- Summary:
- Alibaba share price could potentially have its best run in the second half of the year as its fundamentals and macroeconomic factors align.
Alibaba stock price spiked on Tuesday, closing the day at $97.17 with +7.88% in gains. The sharp rise was sparked by the People’s Bank of China’s (PBOC) announcement of a broad monetary stimulus targeting the country’s property market. PBOC Governor Pan Gongshen announced a 0.5 percent cut on existing mortgages and a reduction of bank reserve requirement ratio (RRR) by half a percentage point.
Implications of the stimulus to China’s economy and Alibaba
The lowering of the RRR is expected to free up $142 billion for lending. PBOC also slashed base interest rates from 1.7% to 1.5% to encourage borrowing. The property market got a huge boost, with the government lowering the minimum deposit requirement from 25% to 15% of property values.
These measures hope to revive the country’s property merket that has nosedived in the this year and injected a contagion in the wider economy. Benchmark indexes, the Shangai Composite and Hang Seng Index rallied more than 4% on Tuesday in reaction to the news.
Mostly good news and an existential limiting factor
China is Alibaba’s largest market, and a weak domestic economy had put a lid on its share price for a prolonged time. Nonetheless, Alibaba (NYSE: BABA) share price rose to a new 52-week high on Tuesday, signaling underlying bullishness that just got ignited by the stimulus news. The e-commerce company’s financials beat forescasts in the latest quarterly report released in August, with an EPS of $2.26 versus $2.06 (+9.61%).
Meanwhile, its revenues grew by +3.7% YoY to $33.47 billion, defying the sour macroecoomic environment. Therefore, news of economic stimulus will likely propel Alibaba share price higher on improved earnings outlook.
However, on the downside, the trade wars between the United States and China could be a limiting factor. The US already put blockades to shipments of microchips to China, limiting Alibaba’s access to the burgeoning AI technology. That could get worrse as political rhetoric hits up in the lead-up to US presidential elections.
Alibaba share price forecast today
Alibaba share price pivots at 96.50, and the upside will likely continue as action stays above that mark. With the bulls in control, watch out for the first resistance at 97.60. However, a stronger bullish momentum could break above that mark to test 98.90.
Alternatively, moving below 96.50 will put the sellers in control, with initial support likely to be at 95.02. If the sellers extend their control, ithe resulting momentum could breach that mark and invalidate the upside narrative. Also, it could extend losses to test 93.25.
