SINGAPORE – Increased regulatory scrutiny of Alibaba-affiliated subsidiary and financial technology powerhouse Ant Group could be bad for both the Chinese economy and the Chinese financial technology sector, said Andrew Collier, chief executive of Orient Capital Research.
The highly anticipated listing of Chinese tech giant Ant Group, which was set to be the world’s largest IPO, was abruptly suspended in November.
It came shortly after Ant’s controller Jack Ma and other company executives were questioned by Chinese authorities about regulatory concerns.
“It’s true, when Jack Ma made his terrible speech … which angered many high-ranking politicians, I thought it was going to be a one-off,” Collier told CNBC’s Squawk Box Asia on Tuesday.
He was referring to the Chinese billionaire’s speech in late October, in which he reportedly appeared to criticize regulators during a controversial speech. Ma is the founder of the Chinese e-commerce giant Alibaba, which has a stake of around 33% in the Ant Group.
Days later, Ant’s double listing in Shanghai and Hong Kong was suddenly suspended, causing Alibaba’s shares to fall.
“This was clearly an excuse by the leadership and probably the state banks to crack down on the entire fintech sector,” said Collier. “Part of it is legitimate because of concerns about the possibility … of a financial crisis. But they had already cut the wings off Ant Financial in a pretty serious way.”
It’s not good for the future of fintech or the future of the Chinese economy
Managing Director, Orient Capital Research
Problems for Alibaba and Ant have only grown since then, when Chinese authorities announced an anti-monopoly investigation into the e-commerce titan last week. Chinese regulators recently ordered the Ant Group to rectify its business.
These developments caused Alibaba’s Hong Kong-listed shares to decline again – more than Hong Kong’s $ 831 billion (approximately $ 107 billion) of its market cap was wiped out in just two sessions, according to calculations by CNBC.
Collier said government scrutiny over Ant was likely focused on both a desire to protect the Chinese consumer and politics.
“Initially, I believed the line that (People’s Bank of China) was trying to protect the consumer,” the analyst said, referring to previous challenges in the peer-to-peer lending space.
“Now that they are getting so serious and making new allegations and telling them to cut down large areas of their business, it is clear that it is partly a political goal to reduce the size of these companies so they don’t do it. ” significant market shares and threaten the very existence of the state system, “he added.
“It’s not good for the future of fintech or the future of the Chinese economy,” said Collier.