Updated: Jan 13
China Tells Alibaba It Means Business. What That Means for the Stock?
Is big regulation coming for the Tech Giants? The narrative is growing.
I think this proverb inspired Jack Ma to conquer all, over a very short period.
Maybe he was helped by a modernising Chinese economy and less authoritarian government and probably because he was born in a county with circa 1.4 billion people as the internet was rising, keeping a watchful eye on Silicon Valley! Whatever the case, kudos to him and his mates!
On 4 April 1999, Jack Ma and his team of 17 friends and students founded Alibaba.com, a China-based B2B site, in his Hangzhou apartment. The rest is business legend.
The largest Chinese e-commerce company Alibaba had another strong quarter in 2020. The annual active consumers on its online shopping properties in China reached 757 million by the end of June, increasing from 742 million at the second quarter of 2020. O.K, we all the know the history.
Singles Day. Alibaba said its total gross merchandise value (GMV) over the Singles Day event, which spanned 11-days, totalled 498.2 billion yuan or $74.1 billion. That beat last year's 268.4-billion-yuan figure. Nov 12, 2020
“The company's name came from the character Ali Baba from the Middle Eastern folk-tale collection One Thousand and One Nights” What inspired me to name my site Insiderkk? Idiot.
Anyway, I digress. The point of this is the latest news about the rise and rise of tech giants and the relationships with central governments & regulators. We all hear about what’s going on in Europe and the USA’s Senate, trying to reign in the powers of these ever-growing tech oligarchs, just as importantly, they want a piece of the action! Money/taxes.
Chinese regulators on Thursday announced an anti-monopoly investigation of e-commerce giant Alibaba Group, stepping up official efforts to tighten control over China’s fast-growing tech industries. This has been brewing for a long time, but the question is, what will be the impact on the stock price? Listed in Hong Kong and New York?
The market regulator said it was looking into Alibaba’s policy of “choose one of two,” which requires business partners to avoid dealing with competitors. The one-sentence statement gave no details of possible penalties or a timeline to announce a result.
Chinese leaders said earlier an economic priority in the coming year will be to step up anti-monopoly enforcement. They appear to be especially concerned about tightening control over Alibaba and other dominant internet companies that are expanding into finance, health care and other businesses. Excerpt from MarketWatch.
Antitrust (probe) latest tweet. RTÉ Business
“China has launched an antitrust investigation into Alibaba Group and will summon the tech giant's Ant Group affiliate to meet in coming days”.
“Antitrust (probe) is a strong signal from the government to guide the development focus of those internet tycoons,” said Vincent Wang, a Shanghai-based partner specialising in antitrust regulators at Global Law Office.
So, things are getting sticky. In simple terms the Chinese authorities want to reign in the growth of such firms, especially if they begin to move into the Insurance and finance sectors, with their immense power. They want to implement financial regulations and other rules sooner rather than later.
There is no doubt that all the fundamentals of the company are strong and going in the right direction quickly and strongly but will potential interventions from both China and the USA regulators and Governments have an impact on the price. No doubt for fundamental day traders, I see they are shorting the asset.
In Hong Kong, Alibaba shares slumped 8.13%, its biggest daily drop in six weeks, after China's regulator remarks, that they are investigating the tech giant for suspected monopolistic behaviour.
Is Jack Ma’s flamboyance and meteoric rise to much for the interventionist Chinese leaders?
How will the stock move in NY?
In America, the House Judiciary Committee's antitrust panel has recently completed a 16-month investigation into Amazon, Apple, Google and Facebook, finding that “Big Tech" has "monopoly power" in key business segments and have “abused" their dominance in the marketplace, in a full-throated condemnation of the giants. Although no great impact in the short term, it seems that there will be a continued debate about their unbounded growth and potential monopoly conducts.
The lawyers will be smiling.
Intraday traders love volatility and this asset is one of them, long term investors will be keeping a close eye on the outcome of such probes and potential interventions.
Update, Alibaba shares BABA NYSE, -13.34% plunged 13.3% to close at $222.00, the lowest close since July 1. That shares suffered the biggest one-day decline since going public in September 2014, breaking the previous record drop of 8.8% on Jan. 29, 2015.
With money you are a dragon, with no money, a worm.(Chinese Proverb)
If you've read this up to here, you may be interested in trading stocks?
There is no argument that CFD trading with leverage offers high risk, however, sometimes, you just see some opportunities that are somewhat obvious, having woke up reading the headlines in Hong Kong regarding the share slump of Alibaba, I concluded that the stock would perform the same when the NY bell rang. Shorting the stock and making big gains.
If you want to practice, open a demo account and see if you can find fundamental opportunities you can gain from.