SINGAPORE – The increasing regulatory scrutiny of Alibaba’s affiliate and powerful financial technology Ant Group could be bad for the Chinese economy, as well as for China’s financial technology sector, said Andrew Collier, managing director at Orient Capital Research.
The long-awaited listing by the Chinese tech giant Ant Group – which was supposed to be the largest IPO in the world – was abruptly suspended in November.
It happened shortly after Ant’s controller Jack Ma and other company executives were interviewed by Chinese authorities on regulatory issues.
“It is true that when Jack Ma made his terrible speech … which angered many senior politicians, I thought it would be one thing,” Collier told CNBC’s “Squawk Box Asia” on Tuesday.
He was referring to the Chinese billionaire’s speech in late October, when he apparently criticized regulators during a controversial speech. Ma is the founder of Chinese e-commerce giant Alibaba, which has an approximately 33% stake in Ant Group.
Days later, Ant’s double listing in Shanghai and Hong Kong was suddenly suspended, causing Alibaba’s shares to plummet.
“Clearly, this was an excuse by the leadership and probably the state banks to crack down on the entire fintech sector,” said Collier. “Part of this is legitimate because of concerns about, you know, the possibility … of a financial crisis. But they had already cut Ant Financial’s wings in very serious ways.”
Not good for the future of fintech or the future of the Chinese economy
Andrew Collier
Managing Director, Orient Capital Research
The problems for both Alibaba and Ant have only increased since then, with Chinese authorities announcing an anti-monopoly investigation on the e-commerce titan last week. Chinese regulators also recently ordered the Ant Group to rectify its business.
These developments resulted in Hong Kong’s listed Alibaba shares suffering yet another fall – with more than 831 billion Hong Kong dollars (approximately $ 107 billion) of its market capitalization eliminated in just two sessions, based on the calculations of CNBC.
Collier said that regulatory scrutiny around Ant was probably centered both on the desire to protect Chinese consumers and on politics.
“Initially, I kind of believed in the line that (People’s Bank of China) was trying to protect the consumer,” said the analyst, citing previous challenges in the point-to-point lending space.
“Now, as they are getting so serious and are making new claims and telling them to reduce large areas of their business, it is clear that it is partly a political objective to reduce the size of these companies so that they do not have significant market share and threaten the existence of the state system, ”he added.
“It is not good for the future of fintech or the Chinese economy,” said Collier.