The speed at which Ant Group revives its nearly US$40 billion initial public offering will depend on how quickly the company responds to the "changing regulatory environment" in China, according to Fang Xinghai, the vice-chairman of the China Securities Regulatory Commission.
In his first public comments since regulators scuttled Ant's highly anticipated listing amid a broader crackdown on technology giants, Fang said the timetable would depend on government efforts to reshape the regulatory environment for fintech companies and Ant's adjustment to those changes.
"International investors have responded to this move quite well," Fang said during a panel discussion at Bloomberg's New Economy Forum. "In the last week, we have seen a lot of inflows in the Chinese capital markets from international investors."
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Restarting Ant's blockbuster IPO could take months as the company evaluates its options, but that has done little to dampen the appetite among international investors seeking to tap future growth in the mainland. Ant's dual listing in Hong Kong and Shanghai was expected to be the biggest fundraising on record, surpassing Saudi Aramco's US$29.4 billion listing last year.
The Shanghai Stock Exchange said on November 3 it was suspending Ant's IPO less than 48 hours ahead of the planned start of trading because of new rules for fintech companies. A few days later, mainland regulators announced draft anti-monopoly regulations designed to curb the growing influence of tech platforms, including their use of data.
The proposed fintech rules would limit cross-provincial lending, restrict maximum loan amounts and require online companies to put up at least 30 per cent of loan capital in co-lending deals with banks.
The rules would eat into profits at Ant and other fintech companies focused on the microfinancing space. Ant and other online lenders have used artificial intelligence and other technologies to originate loans to consumers and small businesses, but have primarily relied on traditional banks for capital to provide credit to borrowers.
"While pro-innovation, Chinese regulators' top priority is financial stability," S&P Global Ratings credit analyst Fern Wang said in a research note on Tuesday. "They have a particularly strong incentive to manage fast-growing consumer lending to lower-income borrowers."
Fang Xinghai, vice-chairman of the China Securities Regulatory Commission, said the revival of Ant Group's blockbuster IPO will come down to how the company responds to new regulations. Photo: Simon Song alt=Fang Xinghai, vice-chairman of the China Securities Regulatory Commission, said the revival of Ant Group's blockbuster IPO will come down to how the company responds to new regulations. Photo: Simon Song
Ant, for example, only retains about 2 per cent of the outstanding credit balance for loans it originates, according to its prospectus. The remaining 98 per cent is underwritten by partner financial institutions or securitised, the company said.
As of June 30, the company had about 1.7 trillion yuan (US$258 billion) in outstanding consumer loans and 400 billion in small business loans. Ant is an affiliate of Alibaba Group Holding, the parent of the Post.
Liu Guoqiang, a deputy governor of the People's Bank of China, told Reuters a few days after the IPO was suspended said the decision to introduce new fintech regulations was "about maintaining stable, healthy market development in the long term".
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
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