(Bloomberg) — The euphoria surrounding Alibaba Group Holding Ltd.’s spinoff plan appears to be all but over.
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The e-commerce giant’s stock has erased all the gains fueled by its ambitious reorganization proposal unveiled March 28 after it slumped 3.2% in Hong Kong on Tuesday. The latest drop came as a worsening US-China rift damped demand for technology shares.
“Overall sentiment on China is low now as geopolitical tensions continue to weigh and it may be difficult for IPO or spin off activity to pick up momentum in such an environment,” said Marvin Chen, an analyst with Bloomberg Intelligence. “While Alibaba stock may remain volatile, downside may be limited as valuations approach single digits again.”
The reversal of fortunes is a stark reminder that tech shares remain at the mercy of US-China tensions despite growing optimism that a years long regulatory crackdown on the sector is easing.
The Hang Seng Tech Index slid 3.5% Tuesday as investors assessed risks including last week’s report that the US is preparing to limit investment in key parts of China’s economy by American businesses.
(Updates with price moves at market close in second and last paragraph)
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