Alibaba antitrust fears cause $200 bn Chinese tech sell-off
HANGZHOU: 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 JD.com Inc. —have shed nearly $200 billion over 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.
On Sunday, the central bank ordered Ma’s other online titan 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 standardbearers 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 are—Ant nas such as media and education and gaining influence over the daily lives of hundreds of millions. That concern crystallised in November, when regulators torpedoed Ant’s $35 billion initial public offering before unveiling draft rules enshrining sweeping powers to clamp down on anti-competitive practices in sectors from e-commerce to social media.
Alibaba fell 8% Monday in Hong Kong, shedding $270 billion of value since its October peak. Tencent and Meituan both tumbled more than 6%. Alibaba rival JD.com Inc. slid roughly 2%.
“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. These companies have been growing at a pace deemed by Beijing as too fast and have scales that are too big.”
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% of their revenue. In Alibaba’s case, that could mean a levy of as much as $7.8 billion.
China’s e-commerce leader on Monday raised a proposed stock repurchase programme by $4 billion to $10 billion, effective for two years through the end of 2022. But the buyback programme 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.