Newsflash | Listing Suspension of Ant’s IPO
ADDED:
05 November 2020
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Shock Suspension

Reports confirmed that regulatory authorities in China had put the brakes on Ant Group Co’s US$35 billion listing in Shanghai and Hong Kong, derailing the world’s biggest initial public offering (IPO). In this Fundamental Flash, we discuss the implications of the suspension to Ant’s business and our portfolio positioning.
Regulatory Roadblock

The suspension came on the heels of a rare joint meeting with Ant’s co-founder Jack Ma who was summoned to a meeting with the country’s top regulatory bodies including the China Securities Regulatory Commission (CSRC) and China Banking and Insurance Regulatory Commission (CBIRC).

Market speculation is that there could be some unfavourable events that took place since the granting of listing approvals, as both the CSRC and CBIRC were the very same authorities that had also approved Ant’s listing.

A consultation paper was released recently by the CBIRC with regards to proposed changes in policies affecting small and micro business loans in China. This could negatively impact how Ant operates its lending business moving forward. The lending business (aka CreditTech) makes up sizeable portion of Ant’s business contributing up to 39% of its revenue as of 1H’2020.

Following such regulatory changes, Ant’s listing approval was suspended by the Hong Kong and Shanghai stock exchange. It was reported that the stock exchange operators had requested that Ant file a disclosure of impact to its business to take into account these new regulatory changes before it can be granted listing approval again.

Ant has always portrayed itself as a technology firm that had maintained close communication with regulatory authorities. Though with this latest surprise, the relationship dynamic between Ant, regulators and its business partners could see changes.

Outlook & Positioning

We do not expect much disruption to Ant’s existing business as of now. That said, Ant’s growth moving forward could very much be constrained given the new capital requirements for its lending business. Also, there is a likelihood that we have just seen the start of regulatory impact on Ant’s business.

Whilst the latest news regarding its listing suspension is certainly negative on a net basis, we don’t believe Ant’s value is zero. As of now, Ant is still a company that is expected to deliver a net profit of RMB50bn in FY2020 as a valuable technology company.

Ant has unique access to the vast user base of Alibaba as part of wider technology conglomerate in a bourgeoning market. Regulatory pressure is also not new to the group, as it has transformed and adapted through various policy changes in the past 16 years.

It is uncertain whether Ant make an immediate effort to get listed again. It is rumoured that the company may take up to 6 months for it to get everything right before applying for listing again.

Alibaba which sits as one of our portfolio top holdings saw a knee-jerk reaction following the suspension of Ant’s IPO. However, Alibaba’s value is largely derived from its core e-commerce business and will likely see its share price stabilise soon. We remain comfortable with our portfolio positioning and will continue to stick with secular growth stocks like Alibaba that have multi-year growth prospects.

Disclaimer
This article has been prepared by Affin Hwang Asset Management Berhad (hereinafter referred to as “Affin Hwang AM”) specific for its use, a specific target audience, and for discussion purposes only. All information contained within this presentation belongs to Affin Hwang AM and may not be copied, distributed or otherwise disseminated in whole or in part without written consent of Affin Hwang AM.

The information contained in this presentation may include, but is not limited to opinions, analysis, forecasts, projections and expectations (collectively referred to as “Opinions”). Such information has been obtained from various sources including those in the public domain, are merely expressions of belief. Although this presentation has been prepared on the basis of information and/or Opinions that are believed to be correct at the time the presentation was prepared, Affin Hwang AM makes no expressed or implied warranty as to the accuracy and completeness of any such information and/or Opinions.

As with any forms of financial products, the financial product mentioned herein (if any) carries with it various risks. Although attempts have been made to disclose all possible risks involved, the financial product may still be subject to inherent risk that may arise beyond our reasonable contemplation. The financial product may be wholly unsuited for you, if you are adverse to the risk arising out of and/or in connection with the financial product.

Affin Hwang AM is not acting as an advisor or agent to any person to whom this presentation is directed. Such persons must make their own independent assessments of the contents of this presentation, should not treat such content as advice relating to legal, accounting, taxation or investment matters and should consult their own advisers.

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TENG CHEE WAI

Managing Director
Teng Chee Wai is the founder of Affin Hwang Asset Management Berhad (Affin Hwang AM). Over the past decade, he has built the Company to be the fastest growing and only independent investment management house in Malaysia’s top three, with an excess of RM47 billion in assets under management as at 31 December 2018.​

​In his capacity as Managing Director / Executive Director, Teng manages the overall business and strategic direction as well as the management of the investment team. His hands-on approach sees him actively involved in investments, product development and marketing. Teng’s critical leadership and regular participation in reviewing and assessing strategies and performance has been pivotal in allowing the Company to successfully navigate the economically turbulent decade.

Teng’s investment management experience spans more than 20 years, and his key area of expertise is in managing absolute return mandates for insurance assets and investment-linked funds in both Singapore and Malaysia. Prior to his current appointments, he was the Assistant General Manager (Investment) of Overseas Assurance Corporation (OAC) and was responsible for the investment function of the Group Overseas Assurance Corporation Ltd.​

​Teng began his career in the financial industry as an Investment Manager with NTUC Income, Singapore. He is a Bachelor of Science graduate from the National University of Singapore and has a Post-Graduate Diploma in Actuarial Studies from City University in London.
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