Regulator approves Ant units’ ABS issues

By GT staff reporters Source: Global Times Published: 2020/11/25 21:23:41

Move follows suspended IPO, shows nation’s open view of financial innovation

Ant Group

In what is seen as a positive signal to the market, Chinese regulators have approved asset-backed securities (ABS) issues by two online lending subsidiaries of the Ant Group. The move follows the suspension of Ant Group's huge dual IPO in early November.

Halting the mega IPO showed regulators' clear and unshakable stance on regulating internet finance to fend off potential risks, while approving the ABS issues underscores Beijing's open and active attitude toward fintech innovation - a key factor in Ant Group's expansion going forward, industry observers said.

Ant Group is adjusting. After the IPO suspension, some observers predicted that the fintech giant would spin off several businesses to clear the way for its dual IPO plan. Others said that Ant would abandon its IPO in the Chinese mainland and independently list in Hong Kong. 

There will be two ABS issues, each worth 10 billion yuan ($1.52 billion). One was announced on November 3, the day that the IPO was suspended, and the other on November 6, according to a notice on the Corporate Bond Information Platform of the Shanghai Stock Exchange (SSE). 

The issues were separately approved by the SSE on November 20 and November 23. The securities will be listed on the SSE's bond trading platform.

The approvals by the SSE were the first for the group after the suspension of the dual IPO. The issuers are two online small-loan entities based in Southwest China's Chongqing, which operate on Ant Group's main consumer-focused financing products, Huabei and Jiebei.

The dual IPO, which was widely expected to be the world's biggest, was halted on November 3 to "protect the interests of consumers and investors," according to China's securities regulators. 

According to the release, the SSE has also accepted another three planned ABS issues by the two lenders, in total equaling 26 billion yuan. Those three issues were announced from early to mid-November. 

"Regulatory approval of Ant Group's ABS issues is an encouraging sign. It puts to rest market speculation that Chinese regulators would take a 'one-size-fits-all' approach to Ant's innovative financial products, which could potentially sink the business," Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, told the Global Times on Wednesday. 

He noted that the ABS financing program and its approval by Chinese regulators could help regain investors' confidence, to some extent. 

Wu Jinduo, head of fixed income at the research institute of Great Wall Securities, told the Global Times on Wednesday that the approval of the ABS issues is a totally different issue from Beijing's inclusion of internet finance into the nation's unified financial regulatory framework. 

"China's attitude on internet finance is very obvious," Wu pointed out. 

Dong said that in terms of supervision of innovative financial services, Chinese regulators remain open, objective, transparent and rational. "It gives hope that Ant Group's business may continue to expand once it fulfills its regulatory responsibility," Dong said.

The SSE said in an announcement on Tuesday that it will prioritize both supervising and providing services, and make more effort to help honest and professional firms transform, grow stronger and be of better quality through the use of the capital market.

Facing a changing regulatory environment, Ant Group named its vice president Li Chen as chief compliance officer, a source familiar with the situation told the Global Times on Wednesday. Li reportedly will coordinate more sources at the group level and report directly to CEO Simon Hu.  

According to a micro-lending draft rule issued in early November, micro-lending platform operators must provide a minimum of 30 percent of the funding for loans. This requirement would be very challenging for Ant Group. According to its stock prospectus, only about 2 percent of loans are on its own balance sheet.

On Monday, Zhang Yong, Alibaba Chairman and CEO, said at the World Internet Conference held in Wuzhen, East China's Zhejiang Province that Alibaba is a beneficiary of China's digital economy era.

"We are very grateful for this era," Zhang said, pledging that Alibaba will actively learn and respond to government policies and rules to build a healthier platform economy.

Despite the suspension of the IPO, analysts predicted that Ant Group will press ahead with its listing plans after making compliance adjustments. 

"Ant Group may spin off several key businesses and reorganize in order qualify" for an IPO, Dong said. It also cannot be ruled out that Ant Group will abandon the A-share market and instead just list in Hong Kong, analysts pointed out.


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