Alibaba is not expecting material impact from antitrust fine

Alibaba’s shares in Hong Kong rose 8% on Monday after Chinese regulators fined the company 18.23 billion yuan ($2.8 billion) due to an antitrust investigation.

Despite the fine’s record amount, Morgan Stanley believes this should remove a significant excess of BABA and shift the market’s focus back to fundamentals. 

Chinese regulators began an antitrust investigation into Alibaba in December. The main focus was on a practice that forces merchants to list their products on one of the two e-commerce platforms rather than choosing both.

On Saturday, the State Administration of Market Regulation of China said that this practice stifles competition in China’s online retail market. SAMR stated that it infringes on merchants’ businesses on the platforms and the legitimate rights and interests of consumers.

Alibaba CEO Daniel Zhang said he does not expect a material impact on the company from the change to this exclusivity agreement.

Zhang also declared that Alibaba would introduce new measures to reduce entry barriers and costs for businesses and merchants on the platform. The company will also keep expanding into smaller Chinese cities and rural areas, the general manager added. 

Beijing is concerned about the power of Chinese tech companies

China’s tech companies have mainly grown into giants unhindered. Yet, Beijing is increasingly concerned about the power of these companies.

Regulatory scrutiny has focused on Alibaba founder Jack Ma’s empire. It happened after the billionaire made some comments in October that seemed critical of China’s financial regulator.

Not long after, regulators shut down what would have been a record-breaking initial public offering from Ant Group, the fintech giant that Ma founded.

Joe Tsai, Alibaba’s executive vice president, said Monday that he is not aware of any further investigations into the antitrust law.

Tsai announced the company is pleased to be able to put this matter behind. However, Tsai said that Alibaba and its peers are subject to consultations from regulators on mergers, acquisitions, and strategic investments as part of a review process.

In addition to the fine, which amounts to about 4% of the company’s revenue in 2019, regulators said that Alibaba would have to submit self-examination and compliance reports to SAMR for three years.

Since July, Markets have reacted positively with stocks. According to Sun Hung Kai analyst Kenny Ng, now that the penalty is determined, the market uncertainty about Alibaba will be reduced. Alibaba’s share price has moved slowly than the shares of emerging economies in general for some time in the past. The implementation of this penalty is expected to allow Alibaba’s share price to regain market attention.