- Chinese regulators are rumored to soon announce a $1.1 billion fine on Ant Group.
- The fine would allow Ant to apply for a financial license and eventually reapply for an IPO.
- BABA stock has advanced 6.6% in Friday’s first hour.
- Alibaba owns 32.65% of Ant Group, owner of Alipay.
Alibaba (BABA) stock has climbed 6.6% on Friday after news emerged in the Asian session that Chinese regulators are close to handing affiliate Ant Group a large fine that will allow it to move on from an era of scrutiny and once again attempt to go public. BABA stock has traded up to $83.97.
BABA stock is also gaining in light of US Nonfarm Payrolls data for June that came in light at 209,000. This figure was below the 225,000 expected and signals that slowing job growth might make the Federal Reserve less likely to raise interest rates over the next several months.
Alibaba stock news: Ant Group IPO may be back on the table
Alibaba’s Hong Kong-listed shares rose more than 3.4% early Friday on news that the Chinese central bank was gearing up to release a large fine on Ant Group – the holding company of the world’s largest payment platform, Alipay. Alibaba founder Jack Ma also set up Ant Group as a subsidiary of Alibaba in 2014, and the larger e-commerce giant still retains a 32.65% ownership stake in the holding company.
The fine is rumored to be 8 billion Yuan or $1.1 billion. Alibaba stock has risen on this news since the fine should release Ant Group from heavy government scrutiny. Alibaba’s share price has been directly related to the drama surrounding Ant Group for more than two years. Ant Group attempted to launch an initial public offering (IPO) in October 2020 at a valuation of $313 billion but was stopped by regulators after Jack Ma criticized Chinese financial regulators.
Since then, Alibaba’s stock price has dwindled from the $320s to the $80 realm and even lower. This $1.1 billion fine is expected to put all of that negativity in the rearview mirror. Analysts expect the payments platform that serves 1.3 billion users to once again be able to focus on growth and set the table for possibly even a larger IPO.
The fine is also quite digestible for the enormous Ant Group. Though 8 billion Yuan is a rather unwieldy figure, Ant Group produced a profit of 9.6 billion Yuan in the quarter ending in December 2022.
Alibaba announced in March that it plans to divide up its empire into six separate companies. These units will be split based on their commercial focus. These include China commerce, cloud intelligence, international commerce, logistics, local consumer services and digital media & entertainment. Units will be allowed to engage in their own initial public offerings, although Alibaba will retain major ownership stakes in each new company.
Alibaba stock forecast
Alibaba stock has been stuck between support at $80 and resistance at $103 for the past five months. Based on the 8-week Simple Moving Average (SMA) gliding below the 30-week SMA, BABA appears entrenched in sideways price action. Swing highs in late January, late March and early June have all come to naught, and each saw a lower high than before.
This trend is pushing BABA stock to cling to support at $80. A break lower will send Alibaba stock down toward support at $73.28 and $63.40. Only a break through the resistance range from $103 to $105.30 will reignite any energy from bulls, who have mostly been ignoring the stock all year.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
Source: https://www.fxstreet.com/news/alibaba-stock-forecast-baba-shares-tick-higher-as-chinese-government-clears-way-for-license-ipo-202307071305