Alibaba Lost More Than $340 Billion In Market Cap Since October 2020; Relief From Beijing Crackdown Not Expected Before 2022

Recently when Chinese e-commerce giant Alibaba’s founder Jack Ma travelled to Europe for the first time since Beijing launched a crackdown, the company’s Hong Kong shares railed as much as 9 per cent on 20 October. But the overall financial situation hasn’t yet improved.

Despite a 30 per cent rebound since 5 October, the price is still 43 per cent behind its October 2020 peak.

In late 2020, Alibaba’s founder Ma gave a speech criticising Chinese regulators and soon after that the company’s fate was changed. Beijing halted the listing of its fintech subsidiary Ant Group and has subsequently launched a broad crackdown on the country's most dynamic industries.

Almost a year later, since the controversial speech, now the technology behemoth has lost a massive $344 billion in market capitalisation. According to Bloomberg, it is the largest wipe-out of shareholder wealth globally.

Ma, who had previously maintained a high profile, had suddenly vanished from public view in the months that followed. Other targets of the Communist Party's campaign were delivery behemoth Meituan and private tutoring firms.

As a result of Beijing’s crackdown, Alibaba ended up paying a record $2.8 billion antitrust fine and pledged to change its business practices.

As a result of China's zero-Covid policy, Bloomberg Intelligence estimates active users at the e-commerce behemoth to have surpassed consensus projections in the fiscal second quarter.

On 5 November, Alibaba is expected to release its profit details.

However, according to another report by Bloomberg, China's top financial regulator said he expects to make major headway in the ongoing crackdown on fintech businesses by the end of the year, fueling speculation that Beijing's drive to reign in its digital behemoths is winding down.

According to China Banking and Insurance Regulatory Commission Chairman Guo Shuqing, authorities have discovered more than a thousand problems with 14 online platforms' finance operations.

He has predicted much more significant improvement before the end of 2021, saying that the firms have responded positively to the input and that around half of the requested rectifications have already been implemented.

Nonetheless, Guo pledged to enact strong restrictions and dismantle monopolies, claiming that unfair competition exists in some sections of China's financial industry. According to the regulator, the country has "zero tolerance" for illegal financial operations.

Investors have pounced on any indication that China's nearly one-year-old crackdown is nearing its end, scooping up battered tech companies in recent weeks.

A smaller-than-expected fine for Meituan earlier this month, as well as a Dow Jones' recent report indicating that the Chinese cybersecurity agency is nearing the end of its investigation into Didi Global Inc., have fueled confidence.

Tom Masi, a portfolio manager at GW&K Investment Management told Bloomberg: “The regulatory crackdown is coming to an end, probably over the next few months and the valuations of Chinese stocks are very inexpensive and attractive, especially for tech stocks.”