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Alibaba shares rally despite reports of massive fine

Alibaba’s US and Hong Kong stocks found themselves on higher ground, after US President Joe Biden signed a US$1.9 trillion stimulus bill into law.

  • Alibaba Group Holding (NYSE: BABA) shares closed 2.77% higher on Thursday (11 March), in line with the wider US stimulus-driven tech stock rally
  • Its Hong Kong shares (HKG: 9988) are also up 1.23% on Friday (12 March), despite reports that Chinese authorities are planning to impose a US$975 million fine on the e-commerce group
  • Analysts see an upside of over 30% on Alibaba’s US stocks
  • Trade Alibaba stocks, long or short, with an IG account

Alibaba could face huge fine

Alibaba Group Holdings could be slapped with a billion dollar fine by Chinese regulators, following an antitrust probe that started late last year.

China’s anti-competition authority, the State Administration for Market Regulation, is considering imposing a fine of over US$975 million on the e-commerce company, The Wall Street Journal reported on Thursday (11 March 2021).

The rumoured fine amount equals the highest fine ever paid in Chinese corporate history. In 2015, Qualcomm Incorporated paid US$975 million over anti-competitive practices.

In December 2020, China’s antitrust body announced that it launched investigations into the group. The announcement had followed the halting of its finance subsidiary Ant Group’s planned US$37 billion initial public offering on the Shanghai stock exchange in the previous month.

Alibaba share price: where next?

Despite the report, Alibaba’s Hong Kong shares are up 1.23% on Friday (12 March). Shares are trading at HK$230.20 each as at 14:10 HKT.

This follows its US listing, which closed 2.77% higher on Thursday, in line with the wider tech stock rally that had come on the back of the signed US$1.9 trillion fiscal stimulus.

In terms of outlook, the group’s US stock currently has a consensus rating of ‘buy’ from 28 analysts, according to the latest data from MarketBeat. It also has an average 12-month share price target of US$323, representing an upside of over 34% from the last traded price.

Last month, analysts from Citigroup, Raymond James, Mizuho, Macquarie and HSBC all boosted their price targets alongside ‘buy’ and ‘outperform’ ratings, after the company announced its December 2020 quarter earnings.

Raymond James analyst Aaron Kessler raised his firm’s target price to US$350 from US$330 while keeping a ‘strong buy’ call, citing the company’s ‘generally solid’ results.

Citigroup analyst Alicia Yap also raised price estimates to US$345 from US$316 with a ‘buy’ rating after Alibaba’s eventual December quarter results surpassed her expectations.

Alibaba’s NYSE stocks are up 5.7% year to date.

Ant Group IPO to happen eventually

In related news, Ant Group Executive Chairman Eric Jing also said earlier this month that the company will still go public at some point as planned, and that it would look for avenues to help employees monetise a portion of their shares.

Jing said in an internal staff memo that the company’s management is in the midst of reviewing its existing remuneration and incentive policy. Management is also working on a ‘short-term liquidity solution’ for employees expected to take effect in April 2021, The Wall Street Journal reported.

The report further added that the ‘liquidity solution’ in question is likely to be a share buyback programme, according to sources close to the company.

How to trade Alibaba shares with IG

Are you feeling bullish or bearish on Alibaba’s stocks?

Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <Alibaba Group Holdings> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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