Analysis |China Stocks Soared due to Alibaba SPLIT

The majority of China stocks ralied in today's trading hour which was led by the news of Alibaba splitting into 6 different companies : Cloud Intelligence Group, TaoBao, Local Services Group, Cainiao, Global Digital Commerce Group and Digital Media & Entertainment. This split in the company caused Alibaba shares to jump by 15% in its US listed shares due to people thinking that by splitting the company, China's regulators will reduce their focus on them. This is because the regulators don't want a company to be too large thereby having too much power in the market, so by splitting the company into 6 parts, investors are pricing in the potential for regulators seeing Alibaba as 6 big companies instead of 1 mega large company, thereby reducing regulations on them.

Despite this, Alibaba alongside other China stocks did lose some of its momentum at around lunch time in the HK market. This can be explained by firstly investors repricing the news. Secondly, there are also some key economic dates during the week, including US GDP q/q on 30 March which will definitely have an impact on stocks all around the world and China's PMI on 31 March which will show us how much China as a whole is growing which can help provide information for China companies' near term growth. This is especially important because during the latest earnings round, majority of China company beat estimatesand grew by around 4% year over year which if the PMI does'nt show sign of economy slowing down, the market will price in further growth China company, but if the oposite happens, these China companies might tank in the short term until further data proves otherwise.