Alibaba Shares Tumble Wednesday – Here’s Why

Alibaba Group Holding Limited (NYSE:BABA) and other Hong Kong stocks plummeted to a 14-month low Tuesday following a report on China’s economic growth falling short of expectations and declining home prices.

The Hang Seng Index dropped 2.8% to its lowest point since November 2022, marking the steepest one-day decline in six months.

The broader indexes IShares China Large-Cap ETF (NYSE:FXI) and KraneShares Trust KraneShares CSI China Internet ETF (NYSE:KWEB) fell 3% – 4% Tuesday.

Alibaba stock fell roughly 3% in Hong Kong. PDD Holdings Inc (NASDAQ:PDD) and JD.Com, Inc (NASDAQ:JD) shed close to 4-5%. Financial stocks like HSBC Holdings, Plc (NYSE:HSBC) and AIA Group also faced losses, SCMP reports.

Real estate companies experienced significant declines, with Longfor Group and China Resources Land falling over 4% after new home prices in major mainland cities saw their steepest drop since February 2015.

China’s economy grew 5.2% last quarter, below the 5.3% market consensus. Retail sales underperformed, while industrial production exceeded expectations.

Strategists at BCA Research expressed skepticism about China’s role in global economic growth, citing the government’s reluctance to implement substantial stimulus measures.

They anticipate that more economic downturns will be needed before policymakers consider interest rate cuts.

Hong Kong and mainland stock benchmarks have dropped at least 4% due to concerns about China’s economic recovery and the ineffectiveness of stimulus measures.

The People’s Bank of China maintained its policy lending rate, indicating concerns about weakening the local currency.

Investment manager Wu Kan noted that the GDP data is causing panic selling, with expectations of further corporate earnings cuts. However, this also raises hopes for more stimulus measures.

In 2023, major Chinese internet firms like Alibaba, Tencent Holding Ltd (OTC: TCEHY, and Baidu Inc (NASDAQ: BIDU) significantly cut their external investments by nearly 40% to 102 deals.

Influenced by the economic slowdown, regulatory challenges, and geopolitical tensions, this reduction marked a significant shift from their previous aggressive expansion strategies.

These companies refocused their investments on sectors like corporate services, healthcare, video games, advanced manufacturing, and AI startups, including those developing large language models similar to OpenAI’s ChatGPT.

Price Action: BABA shares are trading lower by 2.68% at $67.59 premarket on the last check Wednesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo by zhu difeng on Shutterstock

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