SHANGHAI — Chinese fintech giant Lufax is laying the
groundwork for international expansion over the next five years, following a
cash injection from its U.S. IPO, the company’s chief executive told CNBC.
Lufax started trading on the New York Stock Exchange on
Friday raising around $2.36 billion. The stock fell as much as 14.3% on debut
but pared some of those losses to close at $12.85 per share, around 4.8% lower
than the $13.50 offering price. U.S. stock markets sold off last week.
The company, which partners with financial institutions to
offer small business loans and wealth management products via its platform, is
starting to weigh a bigger overseas push after a small initial foray.
“The way we look at the international side, particularly
South East Asia, is a great long-term opportunity. In many of the markets in
Southeast Asia, you add it up, it’s still smaller than a province in China, so
our immediate priority for the next three of four years in terms of growth is
clearly the domestic market,” Greg Gibb, CEO of Lufax, told CNBC in an
interview that aired Monday.
“But if you think about the changes going around Hong Kong,
Greater Bay, opening up those links there, we think it’s the right time to
start to put some preparation in place for what, five years out, could be quite
interesting.”
The Greater Bay Area is a plan by China to connect Hong Kong
and Macau and major cities in South China.
In 2017, Lufax launched a wealth management platform in
Singapore. It has also launched services in Indonesia and Hong Kong. But income
from international operations are “not yet material” to the business, according
to the IPO prospectus.
Gibb said that the push overseas will involve partnering
with local brands but with Lufax technology behind the product. The company
touts its ability to use data and artificial intelligence to help effectively
match customers to the right financial product.
U.S. listing
Lufax went public in New York despite the tensions between
the U.S. and China. Lawmakers in Washington are pushing for greater scrutiny of
Chinese companies through proposed legislation that threatens to delist some
firms in the U.S.
Other Chinese firms have increasingly looked to markets in
Shanghai and Hong Kong for IPOs or secondary offerings. For example, Alibaba,
JD.com and NetEase, three companies listed in the U.S., carried out secondary
listings in Hong Kong.
Ant Group meanwhile will carry out a dual listing in Hong
Kong and Shanghai on Thursday in what is expected to be the world’s biggest
IPO.
But Lufax is not alone in listing in the U.S. Chinese
carmakers Xpeng Motors and Li Auto both went public on Wall Street earlier this
year.
“Our view is that we are a Chinese company that has a lot of
transparency that actually welcomes being on a global stage. We think that… New
York is a great place for us to start, it gives us the access to the right
investors, to the right analyst coverage,” Gibb told CNBC in response to a
question about listing in New York.
“As you know, over the longer term, you have many options as
to what you can do. But for now we think this is the good first step.”
When asked if the company had discussed a secondary listing
in Shanghai or Hong Kong, Gibb said it’s “not something that we immediately
plan” for but “if we had to pull the trigger it’s reasonably straightforward.”
Regulatory risk
Lufax was once a peer-to-peer lending giant in China. But
tougher regulations on the sector from Chinese authorities forced the company
to scale back on that business. In 2019, Lufax exited peer-to-peer lending.
Regulatory risks are certainly high for fintech companies in
China where the rules sometimes struggle to catch up with the technology.
Gibb said that Lufax is well-equipped to deal with any
changes from regulators down the road.
“One of the things which is true about China in general is
it changes very quickly. The market changes very quickly, the regulations are
changing to keep up with the market, one of our marks of success, the reason
that we’ve actually brought the company public now, is because we think the
regulatory framework has improved a lot over the last couple of years,” Gibb
told CNBC.
“If you went back five years ago one of the issues with
fintech in China was there wasn’t much regulation and that led to its own set
of problems for others. But we think actually the goalposts are increasingly
clear. The regulatory risk are declining. There will always be change. But one
of our key strengths that we have developed over this period is the ability to
pivot when you need to and always have a plan B.”
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