Alibaba Antitrust Crisis Stirs Up Worries for Chinese Tech Future

Alibaba has led the second day of selling among China’s largest tech firms, driven by fears of antitrust scrutiny enveloping all powerful corporations in the country. 

Alibaba, Tencent Holdings, Meituan and JD have shed nearly $200 billion in Hong Kong over the two sessions since Thursday, when regulators unveiled an investigation into their monopolistic practices. 

“It is very hard to predict the outcome of the Chinese government’s ongoing investigation into Alibaba and other large consumer internet platforms”, says Baird analyst - Colin Sebastian. He has already cut his price target on Alibaba’s US-listed shares to $285 from $325 over “uncertainty around government oversight and potential for direct regulatory action in the coming year.”

The company’s American depositary receipts closed comparatively unchanged Monday, following their 13% drop the previous session. Volume surged to several times the 12-month daily average as doubts over the future loomed. JD.com fell 3.4% and Tencent declined 3.5%. The day’s Hong Kong trading resulted in: Alibaba falling 8% Monday, shedding $270 billion of value since its October peak, while Tencent and Meituan falling over 6%.

“The Chinese government is putting more pressure or wants to have more control on the tech firms. There is still very big selling pressure on firms like Alibaba, Tencent or Meituan. These companies have been growing at a pace deemed by Beijing as too fast and have scales that are too big”,  says Jackson Wong, asset management director at Amber Hill Capital Ltd.

The question that worries markets most, however, is: are these big tech firms just the beginning?

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