Shares of Alibaba Group Holding Ltd. plummeted Wednesday, as did the shares of most other China-based digital platform companies, after the country's market regulators drafted a draft anti-monopoly law targeting the industry. .
The Chinese market is in crisis after the publication of the new guidelines against monopolies
The negative effect of the new guidelines on investor sentiment has not been limited to internet stocks, as fear of more government scrutiny has led to a large sell-off in the Chinese stock market, bucking the growth that it occurred in global markets, including Europe and the Market Snapshot.
The new guidelines address a number of monopolistic practices, including the abuse of dominant market positions, hindering the work of competing platforms and the imposition of predatory pricing on traders.
"We see the guidelines as an attempt to control the power of large technology platforms, including e-commerce markets," wrote Raymond James analyst Aaron Kessler in a note to customers. Alibaba's BABA stock plunged to 3,6% in the premarket, but cut losses to 0,8% before opening on Wednesday. The drop occurred on the day of Alibaba's big shopping event known as Singles Day, 11/11.
Possible positive implications after the collapse?
Raymond James' Kessler advised traders to take advantage of the drop in price to buy Alibaba shares, as the new law likely won't harm the e-commerce giant and may even help it.
"At this point, we do not believe antitrust guidelines would have any material impact on Alibaba's revenues," Kessler wrote. "It could also serve to encourage new shareholders by aggressive pricing to gain market share, which could be seen as good for Alibaba."
Among other China-based technology companies, the US-listed shares of Tencent Holdings Ltd. lost 2,4% and Pinduoduo Inc. PDD lost 0,6%. JD.com Inc.'s JD stock fell 0,1%, recovering almost all of the decline in premarket of a whopping 3,8%.
Meanwhile, the STOXX Europe 600 SXXP index gained 1,0%. The most active stock of a China-based company was electric vehicle maker Nio Inc. NIO, which tumbled 3,6%, after losing 5,6% on Tuesday. Among other China-based electric vehicle manufacturers, XPeng Inc. XPEV shares fell 2,5% and Li Auto Inc. LI lost 3,6%.
