Alibaba shares jump after China orders Ant Group to revamp business

An Ant Group logo is pictured at the company’s headquarters, a subsidiary of Alibaba, in Hangzhou, Zhejiang Province, China, on October 29, 2020.

Aly Song | Reuters

GUANGZHOU, China – Alibaba shares in Hong Kong rose nearly 4% on Tuesday when it opened after regulators ordered the e-commerce giant’s financial technology subsidiary Ant Group to overhaul its business.

Along with a fine of 18.23 billion yuan ($ 2.78 billion) received by Alibaba as a result of an antimonopoly investigation by regulators, this removed a source of uncertainty for investors.

“Following the decision and the penalties imposed on BABA by the SAMR (State Administration of Market Regulation) antimonopoly investigation, we believe the road is more colorful with the latest updates from the Ant Group,” Jefferies said in a released Monday Note.

Alibaba’s Hong Kong-listed shares later trimmed their opening gains, but last traded nearly 2% during Tuesday’s session. Alibaba’s US-listed shares closed over 9% higher on Monday.

Alibaba has a 33% stake in Ant Group, the company that operates the hugely popular mobile payment app Alipay in China. In November, regulators forced Ant Group to suspend record-breaking Hong Kong and Shanghai IPOs worth $ 34.5 billion.

At this point in time, changes in the financial technology regulatory environment were blamed for the listing’s suspension.

It did so just days after Jack Ma, the founder of Ant Group and Alibaba, made some comments that were critical of China’s financial regulator.

In December, the People’s Bank of China (PBOC) ordered the Ant Group to rectify its business. And on Monday, the Chinese central bank set out specific details of what the company must do.

The PBOC asked the Ant Group to restructure itself into a financial holding company. The Ant Group also needs to create a stronger separation between its payment app Alipay and its credit products. Yu’e Bao, the Ant Group’s money market fund that was once the largest in the world, must also be scaled back, the PBOC said.

Both Alibaba’s massive antitrust fine and Ant Group’s restructuring plan are part of a broader push by China to get a firmer grip on the country’s tech companies, which have grown into largely carefree giants. Their activities often span different sectors, from gaming to financial technology to cloud computing.

While Beijing’s eyes have so far been on Jack Ma’s empire, there are signs that the move could expand to other companies and other areas like data protection.

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