Home features Alibaba stock price crashes 9.8% to extend weekly losses on regulatory concerns

Alibaba stock price crashes 9.8% to extend weekly losses on regulatory concerns

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  • China introduced yesterday a set of guidelines with an aim to limit the power of the biggest tech companies
  • Hang Seng Tech index fell 6.23% today after losing 5.15% yesterday
  • Alibaba share price crashed 9.8% today in Hong Kong to close at the lowest levels since August

Shares of Alibaba (NYSE: BABA) crashed nearly 10% in Hong Kong overnight amid growing concerns of China’s ongoing crackdown on tech titans. 

Fundamental analysis: New guidelines introduced

The official Beijing yesterday introduced a set of guidelines with an aim to limit the power of the biggest tech companies, including Alibaba, Tencent, Xiaomi, JD.com, Meituan, etc. This move has created a havoc in the tech sector sending tech stocks crashing for a second consecutive day. 

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Interestingly, this moves from the regulators comes just a week after the surprising suspension of Ant Group’s historical initial public offering. 

”China’s Big Tech will have to rethink their business models,” said Zhan Hao, a managing partner with Anjie Law Firm in Bejing. 

“The philosophy of internet companies is winner-takes-all, and especially for platform operators, they garner user traffic and build up ecosystems that are similar to each other.”

It is apparent that Beijing is concerned that certain companies, such as Alibaba, are becoming simply too big. Titans like Alibaba, JD.com and Tencent have been able to buy smaller companies given their impressive financial strength and therefore prevent competition. 

“I literally gasped when I first read these guidelines,” said John Dong, securities attorney at Shanghai-based law firm Joint-Win Partners. “The timing — on the eve of Singles’ Day — the forcefulness and the resolve to remake the tech giants is startling.”

Hang Seng Tech index fell 6.23% today after losing 5.15% yesterday. 

Technical analysis: Baba crashes

Alibaba share price crashed 9.8% today in Hong Kong to close at the lowest levels since August and extend weekly losses to almost 12%. This way, all of the vaccine-fueled gains from Monday are erased, as well as those from the last month. 

Alibaba stock daily chart (TradingView)

As seen in the daily chart above, the price action is now testing the key support near the 250.00 mark. This is an 8-month ascending trend line that connects two higher lows from March and May. A plunge below this level is likely to open the door for a deeper correction to 230, where buyers may regroup to buy BABA stock.

Summary

Shares of the biggest tech firms in China, led by Alibaba, collapsed in the recent two days after state regulators introduced new measures to limit the power of internet sector giants in the country.