Will Trump’s Election Hurt Alibaba Stock?
Alibaba Group Holding Ltd (NYSE:BABA) has enjoyed a tremendous year. Alibaba stock reflects this, having gained over 26% year-to-date (YTD), reaching valuations not seen since its fanfare debut on the New York Stock Exchange (NYSE) in 2014. However, it has been losing steam over the past month. There was an especially sharp fall after Donald Trump won the White House.
Alibaba stock is still within its highest range of the year: $93.00-$100.00. But it’s clear that Trump scares investors in Chinese stocks. Trump scares China, and this reflects on Alibaba. The main reason for concern comes from Trump’s pre-election proposal of taxing Chinese goods 45% to encourage employment growth in the United States.
What are the chances that Trump will go through with this? Jack Ma, Alibaba’s founder, does not believe Trump’s threat. Indeed, Ma, from one billionaire to another, had a warning of his own for the president-elect. Ma warned that if Trump refuses to cooperate with Beijing, it will be a disaster. If Ma was hoping to calm the market about Alibaba stock, he failed.
Alibaba and the Singles’ Day Phenomenon: It Could Be Bigger than Black Friday!
Still, Jack Ma made an important point on the very day that Alibaba has typically enjoyed huge—or “yuge,” rather—sales: Singles’ Day. The countdown has started. Singles’ Day is officially celebrated in China on November 11, as a holiday for young people “who are proud to be single.” This singular holiday has become an occasion for single people to buy themselves gifts.
Singles’ Day has a certain bullish appeal for Alibaba stock. The problem is that Katy Perry, an avid Hillary Clinton fan, claimed undisclosed that “family issues” forced her to cancel her headlining performance at an Alibaba-organized extravaganza. David Beckham will replace her. He won’t sing, but there are questions as to how much his world-famous soccer reputation can help singles celebrate their loneliness.
It’s no joke. If, as expected, November 11 delivers a record sales day, BABA stock could bounce back, gaining what it has lost amid the Trump election worries. Still, last year, “Double 11” (i.e. November 11) generated $14.3 billion dollars in sales, which was a 54% jump over the previous year. But, Katy Perry or not, this year should be even bigger—if for no other reason that the Singles’ Day holiday has become more popular. The sales record on that day is already rivaling Black Friday, Cyber Monday, or both, in the United States.
Has Donald Trump’s Election Dealt Alibaba a Bearish Blow?
So, the big question for investors is whether Donald Trump’s electoral tactics have ruined Jack Ma’s plans. Is Ma going to suffer on Singles’ Day? Trump is no friend of Wall Street, or at least, has tried to distance himself from it. Ma, meanwhile, is a great friend to America. He deliberately launched Alibaba’s initial public offering (IPO) on the NYSE. He has also become something of a spearhead for “détente” between Washington and Beijing.
Jack Ma has already moved in this direction, noting he does not fear Donald Trump. China’s President Xi Jinping took a pre-emptive step, being among the very first leaders to congratulate the president-elect. But Ma could be right. Alibaba stock may teeter until Trump’s foreign policy becomes clearer, but, Trump should brush up on the “art of the deal.” If he applies his 45% tax, China can cancel all kinds of Boeing Co (NYSE:BA) orders.
Yes, Boeing is America’s biggest exporter by value. Trump would be doing American manufacturing great harm by hurting Boeing. Moreover, Russia’s Vladimir Putin was the first to congratulate Trump. Russia and China happen to have become rather cozy lately. This suggests that Trump could actually pursue better ties with both Moscow and Beijing—better even than the outgoing Obama administration.
If the new president/entrepreneur Trump thinks about the market as a businessman and a politician, which is likely, BABA stock should continue its bullish path after a bit of turmoil in these uncertain days for the direction of U.S.-China relations. As for Alibaba itself, growth is its secret and it has it in start-up-like quantities despite its size.
Jack Ma wants to expand in the United States. Even if that ambition may have to be scaled back, Alibaba stock could still soar in 2017, because Ma has already explored a major expansion in Asian markets, challenging Amazon.com, Inc. (NASDAQ:AMZN)—like India. (Source: “Alibaba All Set To Enter Indian Ecommerce Market By End of 2016; Govt. Promises ‘Full Support’,” Trak.in, March 21, 2016.)