National Post (National Edition)


Probe stirs global worry on what next for Alibaba, rivals


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 Inc. — have shed nearly US$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 US$285 from US$325, citing “uncertaint­y around government oversight and potential for direct regulatory action in the coming year.”

The company’s American depositary receipts fluctuated Monday — after a historic 13 per cent 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. fell 3.4 per cent and Tencent declined 2.9 per cent. The day’s Hong Kong trading was also fierce: Alibaba fell 8 per cent Monday, shedding US$270 billion of value since its October peak. Tencent and Meituan both tumbled more than 6 per cent.

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 US$35-billion initial public offering before unveiling draft rules enshrining sweeping powers to clamp down on anticompet­itive 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.”

It's unclear what concession­s regulators may try to wring from Alibaba. Under the existing Antitrust Law — now undergoing revisions to include the internet industry for the first time — Beijing can fine violators up to 10 per cent of their revenue. In Alibaba's case, that could mean a levy of as much as US$7.8 billion.

China's e- commerce leader on Monday raised a proposed stock repurchase program by US$4 billion to US$10 billion, effective for two years through the end of 2022. But the buyback program was overwhelme­d by fears that the steps taken against Ant are just the tip of the iceberg. While the central bank stopped short of calling for a breakup, the financial services giant now needs to present specific measures and a timetable for overhaulin­g its business.

The State Administra­tion for Market Regulation dispatched officials to Alibaba's Hangzhou headquarte­rs last Thursday and the on-site investigat­ion was completed on the day, according to local news reports. The People's Daily — the Communist Party mouthpiece — ran a commentary over the weekend warning Alibaba's peers to take the antitrust investigat­ion into Alibaba as a chance to lift their own awareness of fair competitio­n.

Ma, the flamboyant cofounder of Alibaba and Ant, has all but vanished from public view since Ant's IPO got derailed last month. As of early December, the man most closely identified with the meteoric rise of China Inc. was advised by the government to stay in the country, a person familiar with the matter has said.

Ma isn't on the verge of a personal downfall, those familiar with the situation have said. His very public rebuke is instead a warning Beijing has lost patience with the outsized power of its technology moguls, increasing­ly perceived as a threat to the political and financial stability President Xi Jinping prizes most.

 ?? ANTHONY KWAN/BLOOMBERG ?? The icons for Alibaba Group Holding Ltd. applicatio­ns
ANTHONY KWAN/BLOOMBERG The icons for Alibaba Group Holding Ltd. applicatio­ns

Newspapers in English

Newspapers from Canada