FT : China halts $37bn Ant Group IPO, citing ‘major issues’

China halts $37bn Ant Group IPO, citing ‘major issues’
Shanghai and Hong Kong stock exchanges postpone listing two days before trading was due to start

Ant Group’s $37bn public offering in Shanghai and Hong Kong has been suspended by Chinese regulators, one day after officials summoned Jack Ma and other Ant executives for an interview.

China’s largest financial technology company was set to list on Thursday in both cities in a record-breaking IPO.

The Shanghai stock exchange said in a statement that Mr Ma, Ant’s founder, had been called in for “supervisory interviews” and there had been “other major issues”, including changes in “the financial technology regulatory environment”.

“This material event may cause your company to fail to meet the issuance and listing conditions or information disclosure requirements,” the exchange said. “Our exchange has decided to postpone the listing of your company.” It told Ant and its underwriters to make an announcement about the suspension.

Ant said in a statement to the Hong Kong stock exchange that its offshore share offer had also been suspended because the company “may not meet listing qualifications or disclosure requirements due to material matters relating to the regulatory interview of our ultimate controller, our executive chairman and our chief executive officer by the relevant regulators and the recent changes in the fintech regulatory environment”.

“Further details relating to the suspension of the [Hong Kong] listing and the refund of the application monies will be made as soon as possible,” it added.

One broker in Hong Kong said there would be “quite profound” damage from the suspension for retail investors. “I've never seen an IPO suspended at this stage,” said a director at one Shanghai-based brokerage, who suggested it was a “very last minute thing”.

“It's in no one's interest to cancel the [completed share] allocations at this stage,” the director added, “but I don't think there's any precedent for this type of situation.”

Shares in Chinese ecommerce group Alibaba, which owns a 33 per cent stake in Ant, were down as much as 9 per cent in early trading in New York. A spokesperson for Alibaba said it would be “proactive in supporting Ant Group to adapt to and embrace the evolving regulatory framework”.

At the end of October, Mr Ma criticised China’s state-owned banks at a financial summit in Shanghai. Mr Ma suggested the big banks had a “pawnshop mentality” and that Ant was playing an important role in extending credit to innovative but collateral-poor companies and individuals.

On Monday, Mr Ma, together with Eric Jing and Simon Hu, Ant’s chief executive and chairman, were called in by the People’s Bank of China, as well as China’s banking, securities and foreign exchange regulators. Subsequently, Ant said it would “implement the meeting opinions in depth”.

Guo Wuping, an official at the banking regulator, advocated greater regulation of Ant and other financial technology companies in a commentary on Monday, noting their consumer lending products charged higher fees than credit cards issued by banks.

Mr Guo said fintech companies often lured young people into overspending so that “some people in low income groups and young people fall deep into debt traps”.

Meanwhile, the PBoC and China’s banking regulator jointly released new draft regulations on online lending on Monday, which will oblige Ant to cap loans at either Rmb300,000 ($44,843) or one-third of a borrower’s annual pay — whichever is lower. The rules could also make issuing loans across China’s provinces harder and analysts say they may dent Ant’s bottom line.

Ant apologised to investors and said it would “keep in close communications with the Shanghai Stock Exchange and relevant regulators, and wait for their further notice with respect to further developments of our offering and listing process”.

FT : Hedge funds bet against lasting US election-induced market turmoil

Hedge funds bet against lasting US election-induced market turmoil
Firms wager that Wall Street expectations for increased volatility in months ahead are overdone

Some hedge funds are betting that fears over a delayed and disputed US presidential election result are overblown, and that stock market volatility will simmer down in the coming months.

The Vix volatility index, which measures near-term expected swings in S&P 500 equities — as implied by options prices — climbed for much of October over coronavirus nerves and the approaching US presidential contest. It stood at 35 on Tuesday, compared with a long-run average of about 20.

Many investors expect that volatility to last: President Donald Trump’s equivocation on whether he would accept a loss has also caused Vix contracts maturing in November, December and even into 2021 to trade above where they normally would, according to traders. But some hedge funds think those concerns of lasting volatility are unfounded.

Jason Goldberg, a senior portfolio manager at volatility-focused hedge fund Capstone, said he was betting that US stock market derivatives expiring in 2021 were pricing in too high a probability that turbulence would last.

“That’s not to say there are other issues the market won’t have to contend with, namely Covid and the size of fiscal [stimulus],” he said. “But . . . I still don’t think that justifies a Vix of 28, six to seven months from now.”


Nerves remain elevated in what has been a turbulent year for markets. The Vix, sometimes called Wall Street’s “fear gauge”, has consistently stayed above its long-term average in recent months, even though US stocks remain within 7 per cent of all-time highs.

But for four straight weeks, “non-commercial” traders, a group that includes hedge funds, have boosted their wagers that futures tracking the Vix index will decline, according to data from the Commodity Futures Trading Commission.

This bet on lower volatility has only slowly gathered steam. But strategists said that along with similar bets in the options markets, where traders can bet on the price of assets such as stocks and currencies, hedge funds and other investors saw a world with a lower Vix.


Greg Boutle, BNP Paribas’ head of US equity and derivative strategy, said data suggested some investors were placing “volatility compression” trades, albeit carefully.

Tindaro Siragusano, chief executive of 7orca Asset Management, which runs about €400m in its volatility strategies, is among those betting on stability by selling insurance against turbulence in stocks and other financial markets.

“We’re earning good money right now,” he said. A big sell-off in stocks following the result “is not our base case”, he added.

Buying put options on the Vix, which profit if the index declines, has been a more appealing wager for some. The number of outstanding puts on the index has climbed to its highest level since June, outpacing the number of open call options — which would profit if the Vix rose — according to Bloomberg data.

Betting on lower volatility is “timely”, according to strategists with Goldman Sachs. They estimated the Vix pointed to 1.9 per cent average daily moves for the S&P 500 in the coming month, almost double the level observed in October.

FT : Shanghai halts $37bn Ant Group IPO

Shanghai halts $37bn Ant Group IPO
Shanghai Stock Exchange postpones listing two days before trading was due to start

The Shanghai Stock Exchange said on Tuesday that it was postponing Ant Group’s $37bn public offering, one day after four Chinese regulators summoned Jack Ma and other Ant executives for an interview.

China’s largest financial technology company was set to list on Thursday in both Shanghai and Hong Kong in a record-breaking IPO.

The stock exchange’s announcement noted Mr Ma, Ant’s founder, had been called in for “supervisory interviews” with Chinese regulators and said there had been “other major issues”, including changes in “the financial technology regulatory environment”.

“This material event may cause your company to fail to meet the issuance and listing conditions or information disclosure requirements,” the exchange said. “Our exchange has decided to postpone the listing of your company.” It told Ant and its underwriters to make an announcement about the suspension.

Shares in Chinese ecommerce group Alibaba, which owns a 33 per cent stake in Ant, were down more than 5 per cent in pre-market trading in New York.

On Monday, Mr Ma, together with Eric Jing and Simon Hu, Ant’s chief executive and chairman, were called in by the People’s Bank of China, as well as China’s banking, securities and foreign exchange regulators. Subsequently, Ant said it would “implement the meeting opinions in depth”.

The meeting came after Mr Ma criticised China’s state-owned banks at a financial summit in Shanghai at the end of October. Mr Ma suggested the big banks had a “pawnshop mentality” and that Ant was playing an important role in extending credit to innovative but collateral-poor companies and individuals.

At the same summit, however, Wang Qishan, China’s vice-president, emphasised the importance of financial stability. “There should be a fine balance between encouraging financial innovation, invigorating the market, opening up the financial sector and building regulatory capacity,” he said. “Safety always comes first.”

Before announcing the timing of the IPO, Ant executives met with PBoC officials to seek their blessing, according to two senior group executives. Despite receiving assurances, there have long been voices sceptical of Ant within the PBoC and China’s banking and insurance regulator, which views itself as the champion of the country’s biggest lenders.

In its prospectus, Ant said it faced regulatory risks in China and that it would have to establish a central bank-approved holding company in accordance with State Council regulations issued in September. Draft regulations suggest Ant will have to cap loans at either Rmb300,000 ($44,843) or one-third of a borrower’s annual pay — whichever is lower.

Oliver Rui, a finance professor at China Europe International Business School, noted that Ant could previously leverage Rmb3bn in capital into Rmb300bn in loans. But under the new guidelines, Ant will need to keep at least 30 per cent of its capital on its balance sheet. “Their future profit will not be as good as it is now,” said Prof Rui.

Reuters - RBI exploring investment options for reserves, sources say

NEW DELHI/MUMBAI (Reuters) - The Reserve Bank of India is looking at diversifying its foreign exchange reserve investments amid the fall in global interest rates caused by the COVID-19 pandemic, according to two government sources aware of the development.

The RBI’s foreign exchange reserves stand at a record $560.63 billion. The central bank, which mostly invests in gold, sovereign debt and other risk-free deposits, has seen returns fall as monetary policy loosened globally. U.S. two-year government bonds ended at 0.16% on Nov. 2.

As a result, the RBI is likely to increase its gold investments, as well buying dollars and exploring investing in AAA-rated corporate bonds for the first time, said the sources, who declined to be named due to the sensitivity of the issue.

“The RBI is likely to continue to buy dollars. The problem is the dollar deployment and getting good returns,” one of the officials said.

The official added that the RBI was studying the possibility of investing in AAA-rated corporate dollar bonds, which offer better returns than sovereign credit. Such investments have not been made in the past, so the central bank would move carefully.

Foreign investors have continued to pour money into the Indian stock market because of its stronger returns. Foreign direct investment flows, particularly towards Reliance Industries, have pulled in dollars into the country.

Traders say the RBI has been intervening heavily in the spot market to prevent appreciation of the rupee, in turn adding to its reserves.

“The government is comfortable with current rupee levels. It needs to be competitive to help provide an export boost,” the official said.

A second source said dollar buying intervention will continue as both the RBI and the government are comfortable with a 73-75 per dollar range on the local currency.

Despite a contraction in gross domestic product expected in the current fiscal year to March 2021, foreign flows have remained healthy.

Foreign investors bought shares worth $2.52 billion in October, taking total investment in 2020 to $6.47 billion. Though FIIs are net sellers of bonds worth $13.98 billion in 2020 so far, they bought a net $459.30 million in October.

The rupee has fallen for three straight months to October. It is one of the worst-performing Asian currencies in 2020.

“Our 10-year yield is still at around 6% compared to near zero and negative interest rates globally, so we will see inflows continuing and RBI will keep buying dollars to prevent rupee appreciation,” the second source said.

The RBI has already started increasing its investment in gold gradually, the sources said.

Gold reserves stand at $36.86 billion as on Oct. 23 compared with $30.89 billion at the end of the last fiscal year in March, though a large part of this increase can also be attributed to valuation changes.

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • INSP +13.3%, W +13%, MED +12.7%, ANET +12.7%, HALO +9.2%, CPE +8.5%, WBT +8.1%, AMC +7.9%, CRUS +7.8% (also names new CEO), PAA +7.7% (also announces $500 mln common equity repurchase program), JAZZ +7.3%, KFRC +7.2%, JCOM +6.6%, GWPH +6.3%, CDLX +6%, VNOM +5.3%, BHC +5.3%, WLKP +5.1%, IT +4.8%, AGCO +4.8%, MATX +4.2%, RACE +4%, FANG +3.8%, LPX +3.8%, OPCH +3.6%, JELD +3.4%, MIME +3.2%, MCK +3.2%, ZBRA +3.1%, SIMO +3%, EXC +3%, HSC +2.9%, CDK +1.9%, OMI +1.7%, ETN +1.7%, ONTO +1.6%, TREX +1.6%, EMR +1.6%, WMB +1.5%, HUM +1.5%, ATH +1.4%, CTLT +1.2%, FI +1.1%, WPX +1%, LGIH +0.9%

Other news:

  • IEA +14% (announces JV with FH Paschen for the West Lake Corridor rail expansion, valued at over $550 mln)
  • PVAC +7.2% (announced a strategic transaction to improve its balance sheet and liquidity position; transaction is expected to close in the first quarter of 2021)
  • KPTI +6.9% (announces Phase 3 SEAL study of XPOVIO met primary endpoint; also announces earnings)
  • AQST +6.5% (signs royalty monetization agreement with Marathon Asset Management for up to $125 million)
  • PAGP +6.1% (PAGP and PAA announce $500 mln common equity repurchase program)
  • HGEN +5.9% (announced the execution of its first licensing transaction in the Asia-Pacific Region with Telcon RF Pharmaceutical and KPM Tech for development and commercialization rights to lenzilumab for COVID-19 for South Korea and the Philippines)
  • OSUR +5.4% (OraSure's DNA Genotek subsidiary receives FDA Emergency Use Authorization for its ORAcollect·RNA saliva collection device for SARS CoV-2)
  • GLPG +4.3% (GILD and GLPG announce EMA validation of marketing application for filgotinib for ulcerative colitis)
  • BMY +3.5% (announces deucravacitinib (BMS-986165) demonstrated superiority to placebo and Otezla (apremilast) in Pivotal Phase 3 psoriasis study)
  • BIIB +1.9% (positive data from the 24-week SLE portion of the Phase 2 LILAC study (part A) demonstrating that BIIB059 (anti-BDCA2) was associated with a statistically significant reduction in total active joint count)
  • HII +1.7% (awarded $280 mln Navy contract)
  • TWTR +1.6% (announces conclusions from Mgmt Structure Committee evaluation; to begin authorized share repurchase program)
  • NEE +1.4% (to sell interests in portfolio of renewable assets for $1.3 bln in total proceeds, to NEP and KKR)
  • BTI +1.3% (acquires Dryft Modern Oral business)
  • NGL +1.2% (provides update on bankruptcy proceedings)

Analyst comments:

  • PDD +3.9% (upgraded to Buy from Neutral at Goldman)
  • DBI +3.7% (upgraded to Neutral from Negative at Susquehanna)
  • NGG +2.8% (upgraded/resumed to Overweight from Equal-Weight at Morgan Stanley)
  • BBVA +2.7% (upgraded to Hold from Sell at Societe Generale)
  • MNST +2.7% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
  • BP +2.5% (upgraded to Equal-Weight from Underweight at Morgan Stanley)
  • CDAY +2.3% (upgraded to Neutral from Underweight at JP Morgan)
  • STZ +1.9% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
  • RDS.A +1.8% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
  • D +0.9% (upgraded to Outperform from Market Perform at BMO Capital Markets)

Naval News : Chinese H-6N bomber launching a CH-AS-X-13 anti-ship ballistic miss

Chinese Air Force Xian H-6N bomber launching a CH-AS-X-13 anti-ship ballistic missile over the South China Sea
China’s New Aircraft Carrier Killer Is World’s Largest Air-Launched Missile
H I Sutton sheds some light on China's latest aircraft carrier killer: The CH-AS-X-13 air-launched anti-ship ballistic missile (ASBM).
H I Sutton 01 Nov 2020
Navies are racing to develop hypersonic missiles which may change the pace of naval warfare. Russia will deploy the Zircon hypersonic missile aboard warships and submarines. The US Navy has started down the path of the common hypersonic glide body (c-HGB) for its destroyers. Meanwhile China’s latest hypersonic weapon is something completely different; it is air launched.

The massive new missile, labelled CH-AS-X-13, is probably the largest air-launched missile in the world.

The missile was first reported by Ankit Panda, the Stanton Senior Fellow at the Nuclear Policy Program, Carnegie Endowment for International Peace, in April 2018. More recently candid images have appeared on Chinese social media. These provide a clearer view of the novel weapon.

Analysts believe that it may be intended to target high-value warships, particularly aircraft carriers. This makes it an anti-ship ballistic missile (ASBM). And it appears to be carrying a hypersonic glide vehicle (HGV). This may give it extended range and increase survivability against air defenses.


The CH-AS-X-13 may be closely related to the ground based DF-21D anti-ship ballistic missile. Image analysis suggests that it has different dimensions however, so may use a different rocket motor. The most likely reason for this would be the physical restrictions imposed by carrying it under an H-6 bomber. Additionally it appears to be equipped with a hypersonic glide vehicle (HGV) similar to the one seen on the DF-17 ballistic missile. Clearer images in the future may clarify this.

The DF-21D is believed to have a range in excess of 1,500 km. The CH-AS-X-13 may have a similar range, or possibly further due to the aerial launch and a hypersonic glide vehicle. Either way, being carried by a bomber will massively increase its overall reach. The H-6N version which carries it has aerial refueling to further increase their range. The CH-AS-X-13 is therefore a threat beyond the first island chain and South China Sea. It could potentially hit targets in the vast expanse of the Pacific Ocean, or Indian Ocean.

Even if the missile has this incredible range it will face challenges reaching its full potential. Finding and tracking an aircraft carrier at extreme ranges may be the Achilles’ heel. And a lot may depend on the survivability of the bomber itself, and the number of aircraft available for the mission. Context, of course is everything.

The H-6 bomber is not limited to the CH-AS-X-15 however. It can also carry a range of anti-ship missiles. Foremost among these is the YJ-12 supersonic missile. This is similar to the Russian Kh-31 (AS-17 Krypton) missile, but significantly larger. At least four YJ-12s can be carried, meaning that a squadron of bombers could launch a saturation attack on a Carrier Battle Group. The subsonic KD-63 (also commonly referred to as the YJ-63) can also be carried.



Having anti-ship ballistic missiles may also be used to message China’s potential adversaries. On August 26 China test fired a DF-21D ASBM into the South China Sea. This was just weeks after the US Navy aircraft carrier USS Ronald Reagan had been exercising in the area. The CH-AS-X-13 adds another dimension to the threat to carrier battle groups, so its development alone can be seen as sending a clear message of China’s increasing military confidence.

>>> US Gapping down

Gapping down
In reaction to earnings/guidance:

  • SEDG -18.5%, PACB -10.9%, ESPR -8.6%, NPTN -7.2%, OSPN -6.7%, BRKR -5.7%, FBM -5.6%, PYPL -5.5%, ICHR -5.5%, KMT -5.1%, EVER -4.6%, SRC -4.4%, MOS -4%, RCM -4%, NTR -3.8%, FRPT -3.5%, LEG -2.5%, JCI -2.4%, RMBS -2.3%, STE -1.7%, ETRN -1.7%, O -1.5%, MDLZ -0.9%

Other news:

  • AUPH -8.1% (Phase 2/3 data for dry eye syndrome did not meet primary endpoint)
  • DRRX -5.6% (names new Chief Medical Officer)
  • FELE -1.8% (acquires Waterite)
  • EDU -1.5% (prices global offering of 8,510,000 new common shares)
  • BAND -0.8% (stock offering)
  • BMRN -0.8% (receives acceptance from FDA for its NDA for Vosoritide; PDUFA Action Date is Aug 20)

Analyst comments:

  • GHL -4.7% (downgraded to Underperform from Mkt Perform at Keefe Bruyette)
  • MOS -4% (downgraded to Sector Perform from Sector Outperform at Scotiabank)