Alibaba Faces Volatile Reaction to Earnings as Woes Mount

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(Bloomberg) — Alibaba Group Holding Ltd. faces a wild ride over the next few days, with options pricing pointing to huge swings in the stock as investors brace for a drop in earnings and further regulatory scrutiny.

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The Chinese e-commerce giant’s American depository receipts are poised to move nearly 7% after it reports an estimated 60% drop in quarterly profit drop on Thursday, Bloomberg data shows. That would be the second-sharpest earnings reaction for Alibaba since 2015, following an 11% slump on its revenue miss in November.

Investor sentiment to Alibaba is becoming increasingly fragile, with Beijing telling the nation’s biggest state-owned firms and banks to start a fresh round of checks on their financial exposure and other links to Ant Group Co., Bloomberg reported Monday. Alibaba owns a third of Ant.

A lower profit for the three months through December would be the third straight drop for the company and its longest stretch of declines since 2015, Bloomberg data show.

Its U.S.-listed stock is down 64% from its October 2020 peak as Ant Group, in which Alibaba holds a one-third stake, was forced to scrap its initial public offering amid Beijing’s crackdowns on private enterprise. On Wednesday, the firm’s Hong Kong-listed shares advanced as much as 1.4%, on track to snap three consecutive days of declines.

The expected move is based off implied one-day volatility that uses two option market expiries closest to the earnings date.

Fresh worries over Beijing’s regulatory plans for the sector saw Chinese technology shares slip for a third straight session on Tuesday. The Hang Seng Tech Index fell 1.9% to the lowest close since its inception in 2020, with Alibaba among the biggest losers.

(Updates with Hong Kong share move in paragraph 5)

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