A new top-down economic stimulus program from the Chinese government boosted interest in the country’s stocks on Friday. One of the country’s great business champions, e-commerce giant Ali Baba (NYSE: BABA), profited amply from this. The shares ended the day almost 3% higher, which compares very favorably with the almost flat performance of the share price S&P500 Table of contents.
China’s new economic stimulus program
The government initiative did not specifically target the technology sector of which Alibaba is a part, but it did provide some modest optimism for the Chinese economy as a whole. The People’s Bank of China will provide the country’s lenders with 800 billion yuan ($113 billion) worth of one-year loans in a bid to stimulate the economy. Authorities also relaxed a series of rules aimed at helping the troubled domestic real estate market.
Judging from Alibaba’s modest share price gain (and that of other Chinese tech titles), it appears that investors are cautiously optimistic that these reforms will benefit the economy. And a rising Chinese tide will lift all boats in that sea, they hope.
This was reflected in the market-boosting performance of the country’s other major technology companies trading on foreign stock exchanges. JD.comFor example, Friday saw an improvement in the share price of more than 4%. Baidu rose 1%, just like today’s Chinese e-commerce stocks PDD companiesbest known as the operator of the popular, cheap shopping site Temu.
Cautious, not cheerful, optimistic
Top-down initiatives, especially from the Chinese government, have a way of boosting stocks as a group. That dynamic was clearly at play for the country’s big-name tech names at the end of the week. Still, the cautiously optimistic response suggests some skepticism that the new measures will change the game; As always, it is best to buy or sell such titles more on their fundamentals.
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Eric Volkman has no positions in the stocks mentioned. The Motley Fool holds and recommends positions in Baidu and JD.com. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
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