Foreign Cash Flows Into China On Alibaba Breakup Plan

Alibaba co-founder Jack Ma. Image credit: Alibaba

Foreign investment in China surges after Alibaba announces breakup plan, as investors see sign of more business-friendly attitude from Beijing

Foreign investors have begun returning to Chinese-listed stocks since Alibaba announced its breakup plan a week ago, according to exchange data.

Mainland-listed stocks show net foreign buying every day since Alibaba announced the plan to split up into six independent units, reaching a record quarterly total, according to figures cited by Reuters.

Alibaba’s stock surged following the announcement and remains up so far this year, after massive losses in 2021 and 2022.

Industry watchers said foreign investors were taking the firm’s move as the latest sign of a more supportive attitude toward business from China’s government, alongside the recent return of co-founder Jack Ma to the mainland after a long period of absence.

Image credit: Alibaba

Regulatory easing

Alibaba and Ma were both high-profile targets during a wide-ranging regulatory crackdown that began in late 2020.

The first major move in the regulatory campaign was the last-minute cancellation of the $37 billion (£22bn) flotation of Ma’s Ant Group.

Alibaba’s shares lost 80 percent of their value from the start of the crackdown up to last October.

In the week since the breakup announcement some 11.7bn yuan ($1.7bn) has flowed into China’s markets, more than the net 9.2bn yuan in inflows for all of February, Reuters reported.

Foreign cash

The surge drove the inflow for March to 35.4bn and the inflow for the first quarter to a record 186bn yuan.

Up to 67 percent of US investors now see the start of a trend toward more business-friendly actions from China’s government, according to a recent survey by BofA Securities reported by Reuters, which cited an unnamed source.

Employees at Alibaba were less sanguine about the move, with some voicing concern that less profitable departments would struggle and that it would make collaboration more difficult between teams.

The South China Morning Post cited an unnamed employee as saying that collaboration was already difficult and that the restructure could erect more walls and make communication harder.