The short journey of the Chinese ride-hailing giant is the smallest of the overseas listed Chinese technology giants, with total losses amounting to more than $1 trillion since February 2021.
2021 is an extraordinary year for US listed Chinese stocks. Just when investors are getting ready to turn over the page, DiDi Global Inc's withdrawal from the New York stock market reminds us that it may not be over yet.
Only five months after going public, China’s app giant DiDi Global, the largest ride hailing company with 10.9 million active daily users, announced to switch its listing to Hong Kong last Friday. After five volatile months, DiDi’s stock is now priced with an over 50% discount to its IPO price ($14).
What happened to DiDi?
DiDi’s delisting plan didn’t come without warning. It’s not news to traders that the Chinese government has opposed the company’s New York IPO from early stages, reason being concerns over potential leakage of sensitive data to the US, viewed as the main geopolitical rival to China. As a response to DiDi’s ‘unapproved’ listing, within days of the initial public offering, Beijing announced to restrict DiDi’s app downloads and started to crackdown on technology companies listed overseas. DiDi, slumped by 44% in the first month, dropped the most in its initial months among all Chinese IPOs.
Perhaps what surprised the markets most is not just the withdrawal of DiDi, but the extreme power policy maker hold over giant firms. Even the market has repeatedly witnessed Chinese tech companies grappling with Beijing’s tightened regulations, ranging from digital service, education to online games and the regulatory risk for Chinese companies is still way beyond most investor’s expectations.
Who will be the next DiDi?
The short journey of the Chinese ride-hailing giant is the smallest of almost all the overseas listed Chinese technology giants, with total losses amounting to more than $1 trillion since February 2021. Amongst them, Alibaba is one of the most prominent, whose shares have plummeted by more than 55% since February, landing on its four-year-low this month.
So, will Alibaba or any other data-rich Chinese company repeat the story of DiDi in the near future?
This month, Beijing was reported drafting regulations to effectively ban companies from going public on overseas markets, while the US government is also pushing ahead to remove Chinese and Hong Kong listed companies if they don’t comply with Washington’s disclosure requirements. Both sides show little sign to ease the trading environment for Chinese stocks but opens the door for any possibility.
No one can predict what may come next for these bruised Chinese leading firms, however, the market has certainly priced in the soaring risks. For example, pessimistic analysts disclosed their value of Alibaba at all-time low of 13 times projected earnings, down almost 30 times from a year ago, compared to its e-commerce peer Amazon’s 66 times.
Alibaba technical analysis
Alibaba Group Holding Ltd (All Sessions) rose this week after announcing a reorganisation of its e-commerce teams and appointing a new Chief Financial Officer. In addition to this, the People’s Bank of China’s decision to expand support for the slowing down economy by reducing banks’ reserve requirement ratio also helped to boost the broad Chinese sectors. As a result, Alibaba’s share price jumped by almost 10% on Monday and closed the gap left by last week’s dip.
However, even though the stock is immensely undervalued, worries and uncertainty will likely remain to weigh on the sentiment. Current support is hanging around $110, all the way back to September 2016, the next support will be further down to $95.
On top of current levels is the resistance line around $139, which if broken could see the stock jump back on the 50 days moving average to fill the gap between $144 and $151.
Hebe Chen | Market Analyst, Australia
08 December 2021