Alibaba shares plunge on Monday after raising share buyback size

The e-commerce group’s Hong Kong shares took a beating a day after Chinese authorities ordered its fintech arm Ant Group to refocus on its payments business.

  • Alibaba’s Hong Kong share price fell over 7% on Monday (28 December 2020) morning
  • This comes despite the group raising the share buyback amount to US$10 billion from US$6 billion previously
  • On Sunday (27 December 2020), Chinese authorities also announced the results of a recent antitrust probe into Ant Group, Alibaba’s fintech arm
  • Regulators have ordered Ant Group to return to its initial payments services business model

Why did Alibaba open lower on Monday?

Alibaba Group’s share price sunk as much as 7.1% on Monday (28 December 2020) morning, after its board of directors approved the expansion of its share repurchase programme from US$6 billion to US$10 billion.

The share buyback scheme, which commenced earlier this quarter, will be effective for a two-year period through the end of 2022, the group said.

Following that, Alibaba’s Hong Kong shares opened at HK$219.20, before falling to a six-month low of HK$212 by 11:45 HKT.

Alibaba’s shares last traded at this level in June 2020. The stock is up 2.6% year-to-date, which is well below the year’s peak of 46.4% that was achieved on 28 October 2020, when shares had hit a price of HK$307.40.

What’s the regulatory update on Ant Group?

Last week, Chinese authorities began a probe into the e-commerce giant, as part of its antitrust clampdown on suspected monopolistic practices in the internet industry, signalling the start of a more involved approach to private sector dealings.

After sending officials to the group’s Hangzhou headquarters, the government on Sunday (27 December 2020) ordered Ant Group - the financial technology arm of Alibaba - to return to its roots as a payments services provider.

Such a move would put an abrupt halt to Ant Group’s rapidly growing and highly lucrative consumer loans and wealth management segments.

Ant Group’s Alipay first started out as a payment platform for Alibaba’s online shopping sites and apps. It then evolved beyond payments into loans provisions and investments, helping over 700 million users to secure small loans, invest savings and purchase investment products, including insurance.

Ant Group’s growing influence in the finance sector - a key pillar of the economy - had prompted the Chinese government to suspend what would have been the world’s largest initial public offering, citing ‘major issues’ with the listing.

Where next for Alibaba shares?

The outcome of the investigation did not surprise Raymond James analyst Aaron Kessler. He wrote in a client note that he believes ‘the most likely outcome is the termination of these exclusive relationships, though it is difficult to quantify the potential revenue impact’.

Kessler believes investors have priced in these concerns for now. As such, he reiterated a ‘strong buy’ call on the group’s US stocks, alongside a price target of US$330, which represents a nearly 50% upside from current price levels.

Meanwhile, UBS analyst Jerry Liu thinks the probe’s results will likely ‘cause investors to price in a more negative outcome’. He has a ‘buy’ rating on Alibaba and share price target of US$340.

How to trade Alibaba with IG?

Are you feeling bullish or bearish on Alibaba’s Hong Kong/ US 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 Holding> 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

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.