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Chinese Fintech Borders That Hit Ant Were No Surprise: Ping An
(Bloomberg) – Chinese restrictions on fintech that thwarted a massive sell-off of shares by Ant Group Co. have been under consideration for years and have come as no surprise to those in the industry, according to an executive at the largest insurer Chinese in terms of market value. Like Ant, Ping An Insurance (Group) Co. was planning a public listing for a financial technology unit when regulators began issuing a wave of rules to contain the country’s burgeoning online lending industry. Son Lufax Holding Ltd. debuted on the New York Stock Exchange days before the most important checks were unveiled in November, followed closely by the abrupt suspension of Ant’s initial public offering. While the series of tightening measures have prompted investors to ditch Chinese tech stocks. and led to deep cuts in ratings, industry players saw them coming, Jessica Tan, co-CEO of Ping An said in an interview. Tan, 43, oversees Ping An’s technology units, including Lufax and OneConnect Financial Technology Co. “Chinese regulators don’t suddenly throw you a settlement and tell you ‘we’re going to do it,'” Tan said in a statement. visit to his native Singapore. “Every settlement that has been announced comes as a surprise to none of us, including Ant. Ant is also aware of these regulations. Despite the warnings, global investors and bankers were caught off guard when authorities derailed Ant’s planned $ 35 billion IPO on the eve of its listing, underlining the changed regulatory environment. The IPO had created a frenzy, with orders exceeding $ 3 trillion and gray market shares trading 50% above the bid price. Ant, Lufax and their rivals now owe comply with new rules that hamper expansion and force companies to increase their capital. “These regulations have been discussed for the past two years, so we are all familiar with them,” Tan said, citing warnings in Lufax’s public offering documents. “For us, we have already complied with the regulations, so we do not expect any change.” Lufax WarningLufax warned in its prospectus that China’s retail credit and wealth management sectors “may not develop as we expect” and regulatory frameworks “remain uncertain for the foreseeable future.” During a pre-listing tour in October, the company said it plans to increase the proportion of loan risk it bears with lending partners to 20%, from 2% due to potential regulatory demands. people familiar with The proposed online microcredit rules, announced on November 2, called on platform operators to provide at least 30% of financing for loans granted jointly with partners, including banks. Ant’s IPO was halted the next day, just two days before the scheduled listing in Hong Kong and Shanghai. Ant, the fintech juggernaut of Jack Ma, was unaware of the proposed settlement until. that it is released to solicit public comment, the company said in a statement. statement sent by email. The company had fully disclosed in its prospectus all known material risks, including those related to possible regulatory changes, Ant said. The document contained lengthy warnings about the “ very complex and ever-changing ” Chinese regime, and also described Ant’s response at the time of writing. China’s regulatory crackdown continues to weigh on its fintech industry as new rules are put in place. The authorities announced new co-lending requirements last month, capping activity at a maximum of 50% of outstanding bank loans. New York-traded shares of the two Ping An units fell last week, joining a tech sell-off. As the price movements show, “Investors are still concerned about tighter regulation,” said Kevin Kwek, Singapore-based analyst at Sanford C Bernstein. While the latter rule has more of an impact on Ant plus because of its size, “investors generally expect the tightening is not quite over yet.” Last month’s online lending requirements were only released after officials “fully” sought comments from various types of financial institutions, which widely recognized the rule changes, the banking regulator said. last week. The agency will continue to address loopholes in its regulatory system to better prevent risks, it said in a statement on its website Lufax, which was once one of the largest peer-to-peer lenders from China, was forced to transform into a financial giant offering wealth. management and personal lending after Chinese authorities launched a sweeping crackdown on the P2P industry three years ago. Profit JumpLufax reported a 17% increase in fourth quarter profit as tax expenditures fell, even after reducing loan rates for borrowers in order to comply with the relevant new rules. He also gave indications for a 48% increase in net profit for the first quarter compared to the previous three months. Ping An, based in Shenzhen, has seen growth in other parts of Asia and beyond. OneConnect Financial has grown in 14 countries, most recently in Abu Dhabi, the Philippines and Malaysia. The company is looking to hire around 100 people in Southeast Asia, adding to a workforce of 400, after revenues rose about 40% last year, she said. “The big trend is that all financial institutions will spend more and more on technology,” said Tan, who built the fintech unit about five years ago. OneConnect will help fill the void with software and innovations for businesses that aren’t able to do it all on their own, she said. (Updates with regulator commentary in 15th paragraph) For more articles like this, please visit us at bloomberg.com Stay ahead of the game with the most trusted source of business news. © 2021 Bloomberg LP
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