Alibaba
and other Chinese tech stocks were weaker Tuesday amid increasing fears of an economic slowdown in China.
While grim economic data have in recent months buoyed shares in Chinese e-commerce giant
Alibaba
(ticker: BABA) by raising expectations of government stimulus, there are signs that “bad news is good news” no longer fits the bill for Alibaba. Indications of weakening consumption in the world’s second-largest economy may just be bad news for Alibaba stock, even as officials continue to repeat promises of stimulus.
U.S.-listed shares in Alibaba fell 1.5% in premarket trading on Tuesday, extending losses from a 1.2% drop on Monday after the week began with yet another release of underwhelming economic data. E-commerce peer
JD.com
(JD) shed 2.7% in the premarket session after a 0.9% drop on Monday following data that showed China’s second-quarter gross domestic product grew 6.3% year over year, below expectations of a 7.3% increase. Retail sales—a bellwether for both companies—advanced 3.1% annually in June, below forecasts of 3.2% growth.
The data Monday were yet another sign of weakening growth in China that could bode ill for Alibaba stock, and were followed by a further round of government drum-banging over stimulus on Tuesday.
A representative from the National Development and Reform Commission—a Chinese economic planning agency—promised in a Beijing press conference to “restore and expand” consumption, Reuters reported. China faces difficulties in its economic recovery amid “insufficient demand, weak momentum, and weak confidence,” the commission said, according to the report, with policies to boost consumption due without delay.
“We expect more stimulus in the weeks ahead to boost infrastructure, stabilize property sales, and support big-ticket goods consumption,” said Kathy Li, a macro strategist at UBS Global Wealth Management. “But the policy support is likely to be just enough to get GDP growth on track to achieve the ‘around 5%’ annual target, instead of jumpstarting growth.”
Indeed, hopes for a powerful economic recovery in China in 2023—after 2022 ushered in a Covid-19 lockdown-driven slowdown—appear to be fading. The mood is weighing on shares in companies like Alibaba, JD.com, and others exposed to the Chinese consumer with signs that dip-buying on stimulus hopes aren’t doing the trick anymore. Investors may have to see how stimulus itself plays out before getting bullish on these names once again.
Write to Jack Denton at [email protected]
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