When Jack Ma publicly criticized the Chinese government for its tight financial regulation holding back technology development, Alibaba (NYSE:BABA) stock plunged. Markets corrected its valuation downward.
The Ant Financial IPO should have added $34 billion for Ant, in which Alibaba owned one-third of it. The cancellation not only revises the value of Ant downward by at least a half, but the political uncertainties will also continue hurting BABA stock.
The NYSE’s delisting of China telecom operators is another negative development. If the U.S. continues to delist more China-based firms, it will further weaken its ties with China. This could hurt Baidu (NASDAQ:BIDU), Taiwan Semiconductor (NYSE:TSM), and Tencent. Notably, TSM resides in Taiwan, not China. Nevertheless, the market may punish it.
The Chinese government will likely create new regulations that will limit Alibaba’s reach. This will benefit its retail competitors like JD.com (NASDAQ: JD). Besides, regulators could take a bigger stake in Jack Ma’s companies. The increased government ownership would hurt the value of BABA stock and Ant Financial. This would put downward pressure on the stock in the near-term. When the political headwinds clear, markets may buy the stock again. China appears to be cracking down on shadow banking and strengthening its financial services sector. The more regulations and compliance there is, the better Ant Financial is.
