china

Ant Group’s world record-setting IPO in Shanghai and Hong Kong put on halt by Chinese regulators

Business

Bill O’Brien, Editor

“There’s a saying in China: ‘The tallest nail gets hammered down,'” said Duncan Clark, author of “Alibaba: The House that Jack Ma Built” and founder of investment advisory firm BDA China.

India Today

Jack Ma, pictured above, is not formally associated with the fintech company, Ant Group, but is the company’s controlling shareholder. Analysts are putting blame on the ecommerce mogul for recent statements criticizing Chinese regulators.

As U.S. markets whipsawed for the last 24 hours amid Election Day chaos, a leading fintech company in China experienced a ‘day of reckoning’ of sorts. The unicorn fintech company, Ant Group, was on track to set a record in raising capital from public markets with a $34.5 billion dollar IPO. Ant Group offers numerous services to its consumers, which include mobile payments services, wealth management, a third-party credit rating system and a mutual aid platform which “provides a basic health plan to protect participants against 100 kinds of critical illnesses.”

The company has made strides outside of the country into Europe as well. Ant Group’s mobile payment platform, Alipay, has existing relationships with numerous European digital wallets apps in Finland, Norway, Spain, Portugal and Austria. The fintech company has made headway in Britain as well, acquiring international money transfer services provider, WorldFirst, for $700 million in 2019 and reaching an agreement with Barlcaycard that enabled British retailers to accept Alipay in their stores.

The fintech company has been making incredible progress, which is why it is unsurprising that Chinese regulators yanking their IPO sent Alibaba, one-third shareholder of Ant Group, reeling. Alibaba, trading off a high of $310.73 early Monday evening (4:00P EST), fell 7.8 percent to $286.31 amid the news before rebounding to around $298.40 this Wednesday afternoon.

Analysts are pointing fingers at the controlling shareholder of the company and founder of Alibaba, Jack Ma, who recently gave a speech criticizing Chinese regulators for their risk aversion. “What we need is to build a healthy financial system, not systematic financial risks,” the Ant Group co-founder said at a conference in Shanghai. “To innovate without risks is to kill innovation. There’s no innovation without risks in the world.” He also highlighted the need for systemic reform in China’s financial sector, describing it as “a legacy of the Industrial Age.” Ma continued, saying, “we must set up a new one for the next generation and young people. We must reform the current system.”

Chinese regulators responded shortly after as if Ma had spit in their face, bringing Ant Group executives and Ma in for “regulatory interviews” which resulted in regulators deciding to suspend the fintech company’s initial public offerings in Shanghai and Hong Kong and prompting Ant Group to release the following statement to investors:

“Ant Group Co., Ltd. (the “Company”) announces that it was notified by the relevant regulators in the PRC today that its proposed A Share listing on the STAR Market is suspended as the Company may not meet listing qualifications or disclosure requirements due to material matters relating to the regulatory interview of our ultimate controller, our executive chairman and our chief executive officer by the relevant regulators and the recent changes in the Fintech regulatory environment. Consequently, the concurrent proposed H Share listing on the Main Board of The Stock Exchange of Hong Kong Limited shall also be suspended. Further details relating to the suspension of the H Share listing and the refund of the application monies will be made as soon as possible.” (ANT GROUP CO., LTD.)

Ant Group has made it clear it still intends to launch an IPO, preferably before the Chinese New Year, but analysts suspect they may need to do so under stricter capital requirements that will be set by the Chinese regulatory authorities or that it may need to sell its microlending business to do so.

Zambia a proving ground in Africa’s debt crisis

Business

Bill O’Brien, Editor

The Economist

Zambia’s debt negotiations with China have largely been behind closed doors, garnering distrust among Zambia’s retail investors.

Last week the Collegian covered the ongoing debt crisis in Africa that has been fueled by Chinese loans, which make up about a third of debt loads in numerous key struggling countries. Chinese lending practices have been judged differently across the board, with U.S. officials calling out the Chinese government for a practice called “debt-trap diplomacy,” a foreign policy strategy in which a lending nation uses looming default on debt to seize strategic assets from the borrowing nation as collateral. Others reject that theory, citing that China lacks a history for seizing assets over debt defaults but rather provides relief and restructuring options to the nations they lent to. For some nations, that debt crisis is coming to a heel. Zambia, a nation that owes a third of its debt to China, is currently in talks with holders of $3 billion worth of Zambian eurobonds. Zambia has already stated that, unless it is granted an interest payment holiday, a request that will be voted on next week by its eurobond holders, it will not be able to service its bonds. A core group of the eurobond holders have already rejected the proposal.

Owing a third of its debt to China, Zambia will undoubtedly have to address how it is going to service its loans from the economic superpower. With about a dozen other nations in talks with China for debt relief, Zambia will be a testing ground, setting a precedent for how future debt negotiations may go. A key part of Zambia’s debt management strategy is to garner relief from the World Bank and the IMF, organizations that have already begun working to stabilize the African debt crisis but fear their efforts may not be enough. The World Bank has already called for an additional $25 billion in relief funding for the world’s poorest nations on top of a debt-relief initiative the Group of 20 just renewed.

To make matters worse, Zambia has been running into roadblocks earning the good faith of their eurobond holders. They have isolated their talks with China, and conducted negotiations with the People’s Republic behind closed doors, spurring distrust of its retail lenders. Its eurobond holders and retail investors are concerned that China is seeking to gain more favorable loan restructuring terms in closed negotiations and have expressed extreme caution in coming to terms with a deal until China comes to the table with them.

In the next couple of months, Zambia will be heavily reliant on relief coming from organizations like the G20, World Bank and the IMF, and they will have to strike a deal with their debt holders before their inevitable default. Conducting transparent talks with China will be key to earning the good faith of their retail bondholders, including the eurobond holders that vote next week on whether to give Zambia an interest payment holiday.

obrienw4@lasalle.edu