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Investors took a breather on Monday after offloading stocks from

Alibaba Group Holding

(Ticker: BABA), the Chinese e-commerce giant that has been re-examined by antitrust law, shares traded flat after falling 13% in two sessions

Danton Goei, global portfolio manager at Davis Advisors, bets on a rebound towards 2021. “Government action doesn’t really affect Alibaba’s general outlook,” he says. “We think the stock is very cheap right now ”

The drop in prices reflected official tensions around three related but different companies: Alibaba; sister finance company Ant Group, whose blockbuster IPO was canceled at the last minute in early November; and their joint founder, Jack Ma. Of the three, Alibaba’s problems look the least severe looking a barely Dec. 24 The announcement by the state administration of market regulation indicated that it was targeting the company’s practice of “choosing one of two” – i.e. He Force merchants to only sell on Alibaba rather than like competitors


(JD) or



That should deal just a fleeting blow to the core business of e-commerce and leave growth companies like cloud computing completely unmolested, says Goei The most likely follow-up of authorities cracking down on pricing for loss leaders falls into the same category

Challenges facing Ant Group are more serious, the IPO was abandoned after authorities questioned its most profitable practice: borrowing consumer loans and then reselling them to banks with no risk or capital on their own books this weekend when a central bank statement accused Ant of “lacking legal knowledge and ignoring compliance requirements”

The regulator suggested the fintech high-flyer “go back to the basics” as a simple payments network. “The main concern of regulators is that internet banking is getting out of hand,” says Tracy Chen, global credit portfolio manager at Brandywine Global / p>

Ma, who until recently was a revered symbol of China’s online revolution, has done his companies a disservice with “extravagant behavior,” as Chen puts it. He took China’s dominant state banks at a recent conference with party bigwigs for them “Pawnshop mentality” ridiculed and apologized half-heartedly, if at all

Alibaba still owns a third of the Ant Group. However, according to Goei, the paper losses in the postponed IPO are more than priced in. Even if Ant is reduced by half from the target valuation of 300 billion US dollars, this means a decrease in the Alibaba’s stake around $ 50 billion Alibaba’s market cap has lost more than $ 200 billion since the IPO debacle

Chinese regulatory concerns tend to ripple and move from industry to industry, notes Goei’s stake in Alibaba’s co-giant

Tencent Holdings

(700: Hong Kong) were depressed for much of 2019 as the government froze approval of new video games, the biggest source of income, the ban was lifted and Tencent jumped nearly 40% that year

Chances are that business sentiment has further shifted in Beijing’s opaque powerhouses and Jack Ma will end up as “the chicken you kill to scare the monkey,” says Chen, but it’s unlikely Alibaba could be China’s biggest employer right now, she notes, and a valued national champion once shaved a bit “China ultimately wants to win the tech war, and that is what it takes Alibaba,” she says

Then there’s the valuation argument, Raymond James analyst Aaron Kessler believes Alibaba is trading at 16 times its expected 2021 profit This is convincing for a company that in the last quarter increased its sales by 30% and Ebitda by 28% compared to the previous year. “We will continue to buy BABA at the current level,” he says

Investors took a breather on Monday after unloading shares in Alibaba Group Holding (ticker: BABA), the Chinese e-commerce giant under review for antitrust law

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