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Technology Stocks : Alibaba Group Holding Limited

BABA 141.10

+0.1%

Mar 14 3:59 PM EDT

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To: Glenn Petersen who wrote (875)	1/16/2024 8:17:55 AM
From: Sun Tzu	Read Replies (1) of 882

The key issue, at least for me, is structural securities reform in China. Assume BABA or any Chinese stock trades at a huge discount to it cash flow. Say BABA drops to $10 with material change to its business. What exactly will you be getting for that $10? You cannot take over the company. You cannot change the board or the management. The company is under no obligation to pay dividend or buy back the stock. So for all practical purposes, you are powerless and are hitching a ride based on hope. Hopium worked when the consensus view was that China is on its way to be a market economy and will keep operating up. This is no longer the perspective. I understand that the authorities have recently indicated they will reform the rules for greater clarity and will also allow bigger and better foreign ownership. And this is the right medicine. But the fact that they had to suffer a lot before they came to this point means they are not genuine. So they will have to prove themselves first. Which will be hard to do while Xi is still in power.

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