Alibaba Stock Set to Drop for Second Day. Why It’s Time to Look Past China’s Misery.
Alibaba's stock is dropping due to China's struggling economy, but there are signs of resilience and hope for the future.
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Posted 8/31/2023, 1:19:00 PM
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CNBC's Jim Cramer believes that China's market won't collapse despite its recent economic challenges, as he trusts the country's leadership to address the issues and prevent a complete downfall.
Asian stocks, particularly Chinese markets, may find some respite after Wall Street's resilience on Monday despite surging bond yields, although economic data and policy actions out of China remain disappointing.
Nike shares are continuing to drop as China's slowing economy affects the company, leading to its longest losing streak since its IPO in 1980. Other companies such as Starbucks and Qualcomm are also facing challenges in China.
China's economy is facing a series of crises, including a real estate and debt crisis, record joblessness, and a growing lack of confidence, leading to decreased spending and investment.
Profits at China's industrial firms fell for a seventh consecutive month in July, declining by 6.7% year-on-year, as weak demand and a faltering post-pandemic recovery continue to squeeze companies in the world's second-largest economy.
China's leading e-commerce company, JD.com, has experienced a significant decline in its stock price due to investor concerns about the Chinese economic recovery and the property market debt crisis, despite positive second-quarter earnings and growth prospects.
China's economic slowdown is causing alarm worldwide, with countries experiencing a slump in trade, falling commodity prices, and a decrease in Chinese demand for goods and services, while global investors are pulling billions of dollars from China's stock markets and cutting their targets for Chinese equities.
China's attempts to stabilize its stock market through new initiatives and measures have failed as a brief rally fizzled out, reflecting concerns over the nation's economic health.
Chinese stocks, including Alibaba, rise for a second day following stimulus measures from Beijing, but long-term gains may be challenging due to concerns over China's economy.
Ambarella stock is dropping due to weak demand and customer inventory reductions, according to the chip maker's disappointing guidance.
Chinese stocks, including Alibaba, JD.com, and Baidu, rebounded as investors bought the dip, while property manager Country Garden faced liquidity pressures.
Most Asian stocks fell on Tuesday due to concerns over slowing growth in China, a property sector meltdown, and hot inflation readings, which raised concerns over higher interest rates. Chinese stocks were the worst performers, with investors growing impatient with Beijing's slow approach to stimulus measures.
China's stock market rebound may be temporary as corporate earnings continue to decline and companies revise down their outlooks, causing concern for foreign funds and prompting Bank of America to urge caution.
Hong Kong stocks, including SMIC, Tencent, and JD.com, dropped as weak China trade data and a depreciating yuan put pressure on the market.
Alibaba stock falls as more economic data from China weighs on shares.
Chinese stocks have passed the worst of the selling pressure and are still attractive to investors due to their cheap valuation and potential for growth, according to CLSA. However, Beijing needs to address concerns and risks in the economy. The MSCI China Index has fallen this year, but a pause in the Federal Reserve's tightening policy is expected to reverse market pessimism.
The Hong Kong-listed shares of Alibaba Group fell over 4% after the surprise departure of former CEO Daniel Zhang from the company's cloud computing business.
China's property shares are declining and tech shares are underperforming, leading to a slide in the Asian market, while the European market waits for monetary policy decisions from the ECB and the Bank of England.
Alibaba's outgoing CEO Daniel Zhang surprises the market by stepping down from the company's cloud business, leading to a 3.5 percent drop in Alibaba shares.
China's economy is facing potential decline due to high debt levels, government interference, and an aging population, with warnings of a full-blown financial crisis echoing the 2008 US recession. Failure to liberalize the economy could have long-term consequences, as foreign investments are restricted and the lack of capital inflow and outflow could harm businesses.
Chinese internet stocks, such as Alibaba (BABA), JD.com (JD), and Baidu (BIDU), have faced challenges this year due to the stalled Chinese economy, but their low valuations and AI capabilities present potential opportunities for investors. Despite their current struggles, analysts remain optimistic about the long-term prospects of these stocks, with JD.com expected to have the highest upside potential of over 80%.
The performance of Alibaba and JD.com stocks suggests that investors are uncertain about whether China's economy is improving despite positive Chinese data.
US stocks fell on Friday, with the S&P 500 down 0.9%, Dow Jones down 0.5%, and Nasdaq down 1.4%, as concerns about giving up the week's gains outweighed China's improved economic performance, a historic strike by the United Auto Workers, and positive signs of resilience in the US consumer and inflation pressures that make a case for more Fed rate hikes.
China's stock market has slumped due to worrying economic data including falling prices, missed expectations in retail sales and industrial production, and plunging real estate investment, leading analysts to express concerns about an impending downward spiral in the Chinese economy.
Despite uncertainty in the stock market, three stocks that are well-positioned to weather a market crash are Berkshire Hathaway, Walmart, and PepsiCo. Berkshire Hathaway's strong financial results and diversified business make it resilient, while Walmart benefits from its discount retail status and reputation as the largest grocery retailer in America. PepsiCo's steady earnings growth, pricing power, and long history of increasing dividends make it a reliable choice.
Summary: U.S. stocks slumped amid mixed sentiment about the economy, with only the Dow Jones Industrial Average rising for the week, while Asia-Pacific markets mostly fell, and China's venture capital investment dropped by 31.4% compared to 2022 due to its sluggish economy and geopolitical tensions discouraging foreign investors.
Pessimism among U.S. businesses operating in China is on the rise, with a record low percentage of firms optimistic about their five-year outlook, according to a survey by the American Chamber of Commerce in Shanghai, driven by concerns over geopolitics and a slowing economy.
UBS Investment Bank suggests that the stock slump in China is almost over and investors should be more optimistic about the market outlook, as economic fundamentals have improved and technical signals indicate a potential market rebound.