"It's a joke': retail investors shocked as China halts Ant Group's IPO (updated)

Bright Smart Securities & Commodities

04/11/2020 09:35

(Changes slug from ANT GROUP-IPO/SUSPENSION-RETAIL)
    By Yoyo Chow and Clare Jim
    HONG KONG, Nov 4 (Reuters) - Mom-and-pop investors who put
in bids worth a record $3 trillion in China's Ant group -
equivalent to Britain's annual economic output - were stunned
after regulators abruptly suspended what would have been the
world's largest stock market debut.
    China blocked the fintech giant's $37 billion listing on
Tuesday, thwarting its debut in Hong Kong and Shanghai scheduled
for Thursday and dealing a severe blow to the company founded by
billionaire and Alibaba  BABA.N  co-founder Jack Ma.
    The suspension followed a Monday meeting between China's
financial regulators and Ant executives, including Ma, who were
told the company's lucrative online lending business would face
tighter scrutiny, sources told Reuters.  urn:newsml:reuters.com:*:nL1N2HP155
    Retail investors in the two markets - from taxi drivers to
students and young professionals - used their savings and
borrowed heavily from banks and brokerages for what many saw as
a once-in-a-lifetime investment opportunity.
    "I feel like I made a very wrong decision," said 21-year-old
Hong Kong resident and Cambridge student, Vincent Tse, who
applied for 2,000 shares worth around HK$160,000 ($20,640) which
he earned doing a part-time job. 
    "This situation really reveals a deep problem in the Chinese
market and shows a lack of experience in holding such a large
IPO," Tse said, adding that he would no longer invest in Ant and
reinvest in U.S., European or Japanese stock markets.
    In China, investors cited the changing business environment
as a key factor weighing on Ant's future development with some
saying they would still be keen to invest.
    "I'd probably invest again just because of the sheer size of
the market share Ant Financial has," said a 21-year-old student
investor in Beijing who goes by the name Clementine.
    The unprecedented retail frenzy for Ant's shares was backed
by a massive amount of margin lending by financial institutions
in mainland China and in Hong Kong, with brokerages in Hong Kong
lending billions of dollars.
    Some banks in Hong Kong offered as much as 30 times leverage
at interest rates of between 0.4% and 0.5% for a period of
around 10 days, banking industry sources have said.
    Ant said in a statement to the Hong Kong stock exchange on
Wednesday that it would refund the application money for the
Hong Kong leg of the offering without interest over the next
couple of days.
    Several Hong Kong brokers said they would waive handling
fees and interest rates on margin loans for investors who had
subscribed for Ant shares. When contacted by Reuters, major
lenders HSBC  HSBA.L  and BOC Hong Kong Holdings Ltd  2388.HK 
did not comment.
    The brokerages included online challenger, Tencent-backed
Futu  FUTU.O  and Bright Smart Securities  1428.HK , an
established broker which lent HK$47 billion on margin. 
    Bright Smart said in a statement on Wednesday that listed
companies should be required to compensate investors in such
situations.
    Billy Ng, a property manager in his 40s, who subscribed for
20,000 shares on margin financing, said the suspension was
political in nature. 
    As his bank offered low interest of 0.48%, Ng only had to
pay HK$1,400 in interest versus around HK$6,000 normally. 
    Ant apologised to investors for any inconvenience, adding it
would give further details on the suspension of its listing and
applications for refunds as soon as possible.
    "It's a joke on the Chinese stock exchange," said a
37-year-old secretary who wanted to be known only as Olivia, in
reference to the Shanghai bourse disqualifying Ant from listing.
    "If Ant lists again, I'm not sure I'll subscribe again
because if its business model changes then it might be less
attractive than before," she said, adding that she had been
allotted 50 of the 350 shares she applied for.
    ($1 = 7.7516 Hong Kong dollars)

 (Additional reporting by Beijing and Shanghai newsrooms, Alun
John, Donny Kwok and Scott Murdoch in Hong Kong; Writing by
Farah Master; Editing by Jacqueline Wong)
 ((farah.master@thomsonreuters.com; +852 3462 7709;))