The reason for the 13.9% drop in Alibaba Share in July.

  The reason for the 13.9% drop in Alibaba Share in July. China's tech stocks fell as Beijing increased regulatory pressure.  

What happened

Shares of e-commerce giant Alibaba Group Holding (NYSE:BABA) fell 13.9%, according to S&P Global Market Intelligence data. Already, Alibaba's 9988 (HKG) HK$193,50 +1,00 (+%0,52) financial arm Ant Financial has been in trouble since its IPO was canceled by Chinese regulators last year. Then, in April 2021, a $2.8 billion fine for anti-competitive practices was added to the woes. In addition, Chinese stocks scored goals in the US stock markets. For all these reasons, Chinese stocks shrank even more with other sectors.

So what

Alibaba was mostly sympathetic to the industry, as other companies became key targets of China's regulatory crackdown in July. And another government edict ordered food delivery companies to comply with local hourly minimum wage laws.  

The reason for the 13.9% drop in Alibaba Share in July.

  This onslaught of heavy government actions caused panic selling throughout the entire Chinese tech industry. Alibaba took a hit with the rest, although most of the pressure in July was directed at other companies.

Conclusion

Alibaba reported quarterly earnings in the first days of August, with revenue growth (with underestimation) 34% adjusted earnings per share, beating estimates of 16.60 yuan ($2.57). Alibaba's stock looks pretty cheap, with a valuation of nearly 20x next year's earnings estimates. However, the Communist Party's crackdown on tech companies remains a big wild card. Still, for those who expect the regulatory offensive to come to an end at some point, Alibaba's leading positions in e-commerce and cloud computing may present an attractive long-term opportunity.  

Source: The Motley Fool

 

You may also be interested in:

 

One of the issues pending TSMC is Intel’s Plans for ‘Accelerated’ Chip Production