Bloomberg
Alibaba’s US listed shares fall further in China monopoly investigation
(Bloomberg) – Alibaba Group Holding’s US listed shares fell more due to concern over China’s investigation into alleged monopolistic practices at the e-commerce company. Affiliate Ant Group Co., the other pillar of billionaire Jack Ma’s Internet empire, was also called to a high-level meeting on financial regulations. The pressure on Ma is central to China’s broader effort to control an increasingly influential sphere of the internet: the draft anti-monopoly rules released in November gave the government ample freedom to restrict entrepreneurs who until recently enjoyed unusual freedom to expand your domains. The Alibaba investigation is “a warning that the winds have changed,” Bloomberg Intelligence said in a research note. The risk, wrote analyst Vey-Sern Ling, is that business operations “may face headwinds in the long run” as a result of such movements. The shares fell 13% in their biggest drop ever recorded in one day. The drop brought Alibaba to its lowest level since July, and the stock is now 30% below its peak in October. Approximately 141 million shares exchanged hands, mostly in a single session since its debut in 2014. Alibaba said in a statement that it will cooperate with regulators in its investigation and that its operations remain normal. Once hailed as drivers of economic prosperity and symbols of the country’s technological prowess, Alibaba and rivals such as Tencent Holdings Ltd. face increasing pressure from regulators after accumulating hundreds of millions of users and gaining influence over almost every aspect of daily life in China. “It is clearly an escalation of coordinated efforts to control the Jack Ma empire, which symbolized the new entities ‘too big to fail’ in China,” said Dong Ximiao, a researcher at the Zhongguancun Internet Finance Institute. “Chinese officials want to see a smaller, less dominant and more compliant company.” Read more: Jack Ma remains quiet after the Ant Group’s spectacular turnaroundThe State Administration for Market Regulation is investigating Alibaba, the main antitrust body said in a statement without further details. Regulators, including the central bank and the banking supervisory body, will separately bring affiliate Ant to a meeting to promote increasingly stringent financial regulations, which now pose a threat to the growth of the world’s largest online financial services company . Ant said in a statement on its official WeChat account that it will study and meet all requirements. Ma, the extravagant co-founder of Alibaba and Ant, has practically disappeared from public view since Ant’s initial public offering derailed last month. In early December, the man most identified with the meteoric rise of China Inc. was advised by the government to stay in the country, said a person familiar with the matter. Ma is not on the verge of a personal downfall, those familiar with the situation said. His public rebuke is instead a warning that Beijing has lost patience with the extraordinary power of its tech magnates, increasingly perceived as a threat to the political and financial stability that President Xi Jinping most values. Álibaba fell 8% in Hong Kong for a five-month period on Thursday. Asia’s largest corporation after Tencent has caused losses among China’s internet sector leaders since Ant’s IPO was canceled, bringing the overall price to around $ 200 billion. Tencent and Internet services giant Meituan ended more than 2.6% below, while SoftBank Group Corp., Alibaba’s largest shareholder, sank 1.7% in Tokyo. As China prepares to implement the new anti-monopoly regulations, the country’s leaders have said little about how hard they plan to crack down or why they have decided to act now. China’s Internet ecosystem – long protected from competition by companies like Google and Facebook – is dominated by two companies, Alibaba and Tencent, through a labyrinthine investment network that encompasses the vast majority of the country’s startups in AI areas digital finance. His sponsorship also formed a new generation of titans, including travel and food giant Meituan and Didi Chuxing – China’s Uber. Those who thrive out of their orbit, the biggest being the owner of TikTok ByteDance Ltd., are rare. The House Jack Ma Built Is China’s Own Creation: Tim CulpanAnti-monopoly rules now threaten to disrupt this status quo with a series of potential outcomes, from a benign penalty scenario to a separation of industry leaders. Some analysts predict that there will be a crackdown, but a targeted one. They point to the language in the regulations that suggests a strong focus on online commerce, from exclusive forced deals with merchants known as “Choose one of two” at prices based on algorithms that favor new users. The regulations specifically warn against selling below cost to eliminate rivals. But Beijing’s various agencies appear to be coordinating their efforts – a bad sign for the Internet sector. “There is nothing that the Chinese Communist Party does not control and nothing that appears to be spinning out of its orbit in any way will be pulled back very quickly,” said Alex Capri, a researcher at the Singapore-based Hinrich Foundation. Read more: Down $ 290 billion, China technology investors Mull Nightmare ScenariosThe campaign against Alibaba and its peers picked up speed in November after Ma made a famous public attack on Chinese regulators for delaying time. Market supervisors subsequently suspended Ant’s IPO – the largest in the world at $ 35 billion – while the antitrust watchdog threw markets into a bolt soon after with his bill. “Antimonopoly has become an urgent issue that concerns all matters,” said the newspaper in a comment that coincides with the announcement of the investigation. “Rampant growth” in the markets needs to be restricted by law, he added. The Communist Party spokesman said in a comment on Friday that Chinese Internet companies should view the investigation into Alibaba as an opportunity to improve their awareness of fair competition and anti-monopoly practices. The chances that Ant will be able to resume its massive stock list Next year looks increasingly slim as China reviews the rules that govern the fintech industry, which in recent years has grown as an alternative to traditional loans backed by State. China reportedly created a joint task force to oversee Ant, led by the Financial Stability and Development Committee, a regulator of the financial system, along with several central bank departments and other regulators. The group is in regular contact with Ant to collect data and other materials, studying its restructuring and also writing other rules for the fintech industry. “China has simplified bureaucracy a lot, so it is easier for different regulators to work together now,” said Mark Tanner, managing director of Shanghai-based China Skinny consultancy. “Of all the regulatory hurdles, this is the biggest one by far.” Dissecting China’s crackdown on Internet giants: QuickTake (updates with comments from People’s Daily in the 18th paragraph). For more articles like this, visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source. © 2020 Bloomberg LP