Shares of ant-related companies rise after news of Jack Ma's relinquishment of control;  Ali Baba jumps

Shares of ant-related companies rise after news of Jack Ma’s relinquishment of control; Ali Baba jumps

(Reuters) – Shares of listed Chinese companies, which count Ant Group as a major shareholder, rose on Monday after it was announced that Ant founder Jack Ma would relinquish control of the financial technology giant after an overhaul.

Hong Kong-listed shares of 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 rose. . Ant indirectly owns stakes ranging from over 20% to just over 5% in those companies.

Ant said over the weekend that founder Jack Ma will give up control of the company.

The reform seeks to draw a line under a regulatory crackdown that was launched shortly after it canceled its massive stock market debut two years ago.

Redmond Wong, Greater China Market Strategist at Saxo Markets in Hong Kong, said that Jack Ma’s relinquishment of control of Ant and other companies will help clear some doubts and pave the way for the development and expansion of the group’s business.

“It should have removed some of the authorities’ concerns about the group because the change was most likely the result of negotiation with the authorities,” Wong said. “Investor sentiment towards China’s Internet sector is likely to improve further.”

Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission (CBIRC), said in an interview with China’s official Xinhua news agency published on Jan. 7 that the financial business rectification of 14 platform companies is “basically complete”, while only a few remain. You need to solve the issues. He did not mention the corporate power.

Guo was quoted as saying that the authorities will adopt “normal regulation” next and encourage platform companies to operate in a compliant manner.

underwriting speculation

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

“Investors can stop guessing and can finally allocate a risk premium to the new company that Ant has turned out to be,” Alexander Serakov, managing partner at Aquariusx, a Shanghai-based investment advisory firm, said after Ant’s announcement.

Morgan Stanley, in a January 8 research note, said it would elevate Alibaba to its “top pick” of stocks in China’s internet industry in 2023, citing easing regulations as part of the reasons 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 Saturday are likely to cause further delays due to listing regulations.

China’s domestic stock market requires companies to wait three years after a change of listing control. Waiting for two years in Shanghai’s Nasdaq-style STAR market, and one year in Hong Kong.

On Sunday, Ant said it had no plan to launch an initial public offering.

CBIRC on Dec. 30 approved a capital increase in Ant’s consumer financing arm to 18.5 billion yuan ($2.68 billion) from 8 billion yuan in its latest restructuring move.

Reuters reported in November, citing sources, that Chinese authorities were preparing to fine Ant Group more than $1 billion, a move that could pave the way for an end to the fintech company’s two-year regulatory overhaul. Read more

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

“The main problem with Ant’s business model is to include wealth management and loan insurance (Huabei, Jiebei) in the payment platform (Alipay), and evade the necessary risk management regulations, such as capital adequacy ratio and liquidity ratio plus loan loss reserve ratio,” Li said. “.

She said that the leverage is still very high after Ant’s capital increase.

(Reporting by Newsroom in Shanghai, Roxanne Liu and Yingzhi Yang in Beijing, Josh Hurwitz in Shanghai and Ken Wu in Hong Kong; Editing by Kim Coghill and Muralikumar Anantharaman

Our Standards: The Thomson Reuters Trust Principles.

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