What happened
Actions of Alibaba (NYSE: BABA) rose 5.5% on Tuesday after reports surfaced that the founder of the Chinese e-commerce titan was not, in fact, missing.
And
After several news outlets noted that Alibaba founder Jack Ma had not been seen publicly since October, when he criticized Chinese regulators for stifling innovation, speculation about his whereabouts arose. That speculation subsided, however, after CNBC reported that Ma was not missing and was simply “hidden for now”. The news helped to ease investor concerns that Chinese regulators were planning to attack Alibaba in retaliation for Ma’s comments.
Alibaba’s shares rose on Tuesday. Image source: Getty Images.
Tuesday also brought news that the New York Stock Exchange no longer plans to remove three Chinese companies from the list. The NYSE had previously thought that this would be necessary to comply with an executive order issued by President Donald Trump, which sought to prevent Americans from investing in companies that are supposed to support the Chinese military. Although Alibaba was not one of the three companies that the NYSE planned to remove from the list, the news helped to reduce investor fears that US regulators would enact a broader crackdown on Chinese companies.
What now
Investing in Chinese stocks offers potential for attractive returns, in part due to the enormous size and rapid growth of the Chinese economy. Unfortunately, it also carries considerable risks, including the possibility of harsh repression by Chinese and American regulators. Although Alibaba appears to have avoided these problematic scenarios in the short term, investors should be aware that the regulatory risk remains.