Alibaba Leads Dip in US-listed China Shares
A report that Alibaba is facing an investigation in China over a data theft case; Updated the regulator’s concerns widely. US-listed Chinese stocks fell on Thursday; That left them poised for their sharpest weekly loss since March. The Nasdaq index fell about 2%, led by Alibaba. The firm fell as much as 7.7% in a five-day losing streak. Baidu and JD.com declined 2.5% and 0.5%. Nio lost 0.3%.
It is worth noting that the executives of Alibaba’s cloud division were summoned to the talks by the Shanghai authorities; regarding the theft of a large database of police data, one of the nation’s biggest cyber security breaches. The news and reports on Monday that China is hitting the tech giants with regulatory fines dented investor sentiment for the group after a rally in June. In June, the Golden Dragon index increased by 16%. It was already the best month since 2019.
The government appears to have backed off its regulatory crackdown on the tech industry and continued to use support measures. The rally then stalled amid regulatory uncertainty and the risks of a new Covid-19 lockdown. The Golden Dragon Index is still down about 17% this year.
Beijing’s sweeping regulatory crackdown has dramatically slowed China’s e-commerce deal type. Hence, Alibaba is cutting a third of its staff in its domestic deals team. The firm plans to downsize its strategic investment team of more than 110 people. Alibaba and Tencent planned to cut tens of thousands of jobs this year; One of their biggest shutouts in the round.
ByteDance, the owner of TikTok, also downsized its investment team and spun off a sub-group focused on financial returns. This is in response to a regulatory crackdown in China. Chinese regulators launched an unprecedented campaign in late 2020 to rein in the country’s tech giants over the years. The regulatory restraint, linked with a slowing economy, has strongly affected sales gain for most Internet firms. Destroyed their share prices and raising new capital and business expansion became more difficult. This, in turn, has forced companies to look for ways to reduce operating costs.
Alibaba has attracted talent over the years to bolster its internal deal-making capabilities. In 2016 Chinese firms were actively buying assets globally. Hence, the firm’s in-house investment team has grown to approximately 150 people. According to reports, between 2015 and 2021, Alibaba made an average of about 44 investments annually. The peak was in 2018, with 70 deals. Even during last year’s regulatory crackdown, the firm closed 38 deals. However, so far this year, Alibaba has only made nine investments, a total of 5.2 billion dollars.
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