TheChek News Flow

China’s regulators scuppered record stock market debut after summoning founder Jack Ma

Beijing said its suspension of the $37bn listing of Ant Group, controlled by China’s richest man Jack Ma, was needed to protect the country’s capital markets as investors reeled from the eleventh-hour decision.

The move to halt the world’s largest initial public offering of the online lender for an indefinite period would most likely have been signed off by Chinese president Xi Jinping, people familiar with the Communist party’s decision-making process said.

Wang Wenbin, China's foreign ministry spokesman, said on Wednesday the suspension of the IPO aimed to “better maintain the stability of the capital markets and to protect investors’ interests”. 

The Shanghai stock exchange cited “major issues” including changes to the “financial regulatory environment” for its decision on Tuesday evening to halt the offering, which was due to start trading in the city and in Hong Kong on Thursday.

The reversal marks the biggest setback for China’s private-sector entrepreneurs since Mr Xi took power in 2012. The Hong Kong-listed shares of Alibaba, which owns about one-third of Ant and relies on its technology to power its payments platforms, fell 8 per cent on Wednesday.

Mr Ma was unique among his peers in daring to challenge the country’s powerful state-dominated banking sector.

People familiar with the matter said Mr Ma had lobbied regulators against proposals for stronger supervision of online lenders. Ant did not immediately respond to a request for comment on the matter.

In a speech in Shanghai on October 24, he suggested the country’s big lenders had a “pawnshop mentality” and that Ant was playing an important role in extending credit to innovative but collateral-poor companies and individuals.

But after the speech, Mr Ma was summoned by Chinese regulators for “supervisory interviews”. The authorities also announced a slew of new rules for online lenders that could damp Ant’s future profits, casting doubt on valuation of the IPO.

The Shanghai exchange cited “other major issues” including changes to the “financial regulatory environment” for its decision to halt Ant’s listing.

State bank executives have long argued that online finance groups such as Ant enjoy unfair regulatory advantages and pose a risk to the financial system. Fintechs were not subject to the same prudential requirements on issues such as collateral as banks, they said.

“While Ant currently reports a low level of defaults [thanks to] its technology, the figure could take off in the event of a sharp economic slowdown,” said an executive at one of China’s “Big Four” state-owned banks. “That creates social risks the government is keen to avoid.”

The banker added that Mr Ma’s comments at the forum suggested “he wanted to openly challenge the regulator which was unacceptable — that prompted the regulator to go ahead and announce the new rules”.

Mr Xi has strived to boost the primacy of China’s largest state-owned enterprises. While his administration has previously targeted entrepreneurs whose groups were dangerously leveraged, none were as famous or as successful as Mr Ma.

“The logic for Beijing is: ‘If I don't understand and can’t control you — I won't let you grow’,” added the state-run bank executive.

The draft rules issued by China’s central bank this week would require Ant to fund at least 30 per cent of its outstanding microfinance loans totalling Rmb1.8tn from its own balance sheet, compared with 2 per cent currently.

“The trouble is the regulatory environment in which they’ve built their business — on which they’ve presented a series of financials to investors — is going to change, and change against them,” said Fraser Howie, an independent consultant and expert on China’s financial system.

Analysts said it was difficult to determine how long Ant’s IPO would be suspended.

They “will almost certainly return to the market at some point, though the timetable is unclear”, said Andrew Batson, China research director at Gavekal, a research firm. “But the company may well have to make substantial changes to its internal organisation and business model to comply with new regulatory requirements.”

The suspension of the IPO also throws into doubt what would have been a bumper payday for Wall Street investment banks and others working on the deal, which were expected to reap at least $300m in fees.

“The deal would have to complete in order to get paid,” said one Hong Kong-based investment banker who worked on the Ant deal. “It is making everyone very nervous,” added an IPO lawyer in the city.

Ant has vowed to return cash committed to its IPO by retail investors in Shanghai and Hong Kong — many of whom bought with high levels of leverage. But some suggested it had shaken their faith in investing in China’s markets.

“It's a big blow to investors’ confidence,” said Gu Qiankun, a 31-year-old investor in Wuhan who had bought 500 Ant shares.

But Rebecca Chua, founder of Hong Kong investment company Premia Partners, said it was “better for the regulators to put constraints” on Ant now rather than expose traders to heavier losses later. “You don't want retail investors to lose half their fortunes. Jack Ma can afford to — but they can't.”

Decision follows alleged attack by regional government’s armed forces on federal army base

Ethiopia’s prime minister Abiy Ahmed said he had sent federal troops to quell a rebellion in the northern region of Tigray, an escalation of tensions that brings Africa’s second-most populous country to the brink of civil war.

Saying that a “red line” had been crossed, Mr Abiy took to social media early on Wednesday morning to accuse the Tigrayan regional government’s armed forces of attacking a federal army base and of “arming and organising irregular militias”.

Mr Abiy, whose government has been struggling to control ethnic-nationalist violence around the country, said his patience had run out with Tigray, which had pressed ahead with elections in September in defiance of a national postponement attributed to the Covid-19 pandemic.

The prime minister’s office said in a statement that the Tigrayan People’s Liberation Front, or TPLF, had attacked a federal army base in Tigray and “attempted to rob the northern command of artillery and military equipment”. The TPLF, the political party that controls the region of Tigray and lost much of its power nationally after Mr Abiy became prime minister in 2018, viewed the Ethiopian army as an occupying force, the statement said, adding: “The TPLF has chosen to wage war.” 

The confrontation with Tigray is the most serious of several ethno-nationalist conflicts that have flared up since 2018 when Mr Abiy became prime minister of Ethiopia, a country of 110m people divided into 10 ethnically based autonomous regions.

Mr Abiy’s appointment had been meant to resolve tensions between the then TPLF-dominated government and those from the Oromo and Amhara regions who felt excluded from power. Instead, it has triggered a wave of ethno-nationalist sentiment as groups long-suppressed by the previous authoritarian government assert their rights and the TPLF fights back after being dumped from power.

The regional tensions, which some have compared to former Yugoslavia, threaten to derail one of Africa’s most promising economic experiments. Under a state-led development model, the economy grew at close to 10 per cent for much of the past two decades. Mr Abiy had promised sweeping liberal reforms, including privatisation of the huge telecoms monopoly, to take the economy towards middle-income status, but political tensions have slowed his plans.

With phone lines and the internet cut in Tigray, according to NetBlocks, which tracks internet blockages around the world, TPLF officials could not be reached for comment. But Debretsion Gebremichael, Tigray’s regional president, was quoted on Tuesday as saying: “We have prepared our military of special force not in need of a war, but if the worst comes, to defend ourselves.” On Wednesday, the Federal Council of Ministers in Addis Ababa declared a six-month state of emergency in Tigray.

Tigray’s well-organised armed forces have their roots in the rebel army that overthrew a Marxist regime in 1991 and brought the Tigrayans to the centre of power for 27 years until Mr Abiy took over as prime minister two years ago.

One western diplomat in Addis Ababa called the deployment of federal troops a “civil war”. It could, the person said, halt the political and liberal economic reforms that Mr Abiy — who last year won the Nobel Peace Prize for his role in ending a 20-year conflict with neighbouring Eritrea — had been championing.

Another commentator, speaking on condition of anonymity, said it looked as though Mr Abiy had been planning the clampdown for weeks and timed it to coincide with the US elections when the world was distracted.

Mr Abiy’s push for a national pan-Ethiopian identity, opponents say, threatens the autonomy of the ethnic-based states in the country’s federal system and has sparked deadly violence in parts of the country. Hate speech on social media has flourished.

To the Tigrayan leadership — as well as many from other ethnic groups, including Mr Abiy’s own Oromo — the prime minister’s emphasis on national unity undermines a federal system that guarantees significant autonomy for ethnically defined territories, such as Tigray, Oromia and Amhara.

The regional government of Oromia accused the TPLF of supporting a militia group, the Oromo Liberation Front-Shane, which it alleged played a role in a massacre on Sunday that killed at least 54 people. On Tuesday, members of Ethiopia’s House of People’s Representatives said the TPLF should be labelled a terrorist group.

After Mr Abiy came to power, the TPLF refused to merge into his new unitary Prosperity party, which replaced the Ethiopian People’s Revolutionary Democratic Front, a four-party coalition that had run the country for three decades.

In October, the Ethiopian parliament voted to slash budget transfers to the Tigray regional administration, infuriating regional leaders who called it a “declaration of war”.

“The stand-off could trigger a damaging conflict that may even rip the Ethiopian state asunder,” Crisis Group warned in a note this weekend.

Taylor Hatmaker@tayhatmaker / 5:25 AM GMT+1•November 4, 2020

Marjorie Taylor Greene’s win in a Georgia House race means that QAnon is headed to Capitol Hill.

Greene openly supports the complex, outlandish conspiracy theory, which posits that President Trump is waging a secret war against a shadowy group of elites who engage in child sex trafficking, among other far-fetched claims. The FBI identified QAnon as a potential inspiration for “conspiracy theory-driven domestic extremists” last year.

Greene’s win is a startling moment of legitimacy for the dangerous conspiracy, though it wasn’t unexpected: her Democratic opponent dropped out of the race for personal reasons in September, clearing her path to the House seat.

Greene’s support for the constellation of conspiracy theories isn’t particularly quiet — nor are her other beliefs. Called a “future Republican star” by President Trump, Greene has been vocal in expressing racist and Islamophobic views. Greene has also espoused September 11 “truther” theories and criticized the use of masks, a scientifically-supported measure that reduces transmission of the novel coronavirus.

QAnon, once a belief only at the far-right fringes of the internet, has inspired followers to engage in real-world criminal acts, including fatally shooting a mob boss in Staten Island and blocking the Hoover Dam bridge in an armed standoff.

The conspiracy’s adherents have also hijacked the hashtag #savethechildren, interfering with legitimate child safety efforts and exporting their extreme ideas into mainstream conversation under the guise of helping children. Facebook, which previously banned QAnon, limited the hashtag’s reach last month in light of the phenomenon.

Other QAnon believers are on the ballot in 2020, including in Oregon, where Jo Rae Perkins is projected to lose her race against incumbent Senate Democrat Jeff Merkley. Perkins was very open about her beliefs and in June tweeted a video pledging her allegiance as a “digital soldier” for QAnon along with a popular hashtag associated with the conspiracy movement.

Bank’s third-quarter profits slide despite stronger showing from its investment bank

Crédit Agricole warned that there was no visibility at the “end of the tunnel”, as a resurgence of the coronavirus pandemic in France prompted the bank to increase its provisions for the risk of bad loans.

The caution from Crédit Agricole came as its third-quarter profits fell 19 per cent from a year earlier to €977m. The bank’s revenues climbed 2 per cent to €5.2bn. 

Although the outlook for the French economy is deteriorating, Crédit Agricole’s third-quarter results beat forecasts. Analysts had expected net income of €790m, while the bank’s revenues were 4 per cent above expectations, according to Jefferies.

However, Crédit Agricole said the coronavirus crisis was “not resolved and with the second lockdown period we have no clear visibility at the end of the tunnel”.

Just over 70 per cent of the increased provisioning for the risk of loans souring “primarily related to prudent provisioning in sensitive sectors such as aviation, hotels, tourism, restaurants and certain professionals,” the bank said.

Despite being a much smaller player in global financial markets, Crédit Agricole still benefited from the boost in trading revenues enjoyed by rivals. Its investment banking revenue was up 10 per cent in the quarter, the bank said.

Chief executive Philippe Brassac said that he hoped for a return to “normality” and that banks would be able to start paying dividends again from next year, after regulators told them to halt payments to build up capital as insurance against the pandemic’s effects.

SUZHOU, China (Reuters) - BioNTech’s Chinese partner Shanghai Fosun Pharmaceutical Group does not plan to run further clinical trials of the German firm’s coronavirus vaccine candidate that has completed early-stage trials in China, an executive said.

Fosun will focus instead on seeking Chinese approval for BioNTech’s other experimental vaccine which is in final-stage human trials in the United States, Fosun’s Chief Medical Officer Hui Aimin told Reuters in an interview.

The vaccine candidate developed by BioNTech and U.S. drugmaker Pfizer Inc is under real-time regulatory review in Europe and could seek emergency use authorisation in the United States shortly after enough safety data is provided as early as this month.

But the candidate known as BNT162b2 missed an earlier window to be tested in China, as Fosun had rushed into Phase 1 trials of a slightly less satisfactory candidate, BNT162b1, before early trials data overseas showed BNT162b2 is safer.

Hui said he did not regret testing BNT162b1 without waiting for more complete data. “For ordinary vaccines, it does not matter if you wait for a few days, or a month,” Hui said. “But for (COVID-19 vaccines), how many more people would have died had you waited just for one day?” Hui said Fosun was applying for a bridge study for BNT162b2, designed to evaluate whether the large trial data gathered overseas could be extrapolated to the populace of China.

A bridge clinical trial is required for pharmaceutical products which are approved abroad but do not have data to show that ethnic differences can affect their efficacy and safety, China’s National Medical Products Administration said.

Hui expected the late-stage candidate could be greenlighted for use in China “around the same time” as the vaccine’s global clearance.