Economy News Shares

Alibaba: Underperformance and unpredictable future


Alibaba, Tencent, Baidu, and other Chinese tech firms came under fire on Monday. It came after the country’s competition agency announced a slew of fresh fines over the weekend. The latest in a string of antitrust investigations.

Alibaba’s U.S.-listed shares declined 1% on Monday, after a 1.6 percent loss in the company’s Hong Kong-listed shares. In Hong Kong, Tencent declined 0.3 percent, while Baidu sank 2.1 percent.

alibaba tumbles

The three companies were punished by China’s State Administration for Market Regulation on Saturday. Accusations were, among other things, breaking antitrust legislation by failing to declare agreements dating back to 2012. Furthermore, each of the 43 incidents investigated by the competition authorities received a punishment of 500,000 Chinese yuan ($78,000).

The sanctions are the latest in a string of Chinese crackdowns on the country’s technology sector. Which has lasted most of the year. As President Xi Jinping tightens his control over China’s economy, pressure has been directed to for-profit education and real estate companies.

Chinese authorities’ actions have alarmed investors, resulting in a 13% drop in the MSCI China Index this year. In comparison, the S&P 500 Index increased by 27%, while the MSCI All Country World Index increased by 17%.

Regulatory pressures aren’t the only source of concern about China’s technological future. Alibaba, the world’s largest e-commerce company, just announced slower quarterly growth, sending its shares down more than 15% last week. Moreover, it added to macroeconomic fears about China’s second-largest economy.

Best to come? Maybe.

“While individual equities may require an unique catalyst, we believe China’s technology industry has passed its low point,” said Mark Haefele, chief investment officer of UBS Global Wealth Management.

According to the Swiss bank’s committee, the market looks to be weighing a lot of negatives and that an overcorrection might be starting. Despite the fact that the new policy measures may have an impact on profitability, economists still forecast a 15 to 20% increase in earnings over the next two to three years.

The UBS group predicts that the market will progressively position itself for an expected profits bounce in the second half of next year, with MSCI rising 15% overall.

For MetaNews.


Jonathan Hobbs

Jonathan Hobbs is an Australian investor and author that trades on a variety of asset classes, including currencies, equities, and commodities. Jonathan’s experience as a macro trader leverages his unique writing style to combine important elements, such as technical analysis and news. The other elements that he brings into his unique writing styles are foundation analysis aimed at rational equilibrium values, evaluating the sizes and motivations of buyers and sellers, as well as identifying the needs of the buyers and sellers in the individual markets. Jonathan is committed to quality writing for new traders as well as veterans.

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