Why Alibaba Stock Crushed the Market Today

A new top-down economic stimulus program from the Chinese government was stimulating interest in the country’s stocks on Friday. One of the nation’s big corporate champions, e-commerce giant Alibaba (BABA 2.76%), benefited handsomely from this. The shares closed the day almost 3% higher, comparing very favorably to the basically flat performance of the bellwether S&P 500 index.

China’s new economic stimulus program

The government’s initiative didn’t specifically cover the tech sector Alibaba is a part of, but it did supply some modest optimism for the Chinese economy as a whole. The People’s Bank of China will supply the nation’s lenders with 800 billion yuan ($113 billion) worth of one-year loans in an attempt to boost the economy. Authorities also eased a clutch of regulations aimed at helping the troubled domestic real estate market.

Judging by the modest pop in Alibaba’s price (and that for other Chinese tech titles), it seems investors are cautiously optimistic that these reforms will benefit the economy. And a rising Chinese tide lifts all boats in that sea, they’re hoping.

This was evidenced by the market-beating performance of the country’s other tech majors trading on foreign exchanges. JD.com, for example, notched a more than 4% improvement in stock price on Friday. Baidu rose by 1%, as did Chinese e-commerce stock of the moment PDD Holdings, known best as the operator of popular low-priced retail site Temu.

Carefully, not cheerfully, optimistic

Top-down initiatives, especially by the Chinese government, have a way of rallying stocks as a group. That dynamic was clearly in play with the country’s well-known tech names at the end of the week. Yet the cautiously bullish reaction indicates some skepticism that the new measures will be game-changers; as ever, then, it’s best to buy or sell such titles more on their fundamentals.