Alibaba antitrust fears fuel sell-off in Chinese tech giants

Investors worry that net will widen further as Alibaba and Tencent come under scrutiny

HONG KONG • Alibaba Group Holding led a sell-off in Chinese tech giants triggered by fears that antitrust scrutiny will spread beyond Mr Jack Ma's Internet empire and ensnare more of the country's most powerful corporations.

China's e-commerce leader yesterday raised a proposed stock buyback programme by US$4 billion (S$5.3 billion) to US$10 billion, effective for two years through the end of 2022. The programme, which began this quarter, failed to stem a slump in the shares, which slid more than 5 per cent in Hong Kong to a six-month low.

Once hailed as the standard-bearers of China's economic and technological ascendancy, Alibaba and rivals like Tencent Holdings now face increasing pressure from regulators worried about the speed with which they are amassing users and gaining influence over almost every aspect of daily life.

Alibaba has shed over US$230 billion from its peak, battered by the deepening scrutiny and allegations of monopolistic practices at the crown jewel of Mr Ma's empire.

Shares in Tencent and Alibaba rival slid roughly 2 per cent in Hong Kong, while food delivery giant Meituan tumbled more than 4 per cent as investors feared the antitrust net might widen further. Affiliate Alibaba Health Information Technology posted its biggest two-day slump since July 2015.

The People's Daily - the Communist Party mouthpiece - ran a commentary over the weekend warning Alibaba's peers to take the antitrust investigation into Alibaba as a chance to lift their own awareness of fair competition.

"The Chinese government is putting more pressure or wants to have more control on the tech firms," said Mr Jackson Wong, asset management director at Amber Hill Capital. "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."

The State Administration for Market Regulation kicked off an antitrust investigation into Alibaba last week and dispatched officials to its Hangzhou headquarters.

On Sunday, Chinese regulators ordered Mr Ma's other online titan - Ant Group - to return to its roots as a provider of payment services, threatening to throttle growth in its most lucrative businesses of consumer loans and wealth management.

Mr Ma, the flamboyant co-founder of Alibaba and Ant, has all but vanished from public view since Ant's initial public offering got derailed last month. As of early this month, the man most closely identified with the meteoric rise of China Inc was advised by the government to stay in the country, a person familiar with the matter has said.

Mr Ma is not on the verge of a personal downfall, those familiar with the situation have said. His public rebuke is instead a warning that Beijing has lost patience with the outsize power of its tech moguls, increasingly perceived as a threat to the political and financial stability President Xi Jinping prizes most.

Investors remain divided over the extent to which Beijing will go after Alibaba and its compatriots as Beijing prepares to roll out the new anti-monopoly regulations.

Some analysts predict there is a crackdown coming, but a targeted one. They point to language in the regulations that suggests a heavy focus on online commerce, from forced exclusive arrangements with merchants to algorithm-based prices favouring new users. The regulations specifically warn against selling at below-cost to weed out rivals.


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A version of this article appeared in the print edition of The Straits Times on December 29, 2020, with the headline Alibaba antitrust fears fuel sell-off in Chinese tech giants. Subscribe