broke that Ant founder Jack Ma was relinquishing control of the fintech giant following a an overhaul.

Hong Kong-listed shares of Ma’s Alibaba (9988.HK) jumped 7%.

Shares of Longshine Technology Group Co Ltd (300682.SZ), Jilin Zhengyuan (003029.SZ), Shanghai Golden Bridge Infotech Co (603918.SS), Orbbec Inc (688322.SS) and Hundsun Technologies (600570.SS) also increases. Ant indirectly holds stakes ranging from more than 20% to just over 5% in these companies.

Ant said over the weekend that founder Jack Ma would relinquish control of the company.

The overhaul aims to draw a line under a regulatory crackdown that was unleashed shortly after its mammoth stock market debut was scuppered two years ago.

Redmond Wong, Greater China market strategist at Saxo Markets, Hong Kong, said Jack Ma’s divestment of control of Ant and other businesses would help remove some uncertainty and pave the way for development and expansion. expansion of the group’s activities.

“That should have allayed some of the authorities’ concerns about the group, as the change was likely a negotiated outcome with the authorities,” Wong said. “And investor sentiment toward China’s internet sector is expected to improve further.”

Guo Shuqing, head of the China Banking and Insurance Regulatory Commission (CBIRC), said in an interview with China’s official Xinhua News Agency published on January 7 that the rectification of the financial activities of 14 platform companies was “substantially complete”, while a few remaining issues need to be resolved. Guo did not name the companies.

Authorities will then adopt “standardized regulations” and encourage platform companies to operate in a compliant manner, Guo said.

IPO SPECULATION

Ant’s $37 billion IPO, which would have been the world’s largest, was canceled at the last minute in November 2020, leading to a forced restructuring of the fintech company and speculation that the Chinese billionaire should cede control.

“Investors can stop guessing and can finally put a risk premium on the new company that Ant has been transformed into,” said Alexander Sirakov, managing partner at Aquariusx, a Shanghai-based investment advisory firm, after the announcement of Ant.

Morgan Stanley, in a Jan. 8 research note, said it would elevate Alibaba to its “top pick” of shares in China’s internet industry in 2023, citing looser regulations among the reasons for its decision. .

While some analysts have said a relinquishment of control could pave the way for Ant to relaunch its initial public offering (IPO), the changes announced on Saturday, however, will likely cause another delay due to listing regulations.

China’s A-share market requires companies to wait three years after a change of control to list. The wait is two years in the Nasdaq-style Shanghai STAR market and one year in Hong Kong.

Ant said on Sunday that he has no plans to launch an IPO.

On December 30, the CBIRC approved a capital increase in Ant’s consumer finance arm to 18.5 billion yuan ($2.68 billion) from 8 billion yuan in the last stage of its restructuring.

Reuters reported in November, citing sources, that Chinese authorities are set to fine Ant Group more than $1 billion, a move that could set the stage for ending a regulatory overhaul of the Ant Group. two years of the fintech company. Read more

Li Nan, a finance professor at Shanghai Jiaotong University, however, said the problems inherent in Ant remained after its change of control.

“Ant’s key business model problem is to integrate wealth management and loan insurance (Huabei and Jiebei) into the payment platform (Alipay), bypassing necessary asset management regulations. risks, such as capital adequacy ratio, liquidity ratio as well as loan loss reserve ratio,” Li said.

Leverage is still far too high after Ant’s capital raise, she said.

Reporting by the Shanghai newsroom, Roxanne Liu and Yingzhi Yang in Beijing, Josh Horwitz in Shanghai and Kane Wu in Hong Kong; Editing by Kim Coghill and Muralikumar Anantharaman

Our standards: The Thomson Reuters Trust Principles.

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