Alibaba (BABA)’s ADRs could rip higher after a massive relief rally spurred by an ease of regulatory risks, which one equity manager called “a sea change.”
“I think you’re going to see China stocks rip for the next 8 or 12 months into the China National Congress [elections],” Thomas Hayes, chairman of Great Hill Capital, told Yahoo Finance. “When you look at some of them in particular, we’re focused on Alibaba, I think the returns are going to be spectacular.’
On Wednesday, e-commerce giant Alibaba and its peers soared more than 30% after China’s top financial body said it would ensure stability in capital markets and support stock listings overseas.
“The only two things holding these companies back were … the tech crackdown over the summer, in earnest, and then the delisting risk,” said Hayes. “The businesses were growing despite the regulatory crackdowns, despite the zero-COVID shutdowns.”
China’s National Congress elections are coming up this fall, a reason why Hayes believes Chinese stocks will go higher from here.
“Both in China and the United States, the number one job of a politician is to get reelected. They figured that out, they want the transition to go smoothly. They’re juicing the economy,” said Hayes.
Alibaba’s American depository shares had been pounded prior to Wednesday’s rally. They touched a multi-year intraday low of $73.28 earlier this week.
China’s recent lockdowns, regulatory risks, and U.S. disclosure requirements, which pose a threat to the delisting of Chinese firms, have all contributed to investors’ recent flee from Alibaba and its peers.
“We did get forced selling and a final capitulation yesterday [Tuesday] on those delisting fears over the last couple of days, but both of those fears were largely taken off the table last night, when they decided to actively introduce policies to benefit the markets,” said Hayes.
On Thursday ADRs of Alibaba, JD.com (JD), Pinduoduo (PDD), and Baidu (BIDU) were all trading lower as investors took profits off the table. Over the last two days though, they’re each up more than 20%.
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