Bears fo­cus on Alibaba as in­vestors fret over China’s econ­omy

The Pak Banker - - COMPANIES/BOSS -

Short sellers in the United States have pushed bets against Alibaba Group Hold­ing Ltd to the high­est in more than 14 months on con­cern that China's deep­est eco­nomic slow­down since 1990 will only get worse.

Short in­ter­est in China's big­gest on­line re­tailer surged to 7.5 per­cent of shares out­stand­ing on Jan 21, the high­est since Novem­ber 2014, ac­cord­ing to data com­piled by Markit and Bloomberg. That is more than dou­ble from a Dec 1 low.

Bear­ish bets on ri­val JD.com Inc have hov­ered around 2 per­cent since last month. Pes­simists are once again tak­ing aim at Alibaba?a bell­wether for US in­vestor sen­ti­ment on China?as main­land stocks en­tered a bear mar­ket last week.

Those wa­gers are al­ready start­ing to pay off as a sell­off since the start of the year sent the Amer­i­can de­posi­tary re­ceipts of Alibaba down more than 13 per­cent.

In­vestors see Alibaba as a stock that re­flects the state of the Chi­nese econ­omy, said Henry Guo, a San Fran­cisco-based an­a­lyst at Sum­mit Re­search Part­ners LLC, who has a buy rat­ing on the stock. "With China's eco­nomic out­look wors­en­ing, that's just an easy way for peo­ple to have short China ex­po­sure."

China's top lead­er­ship has sig­naled it may ac­com­mo­date more eco­nomic slack­ness as of­fi­cials tackle del­i­cate tasks such as re­duc­ing ex­cess ca­pac­ity.

The world's se­cond-largest econ­omy will slow to 6.5 per­cent this year and 6.3 per­cent next year, ac­cord­ing to the me­dian of econ­o­mist es­ti­mates.

At a cor­po­rate level, coun­ter­feit prod­ucts and ac­count­ing frauds at Alibaba are also on the mind of in­vestors since the com­pany's record 2014 de­but on the New York Stock Ex­change.

Kynikos As­so­ciates LP founder Jim Chanos warned against the stock in Novem­ber, ac­cord­ing to a CNBC re­port. In De­cem­ber, Rus­sian bil­lion­aire Alisher Us­manov said he has started to sell his stake in the e-com­merce gi­ant.

Alibaba de­clined to com­ment on mar­ket spec­u­la­tion in an emailed state­ment. The com­pany is sched­uled to re­port third-quar­ter earn­ings Jan 28. Rev­enue is ex­pected to hit 33 bil­lion yuan ($5 bil­lion), ac­cord­ing to the av­er­age es­ti­mates of 26 an­a­lysts sur­veyed by Bloomberg.

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