Didi's logo. Chinese regulators asked Didi as early as three months ago to delay its US listing because of national security concerns involving its huge trove of data. Reuters
Didi's logo. Chinese regulators asked Didi as early as three months ago to delay its US listing because of national security concerns involving its huge trove of data. Reuters
Didi's logo. Chinese regulators asked Didi as early as three months ago to delay its US listing because of national security concerns involving its huge trove of data. Reuters
Didi's logo. Chinese regulators asked Didi as early as three months ago to delay its US listing because of national security concerns involving its huge trove of data. Reuters

Business

Markets

Didi's market value falls by $22bn after regulatory tightening in China

Ride-hailing company's shares decline by as much as 30% to $10.90, below the $14 IPO price

Bloomberg

July 06, 2021

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China's biggest ride-hailing company Didi fell in pre-market trading after a Chinese regulator ordered the removal of the company’s platform from app stores, days after a $4.4 billion initial public offering in the US.

The company's shares fell by as much as 30 per cent to $10.90, wiping out about $22bn in market value and taking the stock below the $14 IPO price. They traded at $12.33 as of 5.07am in New York (1.07pm UAE time).

The Cyber Space Administration of China barred new users from Didi’s app, citing security risks. Beijing is in the process of a wider clampdown on the nation’s Big Tech companies.

Didi, whose American Depository Receipts have only traded in New York since June 30, said the move may have an “adverse" effect on its revenue in China.

While its 500 million existing users will still be able to order rides for now, China’s cyber security clampdown adds to the uncertainty surrounding all of the nation’s internet companies.

Tencent, which has a stake in Didi, is down 2.7 per cent so far this week, after sliding by 3.6 per cent on Monday and partially trimming losses on Tuesday. The government announcements came on Friday after markets in Asia closed.

Chinese regulators asked Didi as early as three months ago to delay its US IPO because of national security concerns involving its huge trove of data.

Uber, the second-biggest Didi stake holder, fell by 1.9 per cent in pre-market trading. The US stock market was closed on Monday for a holiday.

Full Truck Alliance and Kanzhun, both of which recently went public in the US, decline by 14 per cent and 10 per cent, respectively, after China expanded its probe on the technology industry to include both companies.

Beijing ordered them and Didi to halt new user registrations.

The number of companies based in China filing for New York listings has climbed for a third straight quarter despite weakness in other US-listed stocks that conduct most of their business in China and amid the broad antitrust probe into the nation’s internet companies.

The Nasdaq Golden Dragon China Index is down by about 8 per cent for the year, lagging behind the 14 per cent gain in the Nasdaq Composite Index.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Updated: September 23, 2021, 2:27 PM