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World Ant Group fiasco reflects battle for China's financial soul

07:50  05 november  2020
07:50  05 november  2020 Source:   msn.com

Ant march halted: What Ma’s frozen IPO says about China business

  Ant march halted: What Ma’s frozen IPO says about China business Ant saw its $35bn IPO suspended after its co-founder seemed to criticise the Chinese government’s economic road map.Until, that is, China’s government stopped Ant’s initial public offering’s march in its tracks.

This followed a meeting with China ' s financial regulators on Monday during which Ma and his top executives were told that Ant 's lucrative online lending business would face tighter scrutiny, sources told Reuters.

China ’ s top securities watchdog said it supported a decision by the Shanghai Stock Exchange to block a “hasty” initial public offering of Ant Group , which would have been the world’s largest ever stock market listing.

China's last-minute abandonment of Ant Group's record-breaking IPO stems from an intensifying battle for the soul of the nation's financial system that the fintech giant and its charismatic leader Jack Ma helped to ignite.

Jack Ma standing on a stage: Jack Ma, co-founder of ecommerce titan Alibaba, had stood to become Asia's richest man via Ant Group's IPO © Philippe LOPEZ Jack Ma, co-founder of ecommerce titan Alibaba, had stood to become Asia's richest man via Ant Group's IPO

Global markets were stunned Tuesday when Ant's record-breaking $34 billion IPO was abruptly shelved, frustrating investors eager for a piece of the fast-growing company.

The debacle has prompted head-scratching over how the IPO got so close –- shares were to begin trading Thursday -– only to collapse at the finish line.

Ant Group: China's fintech flyer grounded by regulators

  Ant Group: China's fintech flyer grounded by regulators Set for a record-busting $34 billion IPO in Hong Kong and Shanghai, Ant Group has had its wings summarily clipped by Chinese regulators. Backed by Jack Ma, China's richest man who founded the Alibaba e-commerce empire two decades ago, Ant is a financial technology titan stitched into the everyday life of hundreds of millions of Chinese people through its easy mobile payments system. But the group -- which has more than 700 million monthly active users -- has drawn concern in China's state-controlled finance sector by venturing into personal and consumer lending, wealth management and insurance. Outside China it is less well known.

China suspended Ant Group 's billion stock market listing on Tuesday, thwarting the world's largest IPO with just days to go in a dramatic blow to the financial The move followed a meeting between Ma and China ’ s financial regulators on Monday during which Ma and his top executives were told the

Ant Group runs Alipay, one of China ' s most popular mobile payment apps, but has also been expanding into products such Ant Group has over 900 million users in China for Alipay. But it offers financial products beyond that, including wealth management, loans to businesses and insurance.

Analysts say it was the culmination of an escalating rivalry between Ma and a state-dominated banking and regulatory system controlled by the Communist Party, which has become uncomfortable with Ant's growing power.

Ma, the billionaire tech disrupter and co-founder of e-commerce titan Alibaba, formed Ant through Alipay, the online payments platform and super-app that is now deeply embedded in China's economy.

But the firm has also expanded into offering loans, credit, investments and insurance to hundreds of millions of consumers and small businesses, spurring fear and jealously in a wider banking system geared more for supporting state policy and large corporations.

a sign on the side of a building: Ant Group's Alipay platform has helped revolutionise commerce and personal finance in China © Hector RETAMAL Ant Group's Alipay platform has helped revolutionise commerce and personal finance in China

As global demand for the dual Hong Kong-Shanghai listing pushed the IPO toward record valuations -- potentially handing Ma and Ant Group even more funding, legitimacy and clout -- Chinese regulators acted.

China's Ant Group postpones IPO under regulatory pressure

  China's Ant Group postpones IPO under regulatory pressure China's Ant Group on Tuesday suspended its record-breaking IPO in both Hong Kong and Shanghai as the fintech giant faces growing pressure from Chinese regulators over potential risks. The firm's Alipay platform has helped revolutionise commerce and personal finance in China, with consumers using the smartphone app to pay for everything from meals to groceries and travel tickets. But Ant Group, which has more than 700 million monthly active users, has also caused concern in China's state-controlled finance sector by venturing into personal and consumer lending, wealth management and insurance.

How China ' s Ant Group built a trillion payments machine. When individuals, companies or countries are sanctioned by the United States, they are often cut off from essential financial services because banks rely on SWIFT for clearing US dollar transactions.

China ' s Ant Group was named for the small insect because it serves "the little guys." Now, its IPO could overtake the world's most established banks. Jack Ma's 0 billion Chinese fintech firm Ant Group just got the green-light from China for its monster IPO this month.

In recent weeks, new minimum capital requirements and other restrictions on online lending were imposed to guard against "systemic risk", plugging some of the regulatory gaps that Ant Group had stepped through, analysts said.

"Given the magnitude of Ant Group's operations, the regulators might have felt that they did not have an appropriate handle on the flow of money being processed through Ant Group products," said Philippe Espinasse, a capital markets consultant and former investment banker.

- Ma sounds off -

The moves angered Ma, 56, who had stood to become Asia's richest man via the IPO.

He uncharacteristically lashed out in a speech two weeks ago, saying capital requirements were outdated and that China lacked a true "financial ecosystem".

Ma likened Chinese banks to "pawn shops" for requiring loan collateral and implied that they underserved smaller, younger borrowers.

China's Ant Group facing regulatory pressure ahead of record IPO

  China's Ant Group facing regulatory pressure ahead of record IPO Fintech giant Ant Group is facing growing Chinese pressure over potential risks in its online lending business, with co-founder Jack Ma and other executives summoned to an unusual meeting with regulators just ahead of its record-breaking IPO this week. It follows new state regulations to contain potential risks in China's growing online lending industry, a sector Ant Group has aggressively moved into. It remains to be seen how much impact the pressure may have on the share issue, which has global investors salivating. Video: U.S.

22. The China securities watchdog has 20 working days to accept or reject the registration. The exchange itself has already approved the listing.A representative for Ant declined to comment.Alibaba Group Holding Ltd., which owns a third of Ant after spinning out the finance unit almost a decade

Ant ’s initial public offering will ultimately accelerate the stock benchmark’s transformation from an underperforming old-world gauge to a dynamic index that better reflects China ’ s growing technological prowess. Here are some charts showing the impact of Ant ’s IPO on Hong Kong’ s financial system.

Chinese public figures rarely call out the government, and the reaction was swift.

A series of commentaries in government media mouthpieces pushed back against Ma, warning of extensive risks from online lenders like Ant Group and vowing tighter supervision.

Things came to a head Monday when Ma and two other Ant executives were summoned to a highly unusual meeting with financial regulators.

Exact details of the talks remain unknown, but the next day the Shanghai exchange pulled the IPO.

Ma's critiques "didn't sit well with regulators, many of whom have been grappling with the risks of micro-lending", said Alex Capri, a research fellow at Hinrich Foundation.

"Ant has grown too large and too influential as a financial institution in China, something that will not be tolerated by the (ruling Communist Party)," Capri said.

Experts say a robust online lending sector is needed to meet the needs of ordinary consumers but that China has reason to fear a borrowing binge.

Bad debt in the country's chaotic financial system is a perennial risk, and regulators launched a crackdown on a growing nationwide credit addiction three years ago owing to fears of a financial meltdown.

Former cricketer Mitchell Johnson breaks down and QUITS SAS Australia

  Former cricketer Mitchell Johnson breaks down and QUITS SAS Australia An exhausted Mitchell Johnson broke down in tears and quit during a gruelling challenge on SAS Australia on Tuesday. The 38-year-old former cricketer was carrying a log with his teammates, when he let go and folded over in half. Chief instructor Ant Middleton approached the recruit and asked him whether he wanted to continue with the show.

- 'Awful' timing -

But Ant now boasts around 500 million users of its loan and credit products, which allow consumers to take out cash loans or access revolving credit lines.

This has stoked fears of a younger digital generation with little risk awareness falling into a life-long debt spiral, said Zhang Gang, a strategist with Central China Securities.

"Because of Ant's scale and influence, they may dominate private lending in the future and ... (acquire) private lending companies," said Zhang, who feels tighter regulations are badly needed.

The IPO is expected to eventually go ahead after Ant complies with the new regulatory requirements, which it has vowed to do, although analysts expect the size and valuation to be lower in light of the curbs on Ant's businesses.

But the "awful" timing of the IPO's withdrawal could dent China's hopes of being viewed as a financial and technology force to rival the United States, said Espinasse.

Beijing is pushing its national tech champions to list on China's stock exchanges rather than in the US, partly because of an escalating bilateral rivalry.

"This potentially has significant implications, not just for homecoming listings but also for listings of Chinese tech companies more generally," Espinasse said.

"Ultimately, financial markets are all about trust and transparency and it looks like we don’t have that right now."

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