Alibaba’s Troubles Are Far From Over
China’s Alibaba Group founder and executive chairman Jack Ma.
MANAN VATSYAYANA/AFP via Getty Images
Text size
Alibaba
is in the crosshairs of the Chinese government—and its troubles don’t look to end anytime soon.
Shares of the Chinese internet giant are sliding again Monday morning—they’re down 1.3% after dropping 15% last week—and it doesn’t look like much can stop the slide.
The company is trying. Alibaba said it would buy back $10 billion of its own shares through 2022, up from $6 billion previously. At this point, it’s not clear what Alibaba can do except let the investigation run its course.
And it’s not just Alibaba that’s being targeted. Ant Financial, the online financial company started by Alibaba founder Jack Ma, has also been hit by Chinese regulators. Its November IPO was scuttled, and now the company has been asked to “rectify” its business, though what that means exactly is unclear. Ant has started a working group to figure it out.
U.S. tech giants, of course, have been targeted for antitrust violations at home but with far fewer consequences as of yet. The focus in the U.S. remains on tackling Covid-19—President Donald Trump signed the latest relief package into law—but
Alphabet,
Facebook,
and
Amazon.com
better hope that China hasn’t given U.S. regulators any ideas.
—Ben Levisohn
*** Want more market news from Barron’s? Every weekday we highlight the consequential market news of the day and explain what’s likely to matter tomorrow in our Review & Preview newsletter. Sign up here.
***
Trump Signs Stimulus Bill
Sunday night, President Donald Trump signed a relief package that he previously objected to that includes $900 billion in pandemic relief and $1.4 trillion to fund the government through September.
- The legislation passed in Congress last week with bipartisan support. Trump rejected the package, saying the proposed $600 direct payments to Americans should be increased to $2,000 per person.
- Because Trump decided not to sign the legislation earlier this week, pandemic-related unemployment benefits ended on Saturday, affecting an estimated 14 million people.
- Several lawmakers urged the president to sign the bill over the weekend, including Vermont Sen. Bernie Sanders as well as the governors of Maryland and Michigan. Washington state Gov. Jay Inslee said the state would step in with $54 million in funding for residents who would lose federal unemployment assistance.
- In a statement, Trump said he expects Congress to vote on separate legislation to increase direct payments to $2,000, according to The Wall Street Journal. He also called on Congress to remove what he called wasteful spending in the bill and roll back Section 230 of the Communications Decency Act, among other actions.
What’s Next: House Speaker Nancy Pelosi was already planning to hold a vote Monday on a stand-alone bill to increase economic impact payments to $2,000. House Republicans voted against a similar proposal last week.
—Anita Hamilton
***
How to Play a 2021 Rebound in Demand for Travel
Travel and leisure stocks have been on a tear ever since promising news about the efficacy of Covid-19 vaccines began to emerge this fall. “It’s a belief that travel will come back,” Geoffrey Ballotti, CEO of
Wyndham Hotels & Resorts,
told Barron’s.
- Stocks of cruise operators, though still down at least 40% year to date, have surged on vaccine news. “People have the ability and willingness and desire to go on a cruise post-Covid,” says Chris Woronka, a cruise and lodging analyst at Deutsche Bank.
- Leisure and business travelers will unleash a lot of pent-up demand starting in the middle of 2021 and extending into early 2022. They “will be looking to get out and travel and get caught up,” David Katz, a leisure and gaming analyst at Jefferies, says.
-
Patrick Scholes, who covers cruises and lodging for Truist Securities, points to timeshare companies, including
Wyndham Destinations,
Hilton Grand Vacations,
and
Marriott Vacations Worldwide,
as compelling picks because they’ll benefit both from strong demand and a steady stream of fee income. -
Hotel revenue per available room was down 57% year over year in early December, but a return of business travel, which companies like
Marriott
and
Hilton
depend on, should help turn things around. Steve Reynolds, CEO of Tripbam Analytics, says business travel could increase to 80% of 2019 levels by 2022.
What’s Next: Find out more on how to play a vaccine-driven rebound in travel and leisure stocks here.
—Lawrence C. Strauss
***
The Value Stock Rebound May Be a Head Fake
Value stocks have been outperforming in the fourth quarter as the economy has come out of recession and investors expect economic growth to rebound. That’s a sharp shift from earlier in the year, when value stocks were drastically underperforming growth stocks.
-
The market’s cheapest and most economically sensitive stocks are considered value stocks. Since Sept. 2, the
Vanguard S&P 500 Value
exchange-traded fund is up 6.8%, versus 3.6% for the
S&P 500
and 0.9% for the
Vanguard S&P 500 Growth
ETF. - The recent rotation into value stocks may merely be a function of an expectation that economic activity will rise with the end of the recession and then stabilize, causing value’s outperformance to dissipate.
- Barry Bannister, Stifel Nicolaus’s head of institutional equity strategy, expects the current trend to last a few years at most. He thinks the trend is the result of a short-term bounce out of a recession, not a long-term shift into value.
What’s Next: Value stocks can continue to outperform for a while, but don’t be shocked if they fade just as quickly.
—Jacob Sonenshine
***
MarketWatch Wants to Hear From You
I’ve been working in another state for most of the pandemic. What does that mean for my 2021 income taxes?
A MarketWatch correspondent will answer this question soon. In the meantime, send any questions you would like answered to [email protected].
***
—Newsletter edited by Anita Hamilton, Stacy Ozol, Matt Bemer
