Alibaba shares fall again after Beijing tightens the ant group’s screws

The declines increased the sale of shares on Christmas Eve, reducing Alibaba’s market capitalization to $ 586 billion. Just two months earlier, it had reached a record high of almost $ 859 billion with the expectation that Alibaba would profit greatly from the public Ant price.

Alibaba’s rapid fall has prompted investors to reassess the regulatory risks facing Chinese Internet companies. Last Thursday, the country’s top trade regulator said it is investigating whether Alibaba has abused its dominant position in online retailing through activities such as getting merchants to sell products exclusively on its platforms.

The hard part is figuring out “how much of the recent regulatory moves against Ant and Alibaba is politically based, how far it will go and when it will end,” said Alex Au, managing director of Alphalex Capital Management, a Hong Kong based hedge fund company in He said he is considering buying Alibaba shares if they fall further.

At the center of the ongoing regulatory disaster is billionaire Jack Ma, co-founder and former head of Alibaba, and the controlling shareholder of Ant. In early November, Beijing sank the initial public offerings for the Ant blockbuster, which were on the way to raising at least $ 34.4 billion, after Ma infuriated China’s leadership by criticizing financial regulations and quoting a phrase from Chinese President Xi Jinping in a controversial speech, the Journal previously reported.

Some analysts said the intensification of pressure on Alibaba and Ant is linked to the fact that Ma has fallen out of favor with Chinese officials, but there may be side effects for other large Chinese Internet companies.

On Monday, the Hong Kong Hang Seng Tech index fell 4.3%, with social media and video game giant Tencent Holdings Ltd.

down 6.7% and Meituan, operator of a popular multipurpose application for Chinese consumers, down 6.9%. Tencent and Meituan shares are still up for the year.

Alibaba owns a third of Ant, valued at more than $ 300 billion just before the suspension of its IPO. Ant’s valuation will certainly be revised downwards by investors, as its fast-growing businesses, such as digital lending and investment product sales, may be forced by regulators to shrink.

Chinese regulators called Ant representatives to a meeting over the weekend and instructed the company to refocus its attention on its original payments business and comply with the rules and regulations of its other lines of business, covering personal loans, wealth management and safe.

Richard Turrin, an adviser in the financial technology industry, said the recent sale of Alibaba may have more to do with a fear-based overreaction than a rational reassessment of Ant and Alibaba.

“Whenever China introduces regulations so severe against large private conglomerates, people think of iron fist policies that can crush the latter. But Ant and Alibaba shouldn’t be that kind of case, ”he said.

It is not in China’s interest to break up or destroy a company so profitable that it is already helping small businesses or reducing poverty, he added.

Chen Shujin, a banking analyst at securities brokerage Jefferies, said in digital payments, Ant’s Alipay app is operating in an already saturated domestic market, so its growth potential may be limited.

In the antitrust investigation, Nomura research analysts said in a note on Monday that China may want to use the Alibaba case as a precedent to send a warning shot to other dominant technology companies that used their market power in anti-competitive ways

“Any action on Alibaba will not only affect the company, but will also have profound implications for the entire Internet industry,” said Nomura analysts.

The net result could be a blow to the financial results of China’s internet giants as they move to fulfill regulators’ wishes, said Iris Pang, an economist at ING Bank in Hong Kong. “Ultimately, they will earn less,” she said.

Write to Chong Koh Ping at [email protected] and Xie Yu at [email protected]