China Is Planning a Bigger Ant Crackdown With Bank Funding Curbs

NOVEMBER 04, 2020

The shock suspension of Ant Group Co.’s $35 billion initial public offering is just the beginning of a renewed campaign by China to rein in the fintech empire controlled by Jack Ma.

Authorities are now setting their sights on Ant’s biggest source of revenue: its credit platforms that funnel loans from banks and other financial institutions to millions of consumers across China, according to people familiar with the matter.

The China Banking and Insurance Regulatory Commission plans to discourage lenders from using Ant’s platforms and has already asked some to ensure their portfolios are compliant with stringent draft regulations announced on Monday, said the people, who asked not to be identified discussing private information.

The proposed measures, which call for platform operators to provide at least 30% of the funding for loans, would render many of Ant’s existing transactions non-compliant. The company currently keeps about 2% of loans on its own balance sheet, with the rest funded by third parties or packaged as securities and sold on.

The full scope of China’s plans for Ant are unclear, and it’s possible that lenders will continue to work with the company once it complies with regulators’ requests. Any suggestion that banks would stop using its platforms is “unsubstantiated,” Ant said in a response to questions from Bloomberg. “Ant will continue to support bank partners to make independent credit decisions and leverage Ant’s technology platforms to serve consumers and small businesses.”

https://www.bloomberg.com/news/articles/202...nd=premium-asia

Nov. 3 was a sad, sad day for China.

Not because America’s election changes anything about its hawkish stance toward Beijing — that’s bipartisan — but because China lost a golden investment opportunity by shooting itself in the foot.

Looking purely at the numbers, China is in a sweet spot right now. Its bonds are attractive, as the yield differential with U.S. Treasuries hovers near a five-year high. Beijing’s virus-containment strategy is working, and the economy has bounced back. Meanwhile, President Xi Jinping’s latest five-year economic blueprint, which favors innovation and domestic consumption, is a win for tech companies — exactly the kind of growth stocks investors love.

Foreigners have been buying the China story this year, even as President Donald Trump threatened to sanction and delist mainland companies. They are crowding into Beijing’s sovereign issues at a record pace, promising to overtake domestic city commercial banks as the second largest purchasing bloc. Global investors need to have “a significant portion” of their portfolios in Chinese assets, both for diversification and short-term tactical gains, said Bridgewater Associates LP founder Ray Dalio.

The Shanghai Stock Exchange’s surprise suspension of Ant Group’s record-breaking initial public offering Tuesday night changed the landscape entirely. Two weeks earlier, the company’s billionaire founder Jack Ma made a sensational speech, saying China’s financial system and regulatory framework are broken. On Monday, Beijing’s top financial watchdogs summoned Ma and dressed him down. Then they issued new draft rules to rein in Ant’s lucrative consumer loan business. 

It’s episodes like this that remind us how capricious and thin-skinned Beijing’s policy makers can be. Regulators have been debating whether to allow online microlenders to act as simple matchmakers (rather than traditional lenders, which require capital buffers), for a good two years. Why the sudden change of heart two days before Ant’s much-anticipated trading debut? The fintech giant had already raised at least $34.5 billion from its dual listing in Hong Kong and Shanghai. Now, it has to return billions of dollars to its IPO subscribers.

Somehow, Beijing has proved Ma’s point: China’s bureaucrats don’t know what they’re doing. To govern well, you can’t pick and choose when and how hard to regulate; the secret sauce is consistency. Beijing is looking as childish and moody as Trump on the day of the U.S. election.

While Jack Ma’s botched IPO is the big story, there are plenty of obscure examples that also matter to long-term investors. Consider instead the so-called  keepwell clause. This “gentlemen’s agreement” is a common feature of China’s $790 billion dollar bond market, and in theory protects investors in the event of default. In September, a Beijing court rejected the recognition of the keepwell deed for a conglomerate’s dollar bond. Two months later, a court in Shanghai ruled to accept this provision for an energy trader. China’s stance on keepwell is anyone’s guess.

This is the problem with investing in China. First, assumed rules can be broken at whim, especially when policy makers fear they are losing face. Second, after Ma’s troubles, what billionaire executive will want to speak up? It’s much better to be supplicant, keep quiet and busy yourself making money.  Sure, China has many attractive traits, but you’d better be prepared to stay in perpetual crisis mode.

Wow.. What happened? Baba stock is going to be hammered.

BABA is a Giant OCTOPUS, a Fenomenal CASH Machine

Never disappoint 

One thing I learned so far about China tech is: don't panic, just hold.

One thing I learned so far about China tech is: don't panic, just hold.

i'm gonna hold my 03033 until i run out of cash to buy food.

US elections.... Nasdaq big gains.

HSTech ETF 03033 also gained today 8.135 or +5%.

a lot of tech stocks break 52w Hi today like 09618 JD.com, 03033 almost

maybe ppl have been using the allocated money for ANT to buy other hong kong stocks

All my big tech portfolio increase a lot yesterday in nasdaq and hang seng. Seems like stock market prefer Biden win more than trump. Hmm...

China drafts new antitrust guideline to rein in tech giants, wiping US$102 billion from Alibaba, Tencent and Meituan stocks

https://www.scmp.com/business/china-busines...ein-tech-giants

One thing I learned so far about China tech is: don't panic, just hold.

Mind elaborate more?