Alibaba shares rise 5.5% amid hopes Ant regulatory crackdown is ending

Hong Kong shares of Alibaba Group (9988.HK) opened 5.5 per cent higher on Monday after China fined its affiliate, Ant Group, $984 million for violating laws and regulations, fuelling hopes that a years-long regulatory crackdown on the fintech has ended.

On Saturday, Ant Group announced a share buyback that values the company at $78.54 billion, well below the $315 billion touted in an abandoned IPO in 2020, but providing liquidity to investors.

Online retail giant Alibaba, which spun off Ant 11 years ago and has a 33 per cent stake, said on Sunday it was considering whether to participate in the buyback.

Alibaba's share price rise outpaced a 2 per cent gain in Hong Kong's Hang Seng Index (.HSI) in early trading on Monday.

Alibaba's U.S.-listed shares rose 8 per cent on Friday after the penalty, one of the largest-ever fines for an internet company in China, was delivered.

Ant and its subsidiaries had violated laws and regulations in areas including corporate governance, financial consumer protection, payment and settlement business, as well as anti-money laundering obligations, the People's Bank of China said.

Ant said on Saturday it proposed to all of its shareholders to repurchase up to 7.6per cent of its equity interest at a price that represents a group valuation of approximately 567.1 billion yuan ($78.54 billion).

That is a steep 75 per cent discount to the $315 billion valuation in 2020 for what was set to be the world's largest IPO, had it not been derailed at the last minute by Chinese regulators.

The finalisation of Ant's penalty is seen as paving the way for the firm to secure a financial holding company licence, lift its growth rate and eventually revive its plans for a stock market listing.

However, analysts are questioning whether Ant will press ahead with a listing in the near future.

"According to the company, the reason for the buyback is providing liquidity to existing investors and attracting and retaining talented individuals through employee incentives," said Oshadhi Kumarasiri, a LightStream Research analyst who publishes on Smartkarma.

"Ant could have achieved both these objectives through an IPO....This means IPO is essentially put on hold."