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Alibaba shares soar as it plays down hit from record $2.78 bn fine

·3-min read
Alibaba said the fine would not have a major negative impact on its business

Shares in tech giant Alibaba climbed more than six percent Monday as the ecommerce titan reassured investors that a record $2.78 billion antitrust fine imposed by China would have little impact on its operations.

However, concerns that officials had not finished with a crackdown on the sector weighed on big-name firms including Tencent and JD.com.

Ant Group, whose planned record-shattering $35 billion Hong Kong-Shanghai IPO was shelved late last year amid the Chinese crackdown on Big Tech, separately announced a restructuring plan but vowed to "ensure business continuity".

Regulators slapped Alibaba with the penalty on Saturday after a months-long probe concluded it had been abusing its dominant market position.

But in a conference call to investors on Monday, Alibaba's board suggested the fine marked the end of the investigation, with chairman Daniel Zhang saying the penalty would not have a "negative impact" on business operations.

The government has cracked down on major Chinese tech platforms -- and Alibaba in particular -- over allegations of anti-competitive behaviour, misuse of consumer data and over-aggressive expansions.

"We had good guidance on some of the specific issues under the anti-monopoly law and I would say that we are pleased that we are able to put this matter behind us," company vice-chair Joe Tsai added.

Ant Group said it would comply with government demands that it establish a financial holding company and apply for relevant licences to bring its online lending, credit and wealth management businesses more in line with Chinese banking regulations.

Ant's foray into the wider world of financial services has alarmed regulators who are trying to rein in soaring personal debt.

Ant Group added that it would "return to its origins (in) our payment business", but gave few details.

Alibaba, meanwhile, will introduce measures to lower entry barriers and business costs faced by merchants on its shopping platform.

Alibaba's stock price jumped nearly nine percent to as high as HK$237.60 in Hong Kong on Monday morning before easing back marginally to close up 6.5 percent.

But other tech firms took a hit with Tencent down one percent, JD.com losing two percent and NetEase one percent lower.

"Alibaba's stock has rallied as the fine wasn't as bad as it could have been," said OANDA's Jeffrey Halley. "However, it is the thought that counts, and investors seem concerned that Alibaba will not be the last China tech giant in the fine firing line."

Alibaba has faced special scrutiny after co-founder Jack Ma publicly criticised Chinese regulators in October over their warnings about Ant Group's expansion.

"We have continuous communication with the regulators," Zhang said, adding that the group will "fully comply" with the requirements.

Alibaba was punished for forbidding merchants who use its popular online marketplaces from simultaneously offering products on rival e-commerce sites, the State Administration for Market Regulation said in announcing the fine Saturday.

Lina Choi from Moody's Investors Service warned that the required changes will "likely limit Alibaba's revenue growth" in the future and hinder attempts to grab more market share.

"Investments to retain merchants and upgrade products and services will also reduce its profit margins," she said.

Alibaba and JD.com, along with messaging-and-gaming colossus Tencent, became hugely profitable on the back of growing Chinese digital lifestyles and government restrictions on major US competitors in the domestic market.

But their success has drawn the scrutiny of Beijing as the platforms amassed hundreds of millions of regular users.

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