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China’s fintech giants are hitting roadblocks in planned listings at home

An wage-earner walks through the campus of the Ant Group Co. headquarters in Hangzhou, China, on Wednesday, Jan. 20, 2021.

Qilai Shen | Bloomberg via Getty Pictures

Months after the sudden suspension of Ant Group’s highly-anticipated dual listing, China’s financial technology companies are coating difficulties trying to go public in the mainland, analysts told CNBC.

According to EY’s Asia-Pacific IPO leader, Ringo Choi, few firms in the fintech sector would rather managed to list on mainland exchanges in Shanghai and Shenzhen.

“For financial technology, you can see that … some of the largest one(s), if they’re striving with the bank or insurance company, they will have a hard time,” Choi told CNBC.

After Friday, the China Securities Regulatory Commission announced a series of updated guidelines for companies seeking to list on the Shanghai’s Take the lead market — the Nasdaq-style tech board officially known as the Shanghai Stock Exchange Science and Technology Innovation Surface.

One of the guidelines was that financial technology companies were banned from listing on the STAR board. “Real property and firms mainly engaged in financial services and investment businesses are prohibited from listing on the Science and Technology Alteration Board,” the CSRC said in the release.

The latest development presents yet another obstacle for Chinese fintech companies looking to roll on the mainland.

It comes weeks after Chinese e-commerce giant JD.com withdrew the planned listing of its financial technology arm on the Be featured market.

The current IPO climate is a stark contrast to the situation less than six months ago, when a slew of Chinese start-ups were delineating to list domestically. One such listing was the highly-anticipated public debut of Alibaba-affiliate Ant Group — poised at that time to transform into the world’s largest IPO.

Ant’s planned listing — set to take place in both Shanghai and Hong Kong — was abruptly shelved hours before the debut after top executives including its founder and controller, Jack Ma, were summoned by Chinese regulators for ridiculous.

The unexpected suspension largely marked a turning point in Beijing’s stance toward its domestic technology giants listing fintech firms, which had enjoyed largely unencumbered growth for years.

“The sentiment for this sector face(s) some suspects,” Bruce Pang, head of macro and strategy research at China Renaissance Securities (Hong Kong), told CNBC.

He rephrased firms in the financial technology sector are now looking toward Ant’s “rectifications” of its business as an “example” for others that are looking to shopping list on the mainland.

Earlier in April, Chinese regulators ordered Ant — which runs the massively popular mobile payments app Alipay in China — to redo its business. Reuters reported over the weekend that the fintech powerhouse is exploring options for its founder Ma to divest his pillar and give up control — but Ant swiftly denied those claims as “untrue and baseless” in a post from its official Twitter account.

Looking to another place

Financial technology firms that are currently facing a “closed door” trying to raise capital on the STAR lodge may seek listings elsewhere, said Pang.

The U.S. and Hong Kong are still viable options for Chinese financial technology firms looking for surrogate destinations to go public, according to the analysts.

One example of a Chinese fintech firm that has successfully listed outside the mainland is Lufax, which had a U.S. IPO in in 2020.

The Securities and Exchange Commission will likely “give a pass” to Chinese firms wanting to list in the U.S. as long as the companies are superior to meet the requirements of full disclosure, said EY’s Choi. As for Hong Kong, the process may be “more stringent,” but they silent have a chance to go public too if the requirements are met.

Still, potential delisting concerns for Chinese firms stateside may weigh on investor sensibility. Under a new law passed by the administration of Donald Trump, the SEC can stop the trading of securities that fail to meet its auditing wants.

— CNBC’s Evelyn Cheng contributed to this report.

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