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Ant Eaten: Bankers Left 'Shocked and Confused' As NOVEMBER 7 2020 ISSUE 2358 www.ifre.com Ant eaten: bankers left ‘shocked and confused’ as China stamps on US$34.4bn IPO Pipeline fills up as markets across the world shrug off US election disputes Red flags: bank watchdogs step up scrutiny of working-from-home risks EQUITIES BONDS LOANS STRUCTURED EQUITY Ant agony for Forgiving investors Another ION Good in a crisis: banks but outlook get behind Waste bites the dust: stellar EQL year for China-to-US Management’s 53BNûRElû continues with IPOs brightens US$2.5bn return fails Cellnex return 04 06 08 10 1 IFR Cover 2358.indd 1 06/11/2020 19:10:59 Our mission: providing coronavirus aid to North Rhine-Westphalia Reliable.BANK The stripes in the graph show the average annual temperature increase in Germany from 1881 to 2018. Sustainable investments help to achieve the UN‘s SDGs. #showyourstripes @nrwbank www.nrwbank.com/greenbond ,)5[&RURQD6WRŴUHULQGG 03.07.20 09:11 Upfront OPINION INTERNATIONAL FINANCING REVIEW Down to size disappointment. That is a valuable lesson – even if it had to be learned the hard way. ow many countries would kill a record-breaking IPO at Hthe last minute just to make a point? Certainly, the demise of Ant Group’s US$34bn-plus Hong Up to no good Kong and Shanghai listing last week sends a clear message that no deal is beyond the reach of China’s all-powerful regulators. HEû#OVID ûCRISISûANDûRESULTINGûLOCKDOWNSûAREû Chinese commentators have praised the regulators for Taccelerating change in how bankers and traders are rushing out reforms before the stock was listed, as changes supervised, just as they will have long-term implications for to consumer lending rules would have made for volatile where and how people work. trading in the shares. Supervisors were already using more data analysis to spot But are the Chinese authorities really so incompetent that THOSEûUPûTOûNOûGOOD ûREPLACINGûANûOVER RELIANCEûONûlNDINGû they didn’t realise the need to change the rules for consumer evidence of wrongdoing in chatrooms and text messages. lNANCEûUNTILûûDAYSûAFTERûTHEû)0/ûHADûBEENûPRICED Now, with staff working from their spare bedrooms or !NTSûROLEûINû#HINASûlNANCIALûSYSTEMûMAYûWELLûJUSTIFYû studies – where there are no cameras or colleagues to watch tighter regulation, but the company did not appear or put an early check on misbehaviour – more areas have overnight. If China’s regulators simply wanted to control gone dark for supervisors. So they need to speed up their systemic risks resulting from Ant’s growing dominance, they shift to data and model-based supervision. had ample opportunity to do so long before the listing was 3IGNIlCANTLY ûTHEû#OMMODITYû&UTURESû4RADINGû#OMMISSIONû launched. will next week merge its data and technology arm with its Instead, four of China’s regulatory bodies summoned Jack market oversight operations into a new Division of Data. The Ma and Ant’s other top executives to a meeting on Monday #&4#ûISûSMALLERûANDûMOREûNIMBLEûTHANûMANYûOTHERû and unveiled new rules for online micro-lending, one of the regulators, and it reckons enforcement action could now be most lucrative businesses on Ant’s platform. That prompted brought just by using trading analysis. the Shanghai Stock Exchange to halt the A-share listing on &ORûSUCHûAûSTRATEGYûTOûWORKûATûTHEû#&4#ûANDûMOREûWIDELYû Tuesday, less than 48 hours before the shares were due to will require improvement in data analysis tools, so they not begin trading. ONLYûHIGHLIGHTûPOSSIBLEûINSIDERûTRADING ûSPOOlNGûORûROGUEû The timing of that intervention can only have been TRADING ûBUTûALSOûnûCRUCIALLYûnûAVOIDûmAGGINGûUPûFALSEûPOSITIVESû determined to make a political point – to kill the chicken to That, the big data evangelists say, is all now possible. scare the monkey, as the Chinese saying goes. At least that is the theory. Where’s there’s money to be Ma’s comments at a Shanghai conference in late October made there will always be people trying to take advantage. appear to have triggered this regulatory response. In an No doubt such people are operating right now inside banks unusually blunt speech calling for the modernisation of China’s ANDûOTHERûlNANCIALûINSTITUTIONS ûCONlDENTûTHATûTHEûNEWû lNANCIALûSYSTEM û!NTSûFOUNDERûLIKENEDû#HINASûBIGGESTûBANKSûTOû conditions will allow them to hide any misbehaviour. unsophisticated pawnshops – a description that would not have The real test of the new model of compliance is whether they gone down well with the authorities. It seems clear that China’s do. And we won’t know that – if we ever do – for some time yet. most senior leaders think Ma has simply got too big for his boots and needed bringing down to size. This dressing down, however, comes at a steep cost. In Having a moment halting Ant’s listing, China has missed the opportunity to showcase the depth and competitiveness of its capital TRUCTUREDûEQUITYûISSUANCEûINûTHEû%-%!ûREGIONûINûûISû markets through a world-beating IPO. It makes the regulators SONûTRACKûTOûBEATûTHATûOFûûANDûûPUTûTOGETHERû/Fû look capricious and the country’s market-driven reforms course, volatility is a positive for the asset class so a pandemic disingenuous, and could make other promising Chinese that roils markets is a helpful, if unwelcome, event. issuers rethink the appeal of the Shanghai Star market. 4HEûMARKETûHASûALSOûMATUREDûINûûASûISSUANCEûHASûBEENû Chinese companies looking for certainty of funding may driven by both the desperate and the opportunistic. Deal now be more inclined to turn to the US, especially with the structures have been vanilla – a little boring even, considering prospects of a new US administration that is less erratic and the innovation of years past in the region. Pricing has been less hostile to Chinese companies. sensible with high premiums and low coupons for issuers and 4HEûREALûSIGNIlCANCEûOFûTHEûREGULATORYûINTERVENTIONûLIESûINû trading performance has been positive. THEûCONlRMATIONûTHATûTHEû#HINESEûAUTHORITIESûHAVEûNOTûGIVENû 4HEûMOSTûSIGNIlCANTûSIGNûOFûPROGRESSIONûISûISSUANCEûFROMû up their control over the capital markets or the IPO process. growth names, offering something like the excitement seen $ESPITEûAûSERIESûOFûMARKET BASEDûREFORMSûINûTHEûPASTûû in the US, albeit on a much smaller scale. months, anyone expecting China’s capital markets to follow Equity-linked is often a forgotten part of ECM, understood by international standards had set themselves up for surprisingly few bankers, but it is proving its worth this year. International Financing Review November 7 2020 1 2 IFR Upfront 2358 p1.indd 1 06/11/2020 20:42:46 Top news China-to-US IPO outlook 04 Markets shrug off election woes 06 Investors support Waste 06 China stamps down on Ant IPO Equities “Shocked and confused” bankers do not expect quick relaunch of deal BY FIONA LAU had many chances during the holds a 33% stake in Ant, fell Huabei and Jiebei in a IPO process to stop the listing 8.1% in New York on Tuesday commentary in the 21st Century China’s last-minute cancellation without waiting until two days and underperformed its peers in Business Herald arguing that of the world’s biggest IPO has before the debut. the second half of the week as FinTech lenders should face handed bankers and investors a “We are shocked and investors took the move as an similar levels of scrutiny as painful reminder that the confused,” said one of the attack on Ma, founder of both traditional banks. country’s capital markets bankers working on the deal. Alibaba and Ant. Guo also said Huabei had remain exposed to enormous “The CSRC has approved Ant’s Many observers interpreted similarities to banks’ credit card political and regulatory risks. Star IPO and Hong Kong listing. the halt as being a result of Ma’s businesses but charged ANT GROUP was forced to pull They could have rejected Ant’s recent criticism of China’s consumers a much higher the plug on its US$34.4bn Hong listing if they felt the online lNANCIALûANDûREGULATORYûSYSTEMû management fee. Kong and Shanghai listing on micro-lending business needs At a conference attended by “Regulators should investigate Tuesday, less than 48 hours tighter scrutiny.” regulators on October 24, two whether the leading FinTech before its shares were due to The timing of the regulatory days before the Hong Kong leg of players have infringed begin trading, after China intervention has raised the IPO started bookbuilding, Ma consumers’ rights to choose and unveiled a surprise clampdown questions over China’s said that local and global enjoy fair terms as a result of on online lending. commitment to market-driven REGULATORSûWEREûSTImINGû their monopoly status,” he said. Regulators staged a dramatic reforms in its domestic capital innovation and should introduce intervention on Monday, markets, where the launch of reforms to allow the use of big DRESSING DOWN summoning founder Jack Ma and the tech-focused Star board had data in lending decisions instead 4HEûlRSTûSIGNûOFûTROUBLEûCAMEûONû Ant’s top executives for talks and introduced a disclosure-based of collateral. He also said Monday, when the China unveiling proposals that would IPO regime that is closer to the Chinese lenders still operated on Securities Regulatory limit Ant’s ability to connect US model. a “pawnshop model” and Commission said on its website borrowers and lenders on its fast- The deal’s cancellation also compared the Basel Accords to a that Ant’s top brass had been growing platform. The move came as a bitter blow to 1.5 club for the elderly. summoned to a meeting with a prompted the Shanghai Stock million retail investors in Hong Ma’s comments drew heavy group of senior regulators. Exchange to suspend the A-share Kong, many of whom had criticism in Chinese state media. The CSRC, People’s Bank of leg of the deal on Tuesday night, borrowed heavily to invest in the On Monday, Guo Wuping, head China, CBIRC and State with Ant calling off the Hong IPO, and to the underwriters of consumer protection at the Administration of Foreign +ONGûmOATûMINUTESûLATERû who had been expected to share China Banking and Insurance Exchange held regulatory talks The abrupt halt of Ant’s listing a payday approaching US$400m.
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