HONG KONG: Alibaba’s shares surged by as much as 9 percent in Hong Kong trading on Monday, after the e-commerce giant was fined a record 18.23 billion yuan ($2.78 billion) at the weekend for abusing dominant market position by China’s antitrust regulator.
The shares rally on relief that the fine marked the end of a four-month antitrust investigation into the company – a key source of uncertainty for the market was therefore removed, and that the fine and steps ordered were not more onerous.
China’s State Administration for Market Regulation announced an administrative penalty decision on Saturday, accusing Alibaba of abusing its market dominance since 2015 by prohibiting merchants from opening stores or participating in promotional activities on other competitive platforms, and imposing a fine of 4 percent on its 2019 domestic sales.
The company will introduce measures to lower entry barriers and business costs faced by merchants on its platforms, CEO Daniel Zhang said in a call with analysts on Monday.
The e-commerce group does not expect any material impact from changes to its exclusivity arrangements with merchants, Zhang said.
Alibaba executives said despite the record fine and measures ordered by the market regulator, they remain confident in the government’s overall support of the company.
“They are affirming our business model,” said the company’s executive vice chairman Joe Tsai. “We feel comfortable that there’s nothing wrong with our fundamental business model as a platform company.”
Morgan Stanley said in a Sunday note,”Despite the record fine amount, we think this should lift a major overhang on BABA [Alibaba] and shift the market’s focus back to fundamentals.”
“Now the penalty is determined, the market’s uncertainty about Alibaba will be reduced,” Everbright Sun Hung Kai analyst Kenny Ng wrote in a note. “The implementation of this penalty is expected to allow Alibaba’s stock price to regain market attention.”
–The Daily Mail-CGTN
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