China put the brakes on Ant Group Co.’s $35 billion share sale in Shanghai and Hong Kong, derailing the world’s biggest initial public offering.
The Shanghai stock exchange will suspend the listing after Ma was called in for “supervisory interviews” by related agencies, it said in a statement Tuesday. There was “significant change” in the regulatory environment and “such major issues could lead to your company not longer complying with requirements on listing or information disclosure,” the statement said.
The Hong Kong leg will also be suspended, Ant said in a filing shortly after the Shanghai announcement. The FinTech company’s debut was expected for Thursday. Alibaba Group Holding, which owns about a third of Ant, fell 8 per cent in pre-market US trading. Futures on Hong Kong’s Hang Seng index lost as much as 1.2 per cent.
The shock move comes after China’s regulators warned that Jack Ma’s firm faces increased scrutiny and will be subject to the same restrictions on capital and leverage as banks. Mr Ma, Ant’s billionaire co-founder, was summoned to a rare joint meeting on Monday with the country’s central bank and three other top financial regulators.
A representative for Ant couldn’t immediately respond to a request for comment.
“It’s a pretty bad look, where you have a China company conducting the world’s largest IPO, locking in billions from global investors and getting halted on the eve,” said Yu Tianjiao, a Hong Kong-based analyst at Sanford C Bernstein.
“Longer term, investors are going to reevaluate Ant’s price, people who gave it lofty valuations as a tech company will have to start thinking about it more as a financial services firm and question the growth potential.”
Ant’s decision to list on the Star board, a market launched in Shanghai last year, was seen as a major win for the mainland exchange. The IPO had attracted at least $3 trillion of orders from individual investors for its dual listing in Hong Kong and Shanghai. In the preliminary price consultation of its Shanghai IPO, institutional investors subscribed for over 76 billion shares, more than 284 times the initial amount on offer to them.
The FinTech company’s IPO would have given it a market value of about $315bn based on filings, bigger than JPMorgan Chase and four times larger than Goldman Sachs Group.
”It’s definitely surprising,” said Mike Bailey, director of research at FBB Capital Partners. “If there is something strange going on on the macro side for China’s financial markets or in the company that would be worrisome. That would be like, for instance, if we had some problem with Amazon. I would view that as a meaningful problem for them. This could be something that feeds back into global markets.”
Ant has faced scrutiny in Chinese state media in recent days after Mr Ma criticised local and global regulators for stifling innovation and not paying sufficient heed to development and opportunities for the young. At a Shanghai conference late last month, he compared the Basel Accords, which set out capital requirements for banks, to a club for the elderly.
Ant said following the meeting with regulators that it will “implement the meeting opinions in depth” and follow guidelines including stable innovation, an embrace of supervision and service to the real economy.
The Hangzhou-based company, a 2010 offshoot of e-commerce giant Alibaba, dominates China’s payments market via the Alipay app. It also runs the giant Yu’ebao money market fund and two of the country’s largest consumer lending platforms. Other businesses include a credit scoring unit and an insurance marketplace.
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.”
West Indies v India - Third ODI
India 251-4 (50 overs)
Dhoni (78*), Rahane (72), Jadhav (40)
Cummins (2-56), Bishoo (1-38)
West Indies 158 (38.1 overs)
Mohammed (40), Powell (30), Hope (24)
Ashwin (3-28), Yadav (3-41), Pandya (2-32)
India won by 93 runs
Company profile
Name: The Concept
Founders: Yadhushan Mahendran, Maria Sobh and Muhammad Rijal
Based: Abu Dhabi
Founded: 2017
Number of employees: 7
Sector: Aviation and space industry
Funding: $250,000
Future plans: Looking to raise $1 million investment to boost expansion and develop new products
