The National - Alibaba shares slide as Jack Ma stays away from the public eye amid regulatory probe

Yogesh Khairajani, Special to The National Jan 04 2021

The year 2020 was a bumper one for many listed tech titans. However it hasn't been all rosy for billionaire Jack Ma's companies.

The anti-monopoly investigation launched by Chinese regulators into Alibaba Group last month, and the absence of the billionaire founder from the public realm over the last two months, since the collapse of Ant Group’s initial public offering, are casting a shadow on the performance of the e-commerce giant’s shares.

Alibaba Group’s stock price dropped 2.15 per cent in Monday trading in Hong Kong to close at HK$227.6 ($29.35), as investors grew increasingly nervous over regulatory hurdles.

The e-commerce company’s share price has fallen by a quarter from its peak since the start of the investigation, according to financial services provider Century Financial.

“However, what is important from Alibaba’s perspective is China’s newly enacted laws and regulations regarding its monopolistic behaviour,” said Yogesh Khairajani, a global market strategist at Century Financial.

“The country’s policymakers are concerned and view the company as too big as well as risky. Only clarity regarding the policy can remove the current bearishness in the stock.”

But he added that Alibaba “is still the best play on Chinese consumers” and will always be on investors’ radar once there is more certainty regarding the country’s policy.

Even though investors are shying away from Alibaba's stock, that could change as the company’s valuations are cheap when compared to its Western peers, Mr Khairajani told The National.

“And it is generally expected that China will not damage the fortunes of its biggest corporate success story.”

Alibaba and payments giant Ant Group are facing antitrust scrutiny and questions over risks to financial stability. The unravelling of Ant’s $35 billion IPO in November set in motion a string of decrees regulating China’s technology sector.

Stephen Innes, chief global market strategist at Axi, said Mr Ma was instructed to remain in China during the probe by mainland regulators.

“This continues to weigh on Alibaba stocks as Chinese regulators are concerned about technology companies getting too powerful and venturing into financial services, where their monopolistic tendencies can squeeze out banks from a lower fees perspective. Banks do not possess the means or wherewithal to complete with tech sector behemoths.”

In a rare move, Mr Ma in October said China’s financial system was "stifling" tech innovation. He has since edged away from the public limelight since the Ant IPO collapsed.

“When the chief executive becomes AWOL, investors do not think that is a good sign,” said Naeem Aslam, chief market analyst at Avatrade.

“In these difficult times, we need assurance from the chief executive that he has what it takes to pull the company out of this mess and steer the business in the right direction. The fact that we have not heard anything from Jack Ma isn’t helping the stock or providing any assurance to investors.”

Investors are also worried that the anti-trust scrutiny and tighter regulations will spread beyond Mr Ma’s internet empire to other powerful tech companies such as Tencent Holdings and JD.com.

“Investors are shying away from large China tech in favour of smaller tech [firms] that might sneak in through the side door providing tech services that the large tech might not be allowed to complete,” added Mr Innes.

Regulators have asked FinTech giant Ant Group to revamp its business model and return to its original business as a payment services provider.

The group is reportedly planning to form a holding company to house its wealth management, consumer lending, insurance and payments services as well as MYbank.

Under such a structure, Ant’s businesses would likely be subject to more capital restrictions.