The jury is out on Alibaba Group Holding Ltd (NYSE:BABA). The case is about the recent high volatility prevalent in the equity markets. During a panel discussion on CNBC, which was attended by, CNBC’s Finance Editor, Jeff Cox and Chris Johnson of JK Investment Group, both sides of the case were presented.
Cox blamed illiquidity for being responsible for the havoc that has been going on in the Stock Exchange. According to him, Alibaba Group Holding Ltd (NYSE:BABA)’s huge IPO where the Chinese e-commerce giant raised $25 billion from the equity market, has essentially choked it. The essential funds needed to maintain liquidity in the markets are simply not there anymore.
“[…] Money supply into the equity market is kind of dried up and I do believe, I think you stated very well by taking up the Oxygen in the room and maybe it was just an excuse for the market to just say, o.k. it’s time to catch our breath and we have been waiting so long for this correction […],” said Cox.
There is of course another side of the coin too, as is usually the case. In this narrative, Alibaba Group Holding Ltd (NYSE:BABA)’s IPO is more like an event that indicated that the time has come for a market correction. It did not cause it though. As Johnson explains, the market was already heated up, which is evidenced by several IPOs being issued just before the dive, and waiting for a correction. After Alibaba Group Holding Ltd (NYSE:BABA)’s huge equity event, it was more than obvious to all investors what has to done. A correction.
“[…] If we backup a little and look at the last seven years or so. This is more of an effect of a higher market. These IPOs coming up in a higher market and it is a cause for a correction in prices, and what I mean by this, when I look at it, and I looked at the data, Anytime we have had more than 30 to 35 IPOs in a month, it has come in a month of about 4% to 10% decline n the markets […],” explained Johnson.
There is yet another side of the story too, which the panelists didn’t dig deeper into. It is the current macroeconomic concerns about the slowdown in the global economy and with the current low oil price, the energy market of U.S. might get hit hard as well, depending on which region the price ends up in eventually. Alibaba Group Holding Ltd (NYSE:BABA) is merely a pawn in this narrative, like all other listed companies.
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