Alibaba shares fall 8% after Beijing turns up heat on Ant Group

The personal fortune of Jack Ma, once China's wealthiest person, has tumbled since Beijing took aim at his empire. Photo / AP

Shares in Alibaba fell sharply on Monday after Beijing publicly accused Ant Group, the ecommerce group's sister company, of regulatory failings in its latest salvo against the empire of Jack Ma.

The comments by Pan Gongsheng, deputy governor of the People's Bank of China, were published on the central bank's website on Sunday and come as authorities have turned up the pressure on the business dealings of one of China's wealthiest men.

Alibaba's stock closed 8 per cent lower in Hong Kong, hitting its lowest level since July. The rebuke from the PBoC overshadowed a move by Alibaba on Monday to boost its two-year share buyback programme to US$10 billion ($14b) from US$6b.

The company's shares have fallen more than 25 per cent - scything about US$260b from Alibaba's market capitalisation - since late October, when Ma publicly criticised the country's financial regulators and state-owned banks. The personal fortune of Ma, once China's wealthiest person, has tumbled from just under US$62b to US$49.3b, according to Bloomberg data.

Beijing halted a US$37b initial public offering by Ant Group, Alibaba's online finance unit, following Ma's remarks. That triggered a cascade of public, state media and government criticism of alleged monopoly practices by the two companies.

China's market regulator announced last week that it would launch an antitrust investigation into Alibaba, while Ant confirmed that it had been summoned to a meeting with the PBoC and three other regulators.

Pan's comments, posted a day after PBoC and Ant representatives met in Beijing, have refocused investor attention on the financial services group. Ant had been trying to restructure its business in an attempt to relaunch its IPO next year.

Pan's attack, however, confirmed just how daunting a task that will be. He said Ant would have to "return to its origins" as a payment services provider and "rectify" many of its fastest-growing and most lucrative consumer credit and wealth management operations. Ant has begun that process in recent weeks but investors anticipate it could hit the company's valuation if it is able to return to the market.

"It will take at least 12 months for regulators to draw up detailed new rules for Ant to follow," said Ji Shaofeng, a former official at China's banking and insurance regulator. "Ant won't be able to complete its business overhaul until the new regulations are available."

Ant's IPO would have been the world's largest, and would have valued the company at more than US$300b.

Analysts are uncertain whether a restructuring will satisfy regulators or if Ant will have to sell or close some of its consumer-credit operations. The latter have attracted fierce criticism from state-owned banks that argue Ant has benefited from looser regulatory oversight.

The parallel move against Alibaba, which is listed in Hong Kong and New York, has further raised the stakes for Ma, who established the group more than two decades ago in Hangzhou, the capital of eastern China's Zhejiang province.

After the State Administration of Market Regulation revealed its Alibaba investigation on December 24, Zhejiang officials confirmed they had interviewed company staff and taken materials from the group's headquarters.

Zheng Shan ie, governor of Zhejiang, said on Friday that the investigation was not intended to usher in "winter" for online companies, but instead mark a new "starting point" for the sector's development.

- Additional reporting by Xin ing Liu and Ryan Mc Morrow.

Written by: Tom Mitchell and Sun Yu

© Financial Times