China investors rethink market risk after Ant’s scuppered IPO

China investors rethink market risk after Ant’s scuppered IPO

Lure of big returns remains despite unwelcome reminder of Beijing’s power

HONG KONG — Global investors are taking two distinct messages from the sudden termination of Ant Group’s initial public offering — billed as the world’s largest — by Chinese regulators.

First, controlling financial risk in the world’s No. 2 economy is clearly a top priority for Beijing. Second, a transparent regulatory environment of the sort needed to make Shanghai into a premier financial center remains a work in progress.

As the shock wears off, Ant’s would-be investors are trying to understand the secondary impacts from the abrupt halt of the share offering, which had been set to raise as much as $39.6 billion. The IPO was suspended two days before it was scheduled to take place on Nov. 5.

“By suspending Ant’s IPO at the last minute and publicly reprimanding its founder Jack Ma, China’s financial regulators have demonstrated there is still a force more powerful than the coming wave of financial innovation: the state,” said Andrew Batson, China research director at Gavekal Research.

Four global fund managers, who bid for Ant shares and declined to be named, told Nikkei Asia that they might have underestimated the power Beijing can wield. However, none yet plans to reduce allocations to China. They also said recent regulatory changes would boost China’s financial stability.