Just days ago, China’s Shanghai Stock Exchange, or CSI 300, risked trading at lows not seen since 2015-16. The government posted that its economy grew by 5.2%. However, experts questioned the accuracy of the data. Exports to Europe and the U.S. are falling. Foreign direct investment in the country is also falling.
Chinese tech firms sold off, led by Alibaba (BABA). Baidu (BIDU), JD, Tencent (TCEHY), and the ETF (KWEB) are some of the companies investors dumped. Just as fast as they fell, Alibaba led the recovery on news that its co-founders bought BABA stock. The New York Times reported last Tuesday that co-founder Jack Ma bought shares. Ma bought around $50 million of shares on the Hong Kong-listed stock in the quarter.
Alibaba Chairman Joe Tsai bought $151 million of BABA stock on the U.S. exchange. The company itself bought $9.5 billion of BABA stock in 2023.
Investors followed the insider buying. The stock gained around 6% last week and rose by 11% from its 52-week low.
Cautious investors should think twice about Ma and Tsai’s purchases. No one knows the real reason for their buying motivation. Readers should continue to monitor China’s central bank, which cut its borrowing rates to banks by 50 basis points. The government also vowed to prop stocks through various money printing strategies. Still, forbidding state-owned firms from short-selling or selling Chinese stocks is only a temporary fix. The government needs to repair its economy and stabilize its real estate market. Only then might its domestic consumers spend more liberally again.
