China’s Star Market introduces new listing rules that could freeze out Ant Group for good
- The fintech firm has been ordered to restructure its operations, a change that could see it barred from the Shanghai-based exchange
- Property developers and financial investors will not be allowed to list on the Star Market under the new regulations
Ant, a fintech affiliate of Alibaba Group Holding, has faced increasing pressure from the authorities since its initial public offering was cancelled last year and was recently told by Beijing to restructure into a financial holding group,
Under new rules announced on Friday by the Chinese Securities Regulatory Commission, applicants will be divided into three groups, one of which – property developers and financial investors – will be banned from listing on the Shanghai-based exchange.
Applications from “fintech” or “business model innovation” firms will be subject to extra scrutiny although listing is still possible.
03:04
What is Jack Ma’s Ant Group and how does it make money?
Meanwhile, technology firms, including those make information systems and advanced manufacturing equipment, will be fast tracked.
Last year a mega-IPO by Ant Group in both Shanghai and Hong Kong was suspended by Beijing at the last minute following a speech criticising Chinese financial regulation by Jack Ma Yun, the founder of Ant and Alibaba, which also owns the South China Morning Post.
China’s Ant Group to form a financial holding company after regulatory clampdown
The Chinese financial regulators have since introduced new rules to tighten control over online credit activities and demanded Ant restructure its business to comply with the new regulations.
JD.com has also pulled back a plan to list its fintech arm, JD Technology, on the Star Market after it became clear the application would be refused. JD.com is now in the process of restructuring its fintech unit, which was recently renamed as JD Technology from JD Digits and an earlier name of JD Finance.
The People’s Bank of China, the central bank, last week unveiled a plan to turn Ant Group into a financial holding company, which will be subject to conventional financial regulations.
Under the restructuring, Ant was told to sever links between Alipay, the company’s payment service, from its small loan and credit card businesses. Ant will also be required to reduce its financial businesses’ leverage and to shrink its money market fund businesses.
China’s decision to reserve the Star Market as a financing vehicle for the country’s technology firms and enhance its vetting process has promoted dozens of applicants besides JD.com to pull their listing applications.
Star, also known as the Technology and Innovation Board of the Shanghai Stock Exchange, was the brainchild of President Xi Jinping and was designed to provide science and technology companies greater access to capital markets and encourage innovation in China’s hi-tech industry.
The regulator said it had changed the rules because there “have been problems in a small number of companies that lack core technologies, have insufficient technological innovation capabilities and low market recognition”.
It continued: “It is necessary to combine technological innovation with reforms to the registration system.”
Ant outlines steps to make digital finance safer amid regulatory scrutiny
Under the current organisational structures, fintech firms are still allowed to apply for listings on the Shenzhen tech board, which has lower technological requirements than the Star Market, said Stanley Chan, director of research at Emperor Securities.
He said the Star Market may be aiming to attract large Chinese companies that produce cutting edge technologies such as semiconductors, biotech or artificial intelligence.
“The biggest worry [of policymakers] is to prevent systemic financial risks from getting out of hand at fintech firms,” Chan said. “But this issue has been resolved now that the firms come under the supervision of financial regulators so there is no reason to block off their financing and businesses entirely.”
