Alibaba Group Holding Ltd. led a second day of frenetic selling among China’s largest tech firms, driven by fears that antitrust scrutiny will spread beyond Jack Ma’s internet empire and engulf the country’s most powerful corporations.
Alibaba and its three largest rivals – Tencent Holdings Ltd., food delivery giant Meituan and JD.com Inc. – have shed nearly $200 billion in Hong Kong over the two sessions since Thursday when regulators revealed an investigation into alleged monopolistic practices at Ma’s signature company. That marked the formal start of the Communist Party’s crackdown on not just Alibaba but also, potentially, the wider and increasingly influential tech sphere.
“It is very hard to predict the outcome of the Chinese government’s ongoing investigation into Alibaba and other large consumer internet platforms,” Baird analyst Colin Sebastian wrote in a note. He cut his price target on Alibaba’s U.S.-listed shares to $285 from $325, citing “uncertainty around government oversight and potential for direct regulatory action in the coming year.”
The company’s American depositary receipts fluctuated yesterday – after a historic 13% slide the previous session – as volume passed the 12-month daily average in first half-hour, reflecting doubt over what’s going to happen next. JD.com fell 3.4% and Tencent declined 2.9%. The day’s Hong Kong trading was also fierce: Alibaba fell 8% yesterday, shedding $270 billion of value since its October peak. Tencent and Meituan both tumbled more than 6%.
KeyBanc Capital Markets wrote that this “significant” pullback had created an attractive buying opportunity, adding that it doesn’t anticipate a meaningfully different competitive landscape for the company.
On Sunday, China’s central bank ordered Ma’s other online titan – Ant Group Co. -to return to its roots as a payments service and overhaul adjacent businesses from insurance to money management, spurring talk of an eventual breakup.
Once hailed as the standard-bearers of China’s economic and technological ascendancy, Alibaba and its compatriots now face increasing pressure from regulators worried about the speed with which they’re amassing clout in sensitive arenas such as media and education and gaining influence over the daily lives of hundreds of millions. That concern crystallized in November, when regulators torpedoed Ant’s $35 billion initial public offering before unveiling draft rules enshrining sweeping powers to clamp down on anti-competitive practices in sectors from e-commerce to social media.
“The Chinese government is putting more pressure or wants to have more control on the tech firms,” Jackson Wong, asset management director at Amber Hill Capital Ltd., said by phone. “There is still very big selling pressure on firms like Alibaba, Tencent or Meituan. These companies have been growing at a pace deemed by Beijing as too fast and have scales that are too big.” Coco Liu, Bloomberg
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