Amid the turmoil that has rocked the Chinese stock market and names that are traded on the U.S. exchanges, one name stands out among many, and that’s Alibaba.
As noted by Seeking Alpha on Monday (Aug. 31), the eCommerce giant’s shares were off 3.9 percent on the day, with other names like Baidu (down 3.1 percent) also sliding in the session. The overall Chinese tech index (CQQQ) that trades in the U.S. slumped 2.9 percent, with downward momentum exacerbated by the announcement from China that it would halt large share purchases.
The Chinese government will not prop up its equities markets, in other words, and now the government is instead directing efforts to discipline people it believes contributed to the roller coaster ride that has marked the past several weeks. Thus far, roughly 200 people have been “punished” by being detained by the government for such activities.
In company-specific news, The Wall Street Journal on Monday reported that Alibaba, among others, including chief rival JD.com, is looking to grab new customers in the Chinese countryside, looking to get growth from rural areas even as growth slows in key urban markets.
Alibaba and JD.com together control about 80 percent of the $440 billion Chinese eCommerce market, said WSJ, with most of that concentrated in urban areas. Both companies are targeting 100,000 country villages within the next five years. The push into rural areas is ever more crucial as new customer growth rates in cities slow. Alibaba’s own stakes have grown at the slowest rate in the past several years, as measured by numbers put up in the latest quarter, which ended in June.
For the two eCommerce companies, rural areas represent a strong untapped customer base, as Internet connections multiply via smartphones. Seventy-seven million people in the countryside bought items online, up 41 percent year over year, and the 600 million citizens in those locations are seeing their incomes grow at a rate in the high single digits.