Monday, December 28, 2020

Alibaba’s Stock Suffers Biggest Single-Day Decline


News shaping
the markets today


What’s happening: Shares of Alibaba Group Holding Ltd tumbled sharply on Thursday after the Chinese government launched an anti-trust probe into the company.

What happened: Once hailed among the major economic growth drivers of the country, Alibaba and Tencent Holdings are under immense pressure from Chinese regulators having reported hundreds of millions of users.

Alibaba’s stock suffered its biggest single-day decline on record on Thursday, just a month after Chinese billionaire Jack Ma was forced to suspend the IPO of Ant.

Why it matters: The internet industry in China, which is widely protected from competition from the world’s tech giants like Google and Facebook, is dominated by Alibaba and Tencent.

China’s regulators launched an inquiry into Alibaba for its alleged monopolistic behaviour, which dictates that its merchants work exclusively on its platform.

The other pillar of Jack Ma’s empire, Ant Group, was also summoned to a meeting by Chinese officials. Ma, who is credited with co-founding both Alibaba and Ant, was looking for a planned $37 billion IPO of Ant Group during November. However, the IPO was put on hold as the Chinese billionaire had appeared to have irked the Chinese government with his comments around the country lacking “the risk of a healthy financial system.”

Alibaba issued a statement saying that the company will cooperate fully with the country’s regulators in their investigation, while assuring stakeholders that operations at its company will remain normal through the inquiry.

Meanwhile, management tried to provide some support to Alibaba’s shares by raising its share repurchase program by $4 billion to $10 billion.

How shares reacted: Alibaba’s US-listed shares plummeted 13.3% to close at $222.00 on Thursday, recording its biggest decline ever. The stock tumbled over 5% during early Hong Kong trading to a fresh six-month low this morning.

What to watch: Investors will keep an eye on any news around the investigation, hoping Alibaba does not get fined for any of its practices. The chances are slim of Ant Group going through with its huge stock listing in 2021 with China’s regulators tightening rules in the fintech industry.

The Markets Today


US stocks will be in focus today as investors return from the long holiday weekend.

Context: Wall Street recorded slight gains on Thursday to end the holiday-shortened week on a positive note. Markets are expected to celebrate news of President Donald Trump signing the $900 billion covid-19 aid package.

Details: Following days of drama, President Trump finally announced the signing of a pandemic relief package to avert a government shutdown, which included the $600 direct-payment checks instead of the $2,000 that Trump had been asked for.

The President’s decision to sign the bill into law is likely to be welcomed by global markets. Trading volumes in the US remained low on Thursday as the markets closed early, at 1pm ET on Christmas Eve and remained closed on Friday for Christmas.

Investors continued to monitor progress on the rollout of covid-19 vaccines with the CDC (Centers for Disease Control and Prevention) saying that over one million doses of the vaccine had been administered as of Wednesday. Meanwhile, the EU and UK inked a historic Brexit trade deal, more than four years after Britain voted in favour of leaving the Eurozone.

The Dow Jones index gained 70.04 points to close at 30,199.87 on Thursday, while the S&P 500 rose 0.4% to 3,703.06. Technology stocks delivered strong gains, taking the Nasdaq 100 0.3% highest to 12,804.73.

Despite the gain on the last trading day, the S&P 500 recorded a 0.2% weekly loss, as policy uncertainty affected investor sentiment, while the Dow 30 rose added 0.1% last week.

What to watch: US stock futures traded higher during the Asian session as investors welcomed the stimulus-related news. The rise suggests a higher open on Wall Street today. The US economic calendar remains light today, with the country scheduled to release only the Dallas Fed manufacturing index, which had declined to 12 in November versus a two-year high of 19.8 in the prior month.

The rising covid-19 cases will remain in focus, with infections in the country crossing 19 million.

Other Markets: European trading indices closed mostly higher on Thursday, with the FTSE 100 and Stoxx Europe 600 up by 0.10% and 0.12%, respectively. The French 40 bucked the trend to lose 0.1% in the session.

Support & Resistances
for Today


market snapshot


Futures at 0400 (GMT)

What else to watch today


Spain’s retail sales, France’s initial jobless claims, South Africa's balance of trade, Saudi Arabia’s money supply M3, bank lending growth and balance of trade, Russia’s corporate profits and business confidence, Argentina’s retail sales as well as South Korea’s composite consumer sentiment index.