South-east Asia still a sweet lure for Ant's portfolio companies

Singapore

CHINA'S reported probe into the investments of Ant Group is more likely to be centred on its homeground for now, and thus might not significantly impact the financial services giant's portfolio companies in South-east Asia, industry watchers said.

However, the road ahead remains uncertain, as it is not clear whether the regulatory scrutiny may force Ant and its sister company, Alibaba, to tone down or step up activities in South-east Asia.

According to a Dec 31 Reuters report, which cited anonymous sources, Chinese regulators are considering whether to instruct Ant to divest some of its investments in startups and fintech firms, if they breach rules such as by creating unfair competition.

The divestment of Ant's overseas investments is not likely to be a top priority for Chinese regulators at this point in time, as their concerns about unfair market competition are more for its domestic market, Ling Vey-Sern, a senior analyst at Bloomberg Intelligence, told BT.

Wang Xiaofeng, a senior analyst at research firm Forrester, echoes that she does not see any immediate changes for Ant's overseas businesses, "as there's still a lot to figure out and to be settled domestically".

Ant's involvement in the region skews more towards financial investment rather than deep operational involvement, she added.

That said, in the highly unlikely event that Ant must divest stakes, it will likely be due to having to keep to its core competency and payments vertical, said Timothy Chen, executive director of financial services firm ICH Group.

How the probe plays out is still uncertain at the moment. Zennon Kapron, director of fintech research and consulting firm Kapronasia, reckons that Chinese regulators have a reason to examine the overseas exposure of Ant and the associated risks.

"If Ant goes into a different country, and then somehow the business (it works with) falls apart, that doesn't reflect well on China. And so I think that is something the regulators in China would be looking to control and make sure it doesn't get out of hand," he said.

In the unlikely event that Ant is forced to sell its overseas investments, alternative Chinese buyers might be hard to come by, observers said. Other Chinese tech companies might not be as keen to take over in light of a forced divestment due to regulatory considerations, said Bloomberg's Mr Ling.

Ms Wang noted: "For now, they would remain low-key as Chinese tech giants themselves have a lot on their plates such as antitrust and anti-monopoly."

Frank Troise, chief executive of corporate advisory SoHo Advisors, noted that each of Ant's investments would have carried the key value proposition of access to Ant and developing synergies with the Chinese tech giant. This may result in a tougher look for a potential buyer of Ant's stakes.

He said: "Regrettably, it may come down to a hard asset-based discussion, unless Ant provides a commercial component to allay any economic concerns or hurdles."

Stakes would then have to be picked up by other houses, venture capital firms or conglomerates in the same vertical. Asean startups could now have less of a halo effect if a major investor like Ant Group sells off its stakes, said Mr Chen. He added: "But this should not have any effect on (a startup's) core business."

Indonesian e-wallet operator Dana says that it does not expect any impact from Ant Group's current situation.

Steve Saerang, Dana's vice president of communication, told BT: "As this issue occurs and blows up in our national media, we continue focusing ourselves to accelerate financial services in Indonesia by providing the best digital payment experience."

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