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Questor is The Telegraph’s stockpicking column, helping you decode the markets and offering insights on where to invest.
When folklore character Ali Baba uttered the immortal words “open sesame” in front of a sealed cave, he managed to open a rich trove of treasures and set in train a round of exhilarating adventures.
Shareholders in the Chinese e-commerce giant that bears the same name, however, could be forgiven for wondering where their treasure’s gone and whether there’s any hope of a happy ending to their adventure.
Alibaba, co-founded in 1999 by the now-famed entrepreneur Jack Ma, was riding high until around four years ago. The group sells an astoundingly wide range of goods on its internet platform, as well as offering cloud and artificial intelligence services, logistics, media and entertainment. Growth had been rampant for decades.
But then, in 2020, the group became the highest-profile casualty of a Beijing crackdown on the tech sector – a record fine followed amid allegations of anti-competitive practices, and Ma all but disappeared from the public gaze while the company’s share price spiralled downwards.
Alibaba subsequently unveiled a huge restructuring involving a plan to split itself into six businesses and spin off three divisions – cloud, grocery and logistics. But the divestments have either been scrapped, or at least put on hold. The delays have raised the prospect of renewed government interest in the business.
To compound the gloom, domestic growth slowed over the past two years while competition from heavily promotional rivals like Temu has increased. After hitting a peak in October 2020, the shares have since lost nearly three-quarters of their value.
Nevertheless, there are grounds for optimism, including strong growth overseas and signs of the beginnings of a recovery at home following significant investment by Alibaba. During the six months to the end of September, Alibaba’s international e-commerce business increased its revenues by 31pc versus the same period the previous year. The division joined cloud computing and AI as the group’s best performers.
Domestically, Taobao and Tmall – Alibaba’s two big shopping platforms in China – lifted revenues by 1pc over the three months to the end of September, against a 1pc drop during the previous quarter. A programme of Chinese economic stimulus that got underway last year could also boost consumer demand.
There are other signs that order is being restored at the group, which is headquartered in the Chinese city of Hangzhou. As well as selling off some of its holdings in other companies, Alibaba has set up an ecommerce business group – which includes both international and domestic operations – suggesting it could be rekindling breakup plans.