When Chinese regulators reportedly considered new antitrust rules against online platforms, Alibaba (NYSE:BABA) stock continued its fall. The stock may not return from its peak of over $300 last month. Given the heightened political cloud around it, investors should exercise caution.
Chinese regulators unexpectedly stopped what would have been a blockbuster IPO of Ant Group. Retired Alibaba Chairman Jack Ma owned a controlling stake. He criticized the government weeks before the planned spinoff. Investors should realize that whenever a person or company becomes too big, the Chinese government will notice.
Although Ma’s blunt speech questioning local regulators will cost him financially, investors should avoid Alibaba stock until the selling pressure eases and political clouds clear. Markets will now discount the value of Ant from Alibaba.
Fundamentally, Alibaba is stronger than ever. Singles Day generated $74 billion in gross merchandise volume. The value is not comparable to previous periods, since Alibaba ran the event from November 1 to Nov 11 (or 11.11). Chinese consumers embraced cutting-edge technology, as 60 million used Tmall’s 3D shopping feature. So, they could browse the entire IKEA store on the app without leaving the home.
Premium internet retail firm JD.com (NASDAQ:JD) continues to trade at highs, while the sharp drop in Alibaba is an opportunity. First, wait for BABA stock selling to end.