Ant Group and Alibaba, the two titans of Chinese technology founded by Ma Yun (Jack Ma), are being heavily regulated by the Chinese government, causing global investors to flee from Chinese tech stocks. Jack Ma was on the verge of pulling off an impressive $35 billion initial public offering he co-founded two decades earlier for the finance juggernaut. Ant Group's listing would have valued the company at over $300 billion and boosted Jack Ma's wealth beyond the already impressive $61 billion, cementing his status as one of the richest men in the world.
Shares of Alibaba are down 30% since their recent high in October. Ma's major fintech player - Ant Group, which was one of the most anticipated IPO's in the world was suspended in November as a result of regulatory concerns. This suspension led to a 7% fall in Alibaba's share prices. Moreover, shares of major technology companies in the country have also drastically fallen. According to Bloomberg, Alibaba, Tencent, Meituan and JD.com have lost around $200 billion in value during a handful of trading sessions in the past week. What is more concerning is that, after a scathing speech directed against Chinese state-owned banks and excessive regulations, Mister Ma has disappeared from public light. The speech was also the cause of the IPO suspension.
According to Andrew Collier, managing director of Orient Capital Research, the growing regulatory scrutiny of Alibaba-affiliate and financial technology powerhouse Ant Group may be bad for the Chinese economy as well as China's fintech market. He further mentioned that Ant's scrutiny was primarily focused on the idea to protect consumers and politics.
It's clear that investors were spooked by the growing tensions between China's tech giants and the ruling Communist Party. A lot of senior politicians in China were left unhappy after Jack Ma's criticizing speech. However, the relationship between Ma and the Chinese government has always been tenser than that of his peers. The founder of Tencent, Ma Huateng (Pony Ma), and the co-founders of Baidu, Xu Yong (Eric Yong) and Li Yanhong (Robin Li), have held lower profiles than the founder of Alibaba.
Ant group can be further forced to divest its holdings in fintech companies. The company holds sizeable stakes in Paytm (an Indian payment company backed by SoftBank) and a state bank in China. According to Reuters, the company has over 80 equity investments worth $21.6 billion. Additionally, the fact that Jack Ma's fortune has tumbled by over $12 billion since October explains how serious of a threat this situation is to the Chinese fintech market.
The fact that China's central bank lacks independence should come as no surprise. However, that trait is critical for global investors, whom this year have flocked to China because it's the only major economy to develop in the pandemic period. Private investors might be less enthusiastic about the prospect of funding Chinese tech startups who may face government censorship under strict regulations. This prickly situation further makes other startup markets in the region like Japan and India a more attractive option for investors, posing a threat to the Chinese economy.
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