Mar 31, 2014 03:33 PM

Major Financial Software Firm Halts Trading of Its Shares

(Beijing) -- Shanghai-listed Hundsun Technology Inc. Ltd., a major financial software and information technology provider in the country, is in the spotlight after it suspended trading of its shares on March 18.

The suspension was due to a planned restructuring of its controlling shareholder, Hangzhou Hundsun Technologies Group Co. Ltd. (Hundsun Group), the company said.

It is not clear what that involved, but it is widely thought to be associated with negotiations between Hundsun Group and Alibaba Group, the country's largest e-commerce company.

Alibaba approached Hundsun Technologies with an acquisition proposal in December 2012, a source close to the listed firm said. The negotiations did not work out, and it turned to Hundsun Group.

"Hundsun Group has been negotiating with Alibaba over at least business cooperation and possibly an equity investment," a source with knowledge of the situation said.

The idea of the two coming together has upset many financial professionals, who fear a deal could give Alibaba access to confidential information that is handled by Hundsun's systems.

Hundsun is the country's biggest trading software provider for securities and fund companies, holding more than 70 percent of the market in major fields under the category, a source close to the securities regulator said.

Many fund managers say they also use Hundsun's systems for transaction settlements and clearance. The firm is also a leading software and service provider for trust companies, insurers and banks' wealth management departments.

So far, no user has reported data stolen or missing because system developers cannot access clients' data without the user's supervision, several fund managers familiar with Hundsun's products said. However, given that all data is stored and processed by Hundsun, an expert who knows the systems can in theory work around the restriction and gather user information.

Although Hundsun is bound by contracts not to leak client data even if it had it, the stakes are too high for anyone to trust their business secrets to a potential competitor, the fund managers said.

Their main concern is Alipay, an entity affiliated with Alibaba Group that handles most of the country's mobile and Internet payments. Alipay is the controlling shareholder of Tianhong Asset Management Co., which operates Yu E Bao, a money market fund Alipay started offering in June.

By March 19, Yu E Bao had received 547.7 billion yuan in investments from more than 81 million users, making Tianhong the biggest public fund manager in the country.

Alipay is a crucial part of Alibaba Group's ambition of building a cloud computing platform serving financial institutions and connecting them with consumers.

Once Alibaba forms a close relation with Hundsun, "it can surely find a way to know all of the clients' information," a fund manager fretting over the negotiations said.

A deal would mean an unfair advantage for Tianhong, another fund manager said. "The sooner Alibaba learns about other fund companies' innovative practices, the sooner it can replicate and launch them through the fund company under its corporate umbrella," he said.

(Rewritten by Wang Yuqian)

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