SoftBank on a downwards momentum building

As the dust settles from Alibaba IPO, it looks like many investors have been cashing out not just from the Chinese e-commerce giant but also in its proxies.

China flag
Source: Bloomberg

SoftBank, Yahoo, and China Dongxiang were among the popular proxy stocks that investors had bid up ahead of the listing thanks to their stakes in Alibaba.

Since Alibaba’s listing last Friday, SoftBank’s stock price has slid nearly 10% - a loss of over $8 billion in market cap. Another proxy Yahoo has dropped around 5% over the same period, while a smaller company China Dongxiang saw larger volatility.

On a long-term view, investors might consider the dip as a buying opportunity.  

According to calculations by Jefferies Group, SoftBank’s current market value of $87.4 billion is at least a quarter below the sum of SoftBank’s individual assets. This includes its telecoms business in Japan, as well as takes in US telco Sprint, Japan-based game maker GungHo Online Entertainment and of course Alibaba.

 

Stakes in Alibaba

June 1st till Alibaba IPO

Since Alibaba IPO

Alibaba

-

-

-5%

SoftBank

34%

+19%

-10%

Yahoo 23% +18% -4.8%
China Dongxiang 0.31% +26% -13%

 

However, in the short term there is still some bearish sentiment overhanging that could weigh down the stock price further.

Looking at the daily chart, the stock price has just broken under its Fibonacci retracement of 61.8%, around 7,975 yen, which is also a previous resistance. If the momentum continues, the price would likely test the 38.2% retracement level, around 7,475 yen.

 

Click to enlarge

The MACD has just crossed under the signal line, which indicates a bearish signal and suggests a sell call in the interim.

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