Alibaba Group Holding Ltd – ADR BABA shares are trading lower by 7% to $108.40 this week following the reopening of the Chinese market after a weeklong public holiday.
Volatility this week stems from domestic traders' expectations of broader economic stimulus measures, which were not immediately met. Subsequent actions by China's central bank, the People's Bank of China (PBoC), have somewhat tempered the market’s concerns.
What’s Happening: As China's equity markets resumed trading on Tuesday, investor sentiment was initially cautious due to the lack of substantial economic stimulus that traders had factored into their outlook during the holiday break.
This led to a pressured start for key Chinese stocks, including Alibaba. The company, heavily dependent on China’s domestic economic health and consumer confidence, is especially sensitive to shifts in market sentiment.
Alibaba operates across multiple sectors, including e-commerce, cloud computing, and digital payments, all of which are deeply intertwined with consumer spending and corporate investment in China.
When traders did not see the anticipated large-scale stimulus, concerns grew about the pace of recovery in China's post-pandemic economy. This had a direct impact on Alibaba's stock, as investors recalibrated their expectations for growth in the company's core markets.
What Else: On Thursday, the PBoC stepped in with a new set of measures aimed at boosting the liquidity and stability of China's capital markets.
The central bank unveiled the “Securities, Funds and Insurance Companies Swap Facility” (SFISF), which allows qualified financial institutions to exchange lower-liquidity assets, such as stocks and exchange-traded funds (ETFs), for high-grade liquid assets like Treasury bonds. With a starting scale of 500 billion yuan ($70.7 billion), this facility could expand further based on market needs.
Read Also: Delta’s Turbulent Q3: Mixed Results And Tech Troubles Cloud Holiday Outlook
This announcement was seen as a significant move to enhance market liquidity, providing financial institutions with more flexibility and, in turn, promoting stability across the broader market. Alibaba, as a major player on Chinese exchanges and a constituent of various key stock indices, could directly from this boost in sentiment.
What To Watch For: Alibaba’s stock has been particularly sensitive to this wave of economic and policy shifts due to its reliance on consumer spending and corporate investment, both of which are closely tied to the overall health of China’s economy.
When expectations of further economic stimulus were not immediately realized, Alibaba's stock faced downward pressure, as investors grew cautious about near-term growth prospects.
However, the PBoC’s intervention through the SFISF was seen as a positive sign that Beijing is committed to stabilizing the capital markets and supporting financial institutions.
Read Also: JPMorgan Vs. Wells Fargo: Which Bank Stock Is More Bullish Ahead Of Q3 Earnings?
How To Buy BABA Stock
By now you're likely curious about how to participate in the market for Alibaba Group – be it to purchase shares, or even attempt to bet against the company.
Buying shares is typically done through a brokerage account. You can find a list of possible trading platforms here. Many will allow you to buy ‘fractional shares,' which allows you to own portions of stock without buying an entire share. For example, some stock, like Berkshire Hathaway, can cost thousands of dollars to own just one share. However, if you only want to invest a fraction of that, brokerages will allow you to do so.
In the the case of Alibaba Group, which is trading at $108.6 as of publishing time, $100 would buy you 0.92 shares of stock.
If you're looking to bet against a company, the process is more complex. You'll need access to an options trading platform, or a broker who will allow you to ‘go short' a share of stock by lending you the shares to sell. The process of shorting a stock can be found at this resource. Otherwise, if your broker allows you to trade options, you can either buy a put option, or sell a call option at a strike price above where shares are currently trading – either way it allows you to profit off of the share price decline.
According to data from Benzinga Pro, BABA has a 52-week high of $117.82 and a 52-week low of $66.82.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
