Alibaba Faces Volatile Reaction to Earnings as Woes Mount

(Bloomberg) — Alibaba Group Holding Ltd. faces a wild ride over the next few days, with options pricing pointing to huge swings in the stock as investors brace for a drop in earnings and further regulatory scrutiny.

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The Chinese e-commerce giant’s American depository receipts are poised to move nearly 7% after it reports an estimated 60% drop in quarterly profit drop on Thursday, Bloomberg data shows. That would be the second-sharpest earnings reaction for Alibaba since 2015, following an 11% slump on its revenue miss in November.

Investor sentiment to Alibaba is becoming increasingly fragile, with Beijing telling the nation’s biggest state-owned firms and banks to start a fresh round of checks on their financial exposure and other links to Ant Group Co., Bloomberg reported Monday. Alibaba owns a third of Ant.

A lower profit for the three months through December would be the third straight drop for the company and its longest stretch of declines since 2015, Bloomberg data show.

The stock is down 58% since from its peak in February last year as Beijing clamps down on its businesses and the broader technology sector. The expected move is based off implied one-day volatility that uses two option market expiries closest to the earnings date.

The company has had to shelve a listing of Ant and restructure its fintech businesses. It was also fined for monopoly practices.

Fresh worries over Beijing’s regulatory plans for the sector saw Chinese technology shares slip for a third straight session on Tuesday. The Hang Seng Tech Index fell 1.9% to the lowest close since its inception in 2020, with Alibaba among the biggest losers.