Alibaba Stock Forecast: BABA shares rally 6.6% on hopes for end to Ant Group scrutiny
- 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.
NonFarm Payrolls FAQs
What are Nonfarm Payrolls?
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
How does Nonfarm Payrolls influence the Federal Reserve monetary policy decisions?
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation.
A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work.
The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
How does Nonfarm Payrolls affect the US Dollar?
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower.
NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
How does Nonfarm Payrolls affect Gold?
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa.
Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold.
Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Sometimes Nonfarm Payrolls trigger an opposite reaction than what the market expects. Why is that?
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components.
At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary.
The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
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Author
Clay Webster
FXStreet
Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.
