Alibaba Slips as Big Hopes on Ant IPO Revival Quickly Fade

Alibaba Group Holding Ltd.’s US-listed shares dropped after China’s regulator denied a Bloomberg News report that it has started early stage discussions on reviving the…

initial public offering of Jack Ma’s Ant Group Co..

Shares of the e-commerce giant dropped as much as 5.3% at Thursday open, after shooting up 7% in premarket trading on the Bloomberg report. The stock quickly erased earlier gains after the China Securities Regulatory Commission said it isn’t conducting work on reviving the Ant IPO, although it supports eligible internet platform companies to list in China and overseas. Meanwhile, Ant said it has no plans to initiate an IPO.

Other US-listed Chinese stocks also fell, sending the Nasdaq Golden Dragon China Index down as much as 5.8%, snapping a three-day rally of 15%. Nio Inc. and Bilibili Inc. were among the worst performers amid earnings, declining as much as 9.5% and 15% respectively. Restaurant operator Yum China Holdings Inc. tumbled as much as 11%.

A restart of Ant’s IPO is “too good to be true” and “there are a lot of questions to be answered on the political side,” said Xiadong Bao, an emerging-markets fund manager at Edmond de Rothschild Asset Management. While Alibaba’s stock still looks cheap after the recent rally, more patience is needed before further improvements on fundamentals, he said.

Bullish calls are returning to China’s tech sector amid signs that regulators are taking a more lenient line after more than a year of regulatory squeeze. Chinese stocks have staged strong rallies in Hong Kong and New York this week following news of a likely wrap-up of a probe into Didi Global Inc. and a slew of new game approvals.

The sudden scuttling of Ant’s IPO in November 2020 — just days before the fintech juggernaut was to go public — marked the beginning of China’s hallmark regulatory crackdown that has swept across the country’s internet sector. The crackdown has seen foreign investors flee and the sector labeled “uninvestable.” Alibaba owns about a third of Ant.

“We were only saying a few days ago that if Ant was rehabilitated, it would mark a major positive. This, in a sense, was where the trouble started,” said Gary Dugan, chief executive officer of the Global CIO Office. “If true, it would be very good news and a major potential turning point for the China tech sector and broader Chinese markets.”

Bullish Pivot

While many strategists have started to turn bullish from late 2021, citing cheap valuation and expectations of better policy environment, a sustainable rally had seemed elusive with rebounds barely lasting a few days. Goldman Sachs Group Inc. and Jefferies Financial Group Inc. have been among the early believers of a China turnaround, only to see the Hang Seng Tech Index slide to new lows.

Sentiment took a turn for the better in mid-March this year, when China’s economic czar — Vice Premier Liu He — promised to swiftly end tech scrutiny, stabilize financial markets, and deploy measures to prop up the economy. While the pledges initially seemed to ring hollow with no concrete action, increasing signs are pointing to a softening in the country’s stance toward internet firms.

The Ant news “is a sign that regulators are following through on their pledge to end the crackdown on tech platforms, which will continue to…

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