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Where Was Jack Ma?

We doubt it was anything to do with the authorities as Alibaba looks set to weather regulatory risk

Andrew Willis 26 January, 2021 | 4:28AM
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Andrew Willis: When Jack Ma, went “missing”, the world worried about the fate of the e-commerce titan. But we weren’t worried about Alibaba…

There were some concerns about Alibaba’s business getting too big, as it began “forcing merchants to sell exclusively in their platforms,” according to the state regulator. But Morningstar analysts Iris Tan, Chelsey Tam, and David Peng assess this at around a 15% potential downside from our current fair value – landing around where it already trades these days.

The regulator could have the company paying a fine totalling up to 10% of annual revenue… but weigh this against the fact that it controls around 60% of Chinese e-commerce. In perspective, regulator threats to Alibaba’s AliPay also don’t look as daunting. The company currently only allows payment processing with its own provider for some of its services. But splitting that up across the industry would allow Alipay to break into the transactions of competitors – further widening Alibaba’s giant coverage of the Chinese e-commerce market!

What concerns us most about the threat of regulation is much less obvious, and more of a chain reaction… What happens to impulse purchases when borrowing becomes more difficult?... New restrictions that relate to lending money to online shoppers – through AliPay of course – could see a drop in impulse purchases and financing fees. We see about 10% of Alibaba’s entire gross merchandise value exposed to this risk. But again, in perspective, this looks more like a tax.   

For Morningstar, I’m Andrew Willis.

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Andrew Willis

Andrew Willis  is Content Editor for Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.


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