When investors panicked in March over de-listing worries for China-based stocks, Alibaba (BABA) fell to a $73.28 low. The Chinese government loosened its views as a result. The government told Chinese firms to prepare their financials for auditing.
The Chinese Communist Party may allow the Securities and Exchange Commission to audit Chinese firms. This permission does not stop the SEC from increasing its scrutiny of Chinese firms. Afterward, the SEC added Baidu (BIDU) to the list of companies to consider de-listing.
Alibaba’s steep sell-off last week, falling from $120 to $95.49 on April 14, is a bearish sign. The stock tried but failed, many times to rally throughout the last year. Each time, the stock sold off at the 50-day simple moving average. China’s lockdown of Shanghai will only worsen the country’s economy.
The government does not care about the economic hit from the lockdown. Health Officials get credit for the lockdown and for reporting lower Covid cases. Officials are not punished for any economic losses. The economic disruption will hurt Alibaba, an e-commerce giant. Revenue will not rebound until the lockdown ends.
The lockdown, harsh regulatory rules against Chinese technology firms, and the de-listing risks will hurt BABA stock the most. It is widely held by foreigners. Shareholders will sell the stock first if uncertainties worsen.