Chinese Shares Rise on Potential Ant Group Resolution

Ticker Symbol: NIO, BABA, PDD, JD, BIDU

U.S.-listed Chinese shares were up broadly across sectors today as reports that the Chinese central bank authority, the People’s Bank of China (PBOC), may have accepted to review Ant Group’s application to set up a financial holding company boosted sentiment. Reuters reported that the PBOC has signaled that it is open to granting the license to the embattled company.

Organizing under a holding company would be a key first step in Ant reviving its initial public offering after it was initially scuttled by regulators in 2020. Ant, a subsidiary of Alibaba, was supposed to come to market in one of the biggest financial technology offerings in history shortly before the Chinese state government and regulators clamped down on the technology sector.

The Nasdaq Golden Dragon China Index was up close to 3% in last trading as shares of Chinese companies have risen for 5 weeks in a row. The country is also in the midst of the annual 618 shopping festival, where online retailers such as JD and Alibaba entice customers with discounts. This year’s festival, however, comes amidst lockdowns of major cities due to the Chinese government’s COVID zero policy.

As cities such as Shanghai emerge from the surge in cases, investors are hoping that consumers in the world’s largest nation open their wallets in order to buffer slowing economic growth. The broad consensus currently is for sales to rise 20% during the festival after a 26.5% year-over-year increase in the previous year. Companies are additionally offering their largest ever promotional schemes to woo shoppers to their platforms.

Beijing has also promised to relax its regulatory crackdown on the technology sector, after nearly 2 years of strict supervision, reviews, and mandated changes soured investor sentiment. The potential granting of a holding company license to Ant comes shortly after news emerged that regulators are close to settling on fines for ride-share company Didi Global. A relaxation of regulatory actions would be beneficial to the entirety of China’s stock market.

The Chinese Communist Party has also started to make overtures to the U.S. Securities and Exchange Commission (SEC) to ensure that U.S. listed companies can remain on American exchanges. The SEC has required that all companies listed in the U.S. comply with full audit oversight and obey all audit rules. Chinese authorities have wanted to shield what they consider sensitive information collected by their companies from regulators in other countries.

A deal between the regulators of the two nations could result in one of the largest overhangs from Chinese companies being removed. Large market capitalization Chinese domiciled companies have been amongst the worst performers in the world over the past year. Shares of Nio, Pinduoduo, JD.com, and Alibaba were all up in morning trading.

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