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Alibaba shares jump after China orders Ant Group to revamp business

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An Ant Group logo is pictured at the company’s headquarters, a subsidiary of Alibaba, in Hangzhou, Zhejiang Province, China, on October 29, 2020.

Aly Song | Reuters

Guangzhou, China – Alibaba Hong Kong shares rose nearly 4% on Tuesday after regulators ordered the e-commerce giant’s financial technology subsidiary Ant Group to overhaul its business.

The, along with a fine of 18.23 billion yuan ($ 2.78 billion), Alibaba received A source of investor uncertainty has been removed as a result of an antimonopoly investigation by regulators.

“Following the decision and the penalties imposed on BABA by the SAMR (State Administration of Market Regulation) antimonopoly investigation, we believe the road is more colorful with the latest updates from the Ant Group,” Jefferies said in a released Monday Note.

Alibaba’s Hong Kong-listed shares later trimmed their opening gains, but last traded nearly 2% during Tuesday’s session. Alibaba US-listed stocks closed over 9% higher on Monday.

Alibaba has a 33% stake in Ant Group, the company that operates the hugely popular mobile payment app Alipay in China. In November, Regulators forced the Ant Group to suspend what would have been a Record $ 34.5 billion IPO in Hong Kong and Shanghai.

At this point in time, changes in the financial technology regulatory environment were blamed for the listing’s suspension.

That came just a few days later Jack Ma, the founder of Ant Group and Alibaba, was critical of China’s financial regulator.

In December, the People’s Bank of China (PBOC) ordered the Ant Group to rectify its business. And on Monday the Chinese central bank outlined specific details of what the company needs to do.

The PBOC asked the Ant Group to restructure itself into a financial holding company. The Ant Group also needs to create a stronger separation between its payment app Alipay and its credit products. Yu’e Bao, the Ant Group’s money market fund that was once the largest in the world, must also be scaled back, the PBOC said.

Both Alibaba’s massive antitrust fine and Ant Group’s restructuring plan are part of one broader drive from China to get a better grip on the country’s tech companies, that became giants largely unencumbered. Their activities often span different sectors, from gaming to financial technology to cloud computing.

While so far were Beijing’s eyes focused on Jack Ma Reichthere are signs that crackdown could be taken expand to other companies and other areas like data protection.

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Robert Dunfee