The Chinese stock market has been going through a prolonged period of decline that saw the CSI 300 index – the index of 300 blue-chip companies listed on the Shanghai and Shenzhen exchanges – and the HSI index – the benchmark index for the Hong Kong stock exchange – slump approximately 30% in the last 52 weeks.
The downturn was severe enough that a Singaporean hedge fund pursuing a strategy of going long on Chinese stocks and shorting the Japanese market closed its doors on Tuesday, January 23.
In response, the Chinese government started preparing a major financial injection aimed at stabilizing the stock market. The package is estimated at approximately 2 trillion CNY – $278 billion – and had an immediate effect on the Chinese market.
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Looking at the HSI index, while it fell a worrying 31.96% in the last 52 weeks, and 8.54%, it started rising on the news of the rescue injection and is 2.63% in the green in the last 24 hours.
Similarly, the CSI 300 index is down 23.07% in the last 52 weeks and 4.56% in the red year-to-date (YTD). Its reaction to the government package was, however, less pronounced than HSI’s, as it rose 0.40% in the 24 hours leading up to the time of publication.
Alibaba surges on news of the injection
While the Chinese market did, in general, react to the news of the $278 billion injection, no individual stock rose more rapidly than that of the e-commerce giant Alibaba (NYSE: BABA, HKG: 9988).
The company’s stock, at least looking at the Hong Kong exchange, has been performing in line with the benchmark index – it fell 42.43% in the last 52 weeks and 9.44% since the start of 2024.
However, it rose significantly since the package was revealed at one point, according to an X post by the prominent trader Gurgavin Chandoke, shooting up 6%.
By press time, however, it experienced a correction and is, in the latest 24 hours, up 3.36% and stands at 67.65 HKD.
Alibaba’s stock has been behaving similarly on the New York Stock Exchange, where it is listed under the ticker BABA. In the last 52 weeks, the company’s shares dropped 42.58%, and since January 1, they fell 8.20%.
On the last full trading day – Monday, January 23 – they declined another 1.14% to $68.63 but, as the news of the rescue package came in while it was night in the U.S., rose as much as 6.79% in the pre-market.
Alibaba restructures to participate in AI boom
While the massive government rescue package has certainly had an impact on Alibaba’s stocks, the company has been working for months to alter its business model to better take advantage of the current artificial intelligence (AI) boom.
In November 2023, the company embarked on a major restructuring campaign with a special focus on general cloud infrastructure, and public cloud, and hybrid cloud. The effort was also, at the time, interpreted as part of a broader strategy to reduce China’s dependence on U.S. suppliers, which is also evident in the high-tech semiconductor market.
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