Why are Alibaba shares falling?

• Alibaba (HKG: 9988) share price fell as much as 6.5% on Monday (13 September 2021) to under HK$160
• Its US listing (NYSE: BABA) is also down some 1.8% in pre-market trading
• Chinese authorities have reportedly told Ant Group to move its highly profitable loan divisions onto a separate app
• Beijing also wants Ant to give up user data for a new credit scoring joint venture that would be mostly state-owned
• Feeling bullish or bearish about Alibaba shares? Open an account with us to go long or short on the stock.

Alibaba stock price: what’s the latest?

Alibaba’s Hong Kong listing closed 4.2% lower on Monday, after it was reported that Chinese regulators have ordered Ant Group to carve out its lending businesses into a separate entity.

Shares were down as much as 6.5% at one point. Its US stock is also down some 1.8% in pre-market trading.

Authorities have reportedly instructed Ant Group to remove the company’s two highly profitable loan divisions, Huabei and Jiebei, from the main Alipay arm. Instead, the government would like Ant to create a separate app for the units.

The government also wants Ant to contribute loans-based user data for a new and independent credit scoring joint venture (JV) that would be partly state-owned, according to the reports.

‘The government believes big tech’s monopoly power comes from their control of data,’ said a source familiar with the process. ‘It wants to end that.’

The new JV will mean Ant will no longer be able to assess borrowers’ credit-worthiness independently.

Huabei is a consumer virtual credit card, while Jiebei is a digital cash loan facility that provides borrowers with short-term loans of up to 12 months.

New credit scoring JV: who has the upper hand?

This latest move from Beijing could impact Ant’s burgeoning lending business, largely driven by both Huabei and Jiebei.

Both units, which are part of the CreditTech division, saw their revenue surpass Ant’s main payments operations division for the first time in the first half of 2020 to constitute 39% of overall group sales.

With regards to the proposed JV, it is said that Ant has been trying to get the upper hand. However, the control now reportedly lies with state-owned companies such as the Zhejiang Tourism Investment Group, which will be given majority shareholding.

‘Given the mutual trust between Ant and Zhejiang, the fintech group will have a big say on how the new JV operates,’ a former official at the People’s Bank of China told The Financial Times.

‘But the new set-up will also make sure that Ant listens to the party when it comes to critical decision-making,’ they added.

In May this year, both credit platforms suspended roughly 18 billion yuan (US$2.8 billion) worth of asset-backed securities after Chinese regulators told Ant to make adjustments and review its products and businesses.

This was done to prevent the company from engaging in ‘inappropriate competitive conduct’ in the payments sector, as well as to cut ‘inappropriate links’ between Alipay and loan products like Huabei and Jiebei.

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