Jan 9 (Reuters) – Shares in listed Chinese companies that count Ant Group as a major shareholder rose on Monday after announcements that Ant founder Jack Ma was relinquishing control of the fintech giant following an overhaul.
Hong Kong-listed shares of Ma’s Alibaba (9988.HK) jumped 7%.
Shares of Longshine Technology Group Co Ltd (300682.SZ), Jilin Zhengiuan (003029.SZ), Shanghai Golden Bridge Infotech Co (603918.SS), Orbbec Inc (688322.SS) and Hundsun Technologies (600570.SS) also rose. Ant indirectly owns stakes ranging from more than 20% to just over 5% in those companies.
Ant said over the weekend that founder Jack Ma would relinquish control of the company.
The overhaul is seeking to draw a line under the regulatory crackdown that was launched shortly after its major stock market debut was derailed two years ago.
Redmond Wong, Greater China market strategist at Sako Markets in Hong Kong, said Jack Ma’s ceding control of Ant and other businesses will help remove some uncertainty and pave the way for the group’s business development and expansion.
“It was supposed to address some of the authorities’ concerns about the group, as the change was probably the result of negotiations with the authorities,” Wong said. “And investor sentiment toward China’s Internet sector is likely 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 affairs of the 14 platform companies is “basically complete”, while several remaining issues need to be resolved . Guo did not name the companies.
The authorities will then adopt “normalized regulation” and encourage platform companies to operate according to the rules, Guo said.
Ant’s $37 billion IPO, which would have been the world’s largest, was called off at the last minute in November 2020, prompting a forced restructuring of the financial technology company and speculation that the Chinese billionaire would have to cede control.
“Investors can stop guessing and can finally assign a risk premium to the new company Ant has transformed into,” said Alexander Sirakov, managing partner at Aquariusk, a Shanghai-based investment consultancy, after Ant’s announcement.
Morgan Stanley said in a Jan. 8 research note that it would upgrade Alibaba to a “top pick” stock in China’s Internet industry in 2023, citing easing regulation as part of the reason for its decision.
While some analysts said relinquishing control could pave the way for Ant to revive its initial public offering (IPO), the changes announced on Saturday, however, are likely to lead to further delays due to listing regulations.
China’s domestic A-share market requires companies to wait three years after a change of control to list. It has been waiting for two years on the Nasdaq-style STAR market in Shanghai and one year in Hong Kong.
Ant said on Sunday that it has no plans to launch an IPO.
CBIRC on Dec. 30 approved a capital increase of Ant’s consumer finance arm to 18.5 billion yuan ($2.68 billion) from 8 billion yuan in the latest step of its restructuring.
Reuters reported in November, citing sources, that Chinese authorities were poised to fine Ant Group more than $1 billion, which could set the stage for ending a two-year regulatory review of the fintech company. In more detail
Li Nan, a finance professor at Shanghai Jiaotong University, however, says Anta’s inherent problems remain after the change in control.
“The key problem in Anta’s business model is the incorporation of loan wealth management (Huabei and Jiebei) and insurance into the payment platform (Alipai), avoiding the necessary regulation for risk management, such as capital adequacy ratio, liquidity ratio as well as credit loss. reserve ratio,” Lee said.
Leverage is still too high after Ant’s capital increase, she said.
Reporting from Shanghai by Rokanna Liu and Jingzhi Yang in Beijing, Josh Horvitz in Shanghai and Kane Wu in Hong Kong; Editing by Kim Coghill and Muralikumar Anantharaman
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