The past year has been turbulent for investors with an unstable macroeconomic environment and Central Banks around the world raising interest rates to control rampant inflation. In addition, geopolitical turmoil between Russia and Ukraine and strained diplomatic relations between the United States and China put global stock markets at risk.
That’s because a combination of these factors has resulted in supply chain disruptions and softening demand for products ranging from electronics to automobiles in various markets around the world, more specifically in the United States.
China, a global manufacturing hub, has seen a rough start to the year as COVID cases have surged in the country, though it has backed away from a zero-Covid policy that saw strict lockdowns across the country.
Events in China resulted in a volatile year for US-listed Chinese stocks. Many US-listed Chinese stocks have also faced increased regulatory scrutiny in the past year.
Even cryptocurrency markets are not immune from the global storm. This has left crypto investors on edge as the market has been rocked by scams, bankruptcies and blockchain attacks.
In this scenario, let’s look at two different asset classes, shares of Chinese e-commerce giant Alibaba and Bitcoin, a highly volatile cryptocurrency last year, and what 2023 may hold for them.
Alibaba (GRANDFATHER)
Alibaba shares have lost more than 13% over the past year, underperforming the S&P500 (SPY) decreased by 17.1%.
In comparison, other Chinese stocks fared better than BABA’s peer JD.com (JD) lost only 9.3% while Pinduoduo (PDD) has seen its stock rise more than 65% in the past year.
Stocks have weakened over the past year amid a broad sell-off in Chinese stocks and increased regulatory scrutiny from both Chinese and US regulators.
Alibaba, owned by Jack Ma, has faced increased regulatory scrutiny over the past two years. Back in 2021, it was fined $2.8 billion by China’s antitrust regulator for abusing its dominant position over competitors and merchants on e-commerce platforms.
In addition, the Chinese billionaire’s criticism of the Chinese Government in 2020 also resulted in the delay of the world’s largest IPO by Ant Group, an affiliate of BABA.
However, there are signs of improvement in BABA, with shares up more than 20% in the last five days.
Even Morgan Stanley analyst Gary Yu is bullish on BABA stock with a Buy rating and $150 price target. Yu noted that investors had “underestimated Alibaba’s potential for consumer recovery in China” as the company strengthened its retail leadership in consumer goods categories such as apparel and cosmetics.
Additionally, the analyst also expects BABA’s cloud business to resume growth in the first quarter of next year and expects regulatory scrutiny to ease for BABA.
Yu also confirmed control of Ant Group and Jack Ma, who raised its capital of $1.5 billion.
In addition to Yu, other analysts also a The Strong Buy consensus rating is based on 15 consensus buys.
Bitcoin has seen quite a rough year with the value of the cryptocurrency more than halving. According to a report by CoinShares, 2022 was the weakest year for cryptocurrencies as digital assets saw $433 million inflows, down 95% year-over-year.
The FTX-Sam Bankman Fried saga only ended up alienating crypto investors even more. Another cryptocurrency firm, Genesis, is also considering bankruptcy, while cryptocurrency exchange platform Coinbase Global (COIN) performs another reduction phase. The numerous risks associated with the cryptocurrency market have reinforced the need for regulation.
Given this scenario, will bitcoin only bubble further? On Monday, the coin did not look like it would break the 17,000 level – the highest level since mid-December.
While BTC gained more than 2% in the last five days, in contrast, altcoin Ethereum (ETH to USD) increased by more than 6%.
This prompted Jiang Zhuoer, CEO and co-founder of B.TOP bitcoin mining service, to tweet: “I expect #Ethereum (ETH) to start rising faster than #Bitcoin (BTC) as the leader of the next bull market. This should happen between March and May 2023, when the ETH price will remain permanently outside the current sub-range.
It remains to be seen whether Bitcoin can continue its recent rally for the rest of the year.
The result
While the jury is still out when it comes to Bitcoin and the overall crypto market, I believe BABA is a relatively safe bet as China eases its COVID-zero policy and talks about trade-friendly economic policies.