Alibaba Group and Tencent Holdings saw their shares going up Hong Kong today after China’s US$984-million fine against the Jack Ma-founded Ant Group appeared to signal the end of a regulatory crackdown on the country’s technology sector.
Coming shortly after the penalty last week, the Alibaba affiliate announced a share buyback that values the fintech at a 75% discount to the valuation touted in an abandoned initial public offering (IPO) plan, but is seen as providing liquidity and certainty to investors.
The sudden shelving of Ant’s IPO in late 2020 initially had heralded the start of a wide-ranging clampdown by Beijing on industries ranging from technology to education, since regulators were looking to assert their authority over what they deemed to be excesses and bad practices emerging from years of runaway growth.
This scrutiny left firms, both old and new, operating in a new and uncertain environment, and wiped billions off share prices, ensnaring companies from online retail giant Alibaba to gaming company Tencent and food delivery group Meituan.
Apart from Ant, the Chinese authorities recently announced that they had fined Tencent’s online payment platform Tenpay nearly ¥3-billion ($414.9-million) for committing violations in areas such as customer data management.
The People’s Bank of China (PBOC) revealed that most of the prominent problems for platform companies’ financial businesses had been rectified and regulators would now shift their focus from specific companies to overall regulation of the industry. Huatai Research analysts said: “We view this announcement as a key milestone for a regular, clear and visible regulatory environment for China’s internet companies.”
Alibaba’s shares were up 3.2% at the lunch break in Hong Kong, while shares of Tencent were up 1.5%, both outpacing a 0.8% rise for the broader index. Dickie Wong, Kingston Securities executive director said: “Their share prices have strongly rebounded today mainly driven by the expectation that regulatory pressure from mainland government will ease.”
Alibaba recently revealed that it is considering whether to participate in the buyback that would transfer shares to an employee incentive scheme. On the other hand, Ant said it proposed to all of its shareholders to repurchase up to 7.6% of its equity interest at a price that represents a group valuation of about $78.5-billion.
All of that compared to the $315-billion valuation in 2020 for what was set to be the world’s largest IPO, had it not been derailed at the last minute by Chinese regulators.
