Ant IPO has slim chance of getting done next year


This comes as China overhauls rules governing the fintech industry
Newsfeed01 Dec 2020
Photo credit: AFP Photo


MAINLAND CHINA & HONG KONG

The chances that Jack Ma’s Ant Group Co Ltd will be able to revive its massive stock listing next year are looking increasingly slim as China overhauls rules governing the fintech industry, according to regulatory officials familiar with the matter.

Ant is still in the early stages of reviewing changes needed to appease regulators, who demand that its business comply with a slate of new and proposed guidelines in areas including lending to consumers, the officials said. With so much work needed, and some rules not yet spelled out, the officials said the initial public offering (IPO) may not get done before 2022.

An additional delay of a year or more would be another setback for billionaire Ma, as well as the early-stage investors including Warburg Pincus LLC that were counting on a windfall from what was poised to be a record USD35b IPO. It would also deal a potential blow to Alibaba Group Holding Ltd (9988 HK), which owns a third of Ant and saw its stock tumble after the deal was abruptly suspended this month. Alibaba fell 3.5% in Hong Kong on Monday (30 November).

The enormity of the challenge Ant faces restarting its IPO emerged from discussions with officials working across regulators with oversight of financial services and the securities industry. They emphasised that Beijing’s immediate priority was ensuring the fintech giant fall in line with the evolving regulatory environment.

Under the draft rules for micro-lenders issued in early November, Ant would be forced to replenish capital. That could mean the company needs about USD12b to comply, according to an estimate from Bloomberg Intelligence. The company also needs to apply to the China Banking and Insurance Regulatory Commission for new licenses for its two micro-lending platforms: Huabei (Just Spend) and Jiebei (Just Lend). The banking regulator will limit the number of platforms allowed to operate nationally, and is unlikely to approve two licenses for Ant, said the people.

Ant will also need to apply to the central bank for a separate financial holding company license since its operations straddle more than two financial segments. The Hangzhou-based firm is awaiting the final version of the micro-lending rules and expects more regulations on the fintech sector, one of the people said. In the meantime, the IPO is not a priority.

Understanding the authorities’ thinking and navigating the complex rules – some of which are still subject to change – are the biggest hurdles facing Ant, whose listing was halted just two days before scheduled debuts in Hong Kong and Shanghai. The highly anticipated IPO had set off an investment frenzy, with soaring demand pushing its valuation to USD315b, more than JPMorgan Chase & Co Ltd’s (JPM US) at the time.

Without any actionable plan agreed upon by all parties, Ant faces an extended pause in reviving the IPO, potentially longer than the few months delay signalled by some analysts and the top executive at Singapore’s DBS Group Holdings Ltd (DBS SP), one of the bankers on the deal. If Ant fails to get the sale done before its IPO filing expires in October, it would have to go through the listing process again in Shanghai and seek new approvals. – Bloomberg News.

The Shanghai Composite Index fell 0.49% to 3,391.76 while the Hang Seng Index tumbled 2.06% to 26,341.49.

 

REST OF ASIA

South Korea’s economy grew at a faster pace than initially estimated last quarter, as greater investment boosted the country’s rebound from its pandemic-driven slump.

Gross domestic product increased a revised 2.1% in the third quarter from the previous three months, the Bank of Korea reported Tuesday (1 December), compared with 1.9% in earlier calculations. Analysts had expected the reading to be unchanged.

The revision comes after the central bank last week (ended 27 November) raised its forecast for the full year, projecting a 1.1% contraction that was less small than seen in August. More investment and construction were among reasons for the upward revision to last quarter’s growth figure, the bank said.

South Korea’s shipments have been recovering in recent months, as COVID-related demand boosted its tech sales and the economy in China, its largest trade partner, continued to gain momentum. Exports probably increased 7.5% in November from a year earlier, the biggest gain since 2018, according to economists’ estimate before official data due later Tuesday.

From a year earlier, the economy contracted 1.1% last quarter, unchanged from the previous estimate. – Bloomberg News.

South Korea’s Kospi Index bounced 1.03% to 2,618.00 at the open on Tuesday after losing 1.60% to 2,591.34 on Monday.

Australia’s S&P/ASX 200 Index was 0.25% higher at 6,533.80 in early-Tuesday trading. It fell 1.26% to 6,517.80 on Monday.

The Taiwan Stock Exchange Weighted Index slipped 1.04% to 13,722.89.

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