Alibaba in trouble: Tumbles to record low as Chinese economy slows, Jack Ma's wealth dives
Alibaba Group Holding Ltd now faces a hurdle as China's economy slows down threatening company stock price and performance. Founder JacK Ma also felt the impact of the crisis as his wealth declined by as much as $752 million. With Alibaba's recent performance, investors are starting to get concerned wondering how the company can overturn its bearish future.
According to Bloomberg, Ma's net worth went down to $31.2 billion, almost by 2.4 percent, as his company's shares declined by as much as 8 percent at around $71 to 74 - a shy away from their IPO price at $68. The company's recent performance is in light of China's economic slowdown. The country also devaluated the Yuan last August 11 adding to investor concerns. This is the lowest point for the currency in the last three years.
According to Forbes' Tim Worstall, Alibaba's problem is China's financial regulations that supresses people's purchasing power. The government continues to impose restrictions on what citizens can spend on in favor of other focus economic sectors. As Worstall puts it: "The walls here are the financial regulations which lead to that repression. The plunder isn’t so much plunder as the righteous profit that can and will be made by being able to offer Chinese citizens something closer to market rates on their savings and investments."
When it comes to solving the problem, Worstall has this to say: "And the determinant of who and whether such schemes will be successful depends upon the vigor with which China’s rulers defend those current walls of the financial system." Analysts reduced their price targets on the stock already moving from $106 to $99.09 last Aug. 13 prior to the announcement of the company's quarterly results through June.
According to another report by Forbes, although 41 analysts recommended 'Buy' for the stick, none went for a 'Sell' rating. As for China's future, International Monetary Fund's Markus Rodlauer has to say (via Yahoo News): "Insufficient progress in containing vulnerabilities and advancing structural reforms continues to pose the biggest risk to the outlook."
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