Alibaba and other Chinese tech stocks experienced weakness on Tuesday due to growing concerns of an economic slowdown in China.
Bad News is No Longer Good News for Alibaba
Although Alibaba’s stock has been buoyed in recent months by grim economic data that raised expectations of government stimulus, it seems that the saying “bad news is good news” no longer holds true for Alibaba. The indications of weakening consumption in the second-largest economy in the world may just bring bad news for Alibaba stock, even as officials continue to repeat promises of stimulus.
Declining Performance of Alibaba and JD.com
In premarket trading on Tuesday, shares of Alibaba listed in the U.S. fell by 1.5%. This decline comes after a 1.2% drop on Monday following another release of underwhelming economic data. Similarly, e-commerce peer JD.com shed 2.7% during the premarket session, adding to a 0.9% drop on Monday. The disappointing second-quarter gross domestic product growth of 6.3%, falling below expectations of a 7.3% increase, directly impacted these stock prices. Additionally, retail sales, which are considered a benchmark for both companies, only advanced by 3.1% annually in June, falling short of the forecasted growth of 3.2%.
Bleak Outlook for Alibaba Stock
The data released on Monday serves as yet another indication of a deteriorating growth trend in China, which could potentially harm Alibaba stock. Furthermore, the government’s continued emphasis on stimulus provides little reassurance in the face of this concerning economic situation.
Restoring and Expanding Consumption in China
It is evident that the road to economic recovery in China requires comprehensive efforts and strategic policy implementation. As the situation evolves, market participants will be closely monitoring the outcome of stimulus measures before considering a bullish stance on stocks tied to China’s consumer sector.