Alibaba’s takeover of Tianhong to reshape online finance

Alibaba’s takeover of Tianhong to reshape online finance

Xinhua

2013-10-12

Alibaba’s latest takeover of Chinese fund management firm Tianhong will inject new vitality into China’s online finance market, analysts believe. Zhejiang Alibaba E-commerce, the parent company of Alipay, China’s biggest online payment platform, will buy 51% of Tianhong Asset Management Company, according to a statement released on Wednesday by Tianhong’s shareholder, Inner Mongolia Junzheng Energy & Chemical Industry.The statement said that Tianhong’s registered capital will surge to 514.3 million yuan (US$83.69 million) from its previous 180 million yuan (US$29.42 million) through the fundraising round announced Wednesday.

This will make Tianhong the country’s largest fund management company in terms of registered capital, surpassing that of China Asset Management, currently the largest with registered capital of 238 million yuan (US$38.9 million).

Zhejiang Alibaba will invest 1.18 billion yuan (US$192.9 million) for 51% of Tianhong’s registered capital to become the largest shareholder of the company.

Inner Mongolia Junzheng and Tianhong’s management will also buy more of Tianhong’s registered capital.

Shares of Inner Mongolia Junzheng soared to the daily trading limit of 10 percent on Thursday.

Tianhong will remain independent in its operations, and the company’s name, registration place, structure and management will stay unchanged, Chen Liang, spokesman for Alipay, said Thursday.

“Alipay has some experience in the field of online finance, and we hope the takeover will bring more Internet elements and mindset to the traditional fund industry,” Chen said.

In June, Alipay joined hands with Tianhong to create a wealth management product, called Yu E Bao, for users of Alipay to transfer their Alipay balance into a Tianhong money market fund.

The product soon attracted millions of users after its launch, as it offers an annualized yield of about 4.5%, higher than the one-year deposit rate of 3% offered by commercial banks.

In the first 18 days, Yu E Bao gained 2.5 million users and raised more than 6.6 billion yuan (US$1.07 billion), data from Alipay showed. Analysts believe its size will surpass 100 billion yuan (US$16.34 billion) by the end of year.

Liu Xiaoguang, chairman of the Beijing Capital Group, said cooperation between Alipay and Tianhong has been upgraded from a single product to the capital level, and the deal will offer Alipay a significant entry into the field of asset management.

Zhang Jianhui, a fund industry insider, said that the deal will optimize Alibaba’s internal use of resources and ease its future development in the financial sector.

The takeover by Alibaba will undoubtedly create a strong competitor for other fund companies, but it will also accelerate the integration of the fund management industry and the Internet sector, Zhang said.

Zhang said that more internet-based businesses may follow a similar path to tap into the fund industry, bringing new vitality to fund management companies in China.

Chen said that Alipay does not rule out the possibility of similar shareholding moves in the online finance sector in the future.

“We will insist on becoming an open platform for online finance, so we see all business partners as equal in terms of conducting innovation and creating value for our customers,” Chen said.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: