Hong Kong led losses in Asian stock markets on Friday as Alibaba faced a significant downturn following its decision to cancel the planned spinoff of its cloud computing arm. This sell-off marked the end of a week that started with excitement on global trading floors but concluded with a tepid finish, with Wall Street drifting despite a positive jump in US jobless claims.
Alibaba, a market heavyweight, experienced a more than 10 percent drop after surprising the market with its choice to halt the spinoff of its cloud computing arm. This decision was attributed to the ongoing US-China chip war, with the recent expansion of US restrictions on the export of advanced computing chips playing a crucial role.
The cloud spinoff was a key component of Alibaba’s extensive restructuring plan announced in March, which aimed to split the company into six distinct entities. This move, however, raised questions about the $200 billion valuation traders had placed on the group.
Alibaba stated in an earnings release that the spinoff “may not achieve the intended effect of shareholder value enhancement,” leading them to abandon the full spinoff. Instead, they expressed the intention to focus on developing a sustainable growth model for the Cloud Intelligence Group.
The announcement took traders by surprise, causing Alibaba’s US-listed shares to plummet more than nine percent. This development added Alibaba to the list of high-profile victims affected by the ongoing tensions between China and the US.
The broader Asian markets also struggled, influenced by a soft lead from Wall Street. Despite news of rising jobless claims indicating a softening labor market, other economic indicators, including weaker-than-expected consumer and producer price inflation, fueled hopes that the Federal Reserve would not need to raise borrowing costs further.
Traders considered the unexpected increase in jobless claims as a factor that could prompt a shift in the Federal Reserve’s policy. However, concerns lingered about the possibility of a Fed rate hike if economic data took a turn for the worse, with warnings of a potential recession.
In Asian trade, several markets, including Sydney, Seoul, Singapore, Mumbai, Bangkok, and Wellington, were in the red. Tokyo, Shanghai, Taipei, Manila, and Jakarta showed marginal gains.
Crude prices inched higher but struggled to recover from Thursday’s almost five percent collapse, driven by concerns about demand, China’s economic challenges, and rising US stockpiles. West Texas Intermediate entered a bear market, having declined over 20 percent from its recent peak, despite pledges from Saudi Arabia and Russia to maintain output cuts.