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Why Alibaba, JD.com and TAL Education Group are down today

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what happened

Major Chinese equities traded on US exchanges continue to struggle today as important news and the beginning of the earnings season across the sector.

Share of Chinese e-commerce specialists Alibaba (BABA -8.14%). When JD.com (JD -4.44%). At 9:52 am ET, it decreased by about 8.5% and 5.5%, respectively.Meanwhile, shares of an online tutoring company TAL Education Group (TAL -7.51%). It was down almost 9%.

So what

Earlier this week, Alibaba announced plans to double-list and list in Hong Kong in addition to its current listing on the New York Stock Exchange. The company announced that it will be listed in Hong Kong by the end of the year. Management quoted the fact that Hong Kong is at the heart of the company’s “globalization strategy” and is “fully confident in China’s economy and future.”

Chinese stocks also deal with news this week that billionaire Jack Ma plans to leave Alibaba’s affiliate Ant Group, a major tech giant. Ant Group has been trying to publish since 2020.

This move seems to be part of a broader effort to further separate Ant from Alibaba, which was founded by Ma. Recently, several Ant executives have also cut off their ties with Alibaba. All of this could speed up Ant’s final initial public offering, but investors may not see this as a plus for Alibaba.

Alibaba will also report earnings on August 4, and analysts expect the company to record a slowdown in earnings, the first quarterly decline in earnings to date.

The Financial Times Alibaba’s US subsidiary reported Wednesday that it no longer expects to reach its goal of adding one million small businesses. The target is part of a broad push into the US e-commerce market, Amazon..

In other news, the TAL Education Group reported first quarter earnings for fiscal year 2023. TAL generated a loss of $ 28.3 million against a total revenue of $ 224 million. Revenues plummeted by nearly 84% year-on-year.

The market expected TAL’s earnings to slow significantly due to the Chinese government’s crackdown on tutoring, but investors seem to be similarly disappointed.

So

This week was a forgotten week for Chinese equities, but it was generally a positive month for US equities. Alibaba seems to be dealing with some legitimate business headwinds, but it’s a bit unclear how Ma’s breaking the relationship with the company will affect it in the future.

In recent months, the Chinese government has begun to ease the crackdown on regulations that hit stocks last year. The country is also addressing the resurgence of COVID-19 cases, which has led to many blockades in major cities in China.

I’m more worried about these issues now. If regulatory pressures continue to ease and the blockade does not have much impact on the Chinese economy, I think the sector is up, but it’s still a big problem. If you are considering buying any of these stocks, be prepared to hold them for a long time and anticipate short-term turmoil.

John Mackey, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s Board of Directors. Bram Berkowitz does not have a position in any of the listed stocks. Motley Fool belongs to Amazon and JD.com and recommends it. The Motley Fool recommends the TAL Education Group. The Motley Fool has a disclosure policy.

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