Shares of China’s Alibaba Group Holdings (BABA) tumbled more than -10% last Thursday and Friday after the company canceled a spinoff of its cloud division, citing U.S. restrictions on advanced semiconductor sales to China. Tencent Holdings (TCEHY) also fell more than -3% last Friday, despite reporting better-than-expected quarterly earnings results, after it warned of the impact of the U.S. chip trade curbs. The latest developments offer a fresh reason for foreign investors to refrain from investing in Chinese stocks.
Alibaba’s core business of selling goods online to Chinese customers was weaker than expected in Q2 amid China’s sluggish recovery. In addition to scrapping the spinoff of its cloud business, Alibaba also said it was suspending a listing for its grocery business Freshippo, clouding the near-term outlook for the company. JPMorgan Chase said, “We think the outlook for domestic e-commerce growth has weakened, and the amount of value-unlocking capital market activities has decreased,” following Alibaba’s results.
