Alibaba Group Holding Ltd 155.90 HKD −6.30 (3.88%)today
#1

Looks attractive
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#2

Wait......

I, being poor, have only my dreams; I have spread my dreams under your feet; Tread softly because you tread on my dreams.
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#3

Noted.
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#4

OMG so low now
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#5

last chance….buy while you can….
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#6

Looks like still not the time yet. The confidence level needs to be above 70%. Rather gain less than lose money.
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#7

Monday drop or rise I will enter position
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#8

BABA and Tencents gone case as their data will be nationalized...Not only that, these internet companies have no role in CCP 5 years plan..

https://www.reddit.com/r/baba/comments/p...urce=share&utm_medium=ios_app&utm_name=iossmf

The most glaring misperception I’ve noticed, is that a few investors still think this crack-down is about siphoning money from / purposefully harming Western investors. First off, it’s not about this at all. This is about the CCP fixing China’s own internal problems, and capital as a whole (not just western investors) being collateral damage from this.

For example, many of these companies that were caught in the new regulations, are already dual- listed in the US and Hong Kong. And some even only have listings in Hong Kong or Mainland. For example, the education sector regulations news broke the night of July 22nd (US time). In the days after, the CSI 300, an index of the 300 largest companies listed in Shanghai and Shenzhen dropped over 10%, and over 20% since its February peak. Foreign investors make up less than 5% of the domestic Chinese market, so this impact hurt primarily domestic Chinese investors

Additionally, the Hong Kong market is also dominated by mainland investors, with mainland institutions estimated to comprise ~40% of Hong Kong volumes, while mainland retail investors make up another ~20%. These investors are shareholders of many of the Hong Kong listed technology, education, gaming, and property management companies, which also experienced drops of ~20 - 80%.

The difference in Chinese policies vs. many Western governments, is that China prioritizes the labor and tech components of this equation more so than capital. While labor is made up of the domestic population itself (and the goal of society is to improve the well-being of the population) and technology is used to amplify this output, capital is face-less (or at least belonging most to those who have benefitted from the country’s rise and accumulated the capital in the process, and thus have a “national duty” to help & repay their fellow citizens / country who helped them achieve this success).

In the 1980’s while China was opening up, Deng Xiaoping famously said “Let others get rich first”. The idea was to allow certain enterprising individuals to generate wealth first, and over time this new wealth would be used to help “backward” areas of the country. The intention was not, to allow some to get rich, and then use this newfound wealth / power to then go squeeze even more profits out of those left behind (which is what the CCP sees many Chinese companies to be doing today).

Capital is meant as a tool (i.e. fuel) to enhance & accelerate society’s goals, not as an end-goal itself. Versus many Western markets, where it seems that the betterment of shareholders (and putting more money into their pockets) is often the end goal itself. If the well-being of capital must be sacrificed to ensure a better long-term direction of society (higher birth rates, affordable housing, protection of consumer data, a more free-thinking / creative education for kids vs. today’s heavy burden of rote-memorization) then in the Chinese government’s eyes, it’s a worthy trade-off.

This is especially true if the capital to be impaired is “fueling” the wrong societal goals in the first place – such as high educational costs which discourage births, high housing prices which discourage family formation, keeping delivery drivers’ wages low so as to squeeze profits to line- shareholder’s pockets, etc. In this case, the capital wasn’t being productive anyways, so there’s no loss if the government impairs it (and sends a message to discourage future investment in these fields).

Know The Plan

As such, it’s crucial to understand what China’s priorities are first and thus where capital can go to support these objectives, if you want to have higher odds of investing your capital in China safely. The easiest way to understand this, is by studying China’s five year plan (this is a “blueprint” released by the government every five years, setting the goals for near-term government policies).

In the last five year plan relating to 2021 – 2025 (meeting held in October 2020), the government discusses how it aims to become a moderately developed country by 2035 (i.e. $30,000 USD per capita). It hopes to achieve this via a focus on domestic consumption (and of domestic brands), and by continuing to close the urban vs. rural living standards gap. In terms of innovation, the tone also changes to a focus on the hard-sciences (biotechnology, semiconductors, quantum computing, space exploration, climate technology, etc), and increasing the funding provided to basic research R&D.

So What’s The Problem?

Over the past thirteen years, China’s GDP has slowed from ~14% y/y growth in 2007 to just over ~6% y/y today. So why is this a problem?

Well when the overall pie is naturally growing rapidly, the country can “direct” resources (labor, capital, government policy / support) to specific areas, so that the “newly formed slices of pie” have a greater chance of forming within lagging areas (rural areas, lower-income workers, etc). You can create new prosperity for these areas, without having to take chunks from existing pieces (pieces that already belong to someone else).

However as GDP growth slows, so too does this ability to create new opportunities for the underserved areas, without affecting the prosperity of existing participants. Slowing growth wouldn’t be an issue if the problems were fixed during the high-growth periods – but in China’s case, the problems have actually become worse. Income inequality has in fact widened, and the IMF indicates that China not only has one of the worst levels of income inequality among Emerging Markets countries, but also one of the highest rates of worsening over the past 30 years.

Slowing growth wouldn’t be an issue if the problems were fixed during the high-growth periods – but in China’s case, the problems have actually become worse. Income inequality has in fact widened, and the IMF indicates that China not only has one of the worst levels of income inequality among Emerging Markets countries, but also one of the highest rates of worsening over the past 30 years.

Generally in countries that experience slow growth, as the pie stops growing, the only way to better your own family’s circumstances and get a bigger piece for yourself, is to take a chunk from someone else’s pocket. China’s issue is that the starting line / opportunity to do so isn’t equal – those who have amassed a large piece during China’s high-growth phase (either through self-determination, or as a benefit of government support), are more advantaged and now have more power (bigger piece = more resources / access / connections = more power to acquire more pieces from others). These stronger players are always looking to grow too, and because of their advantages, naturally resources accrue to the top (“rich get richer”) rather than flowing the other way around. Hence, this leads to an even wider income gap, and requires an even stronger force (the CCP) to stop this dynamic.

Historically one of the great equalizers and best ways to get your family better financial footing, was through education. In China (and almost all Confucius-based cultures – such as Korea, Japan, and Vietnam), education is highly prized, and the resources of the entire extended family would be pooled to support the education of a single gifted child (with the idea that when they succeeded, the entire family would as well)

This cultural mindset dates back thousands of years, starting with China’s Imperial Examination during the Sui Dynasty (581 AD). This grueling exam was technically open to all levels of society, and helped to promote an avenue of equality in society4.

“The civil service examination system was an important vehicle of social mobility in imperial China. Even a youth from the poorest family could theoretically join the ranks of the educated elite by succeeding in the examination system. This assurance of success in the examinations dependent only on one’s ability rather than one’s social position helped circulate the key ideas of Confucianism... The hope of social mobility through success in this system was the motivation for going to school in the first place, whether one was the son of a scholar or a farmer... This curricular uniformity had an extremely powerful effect on Chinese society, and the major impetus for this uniformity was the meritocracy promoted by the civil service examination system.”

If this sounds familiar, it’s because this system is very similar to the Gaokao college entrance exam used today. This exam lasts for 9 hours over several days, and this single test largely determines the rank / pedigree of the college the student is accepted into. While there are certainly valid criticisms of the test (imagine your future being based entirely on an amped up version of the SAT test available only 1x a year), it’s also regarded as the fairest way of screening talent in a population of 1.4 billion people. Regardless if you’re from a rural or urban family, a wealthy or poor family, the test results you get are still largely determined by your own ability (and not how much your family donates to a certain school)

So given the cultural impact of the Imperial Examination, which lives on today in the form of the Gaokao, and culture emphasis on education in general, where do you think families are going to spend their resources as they grow wealthier? Especially as due to the decades long one-child policy (now abolished), all their resources are focused on a single kid? Well on average, Chinese parents spend ~$18,000 USD per year on after-school tutoring. Considering China’s average GDP per capita is only ~$10,000 USD, it obvious that the bulk of a family’s resources are going towards their kid’s education, with additional support from the extended family and savings. The financial pressure on families, and mental pressure on students is intense. Starting in elementary school, 60% of students are already being tutored outside the public classroom (and steadily rising in % for older students), spending several additional hours a day ultimately prepping for the Gaokao. As an example of this pressure, in 2012, images of Chinese students using IV drips to aid them in studying went viral

But if your kid’s classmates are all using expensive after-school tutoring services, what option do you have as a family? At the end of the day, it’s a ranked test and the better your kid’s classmates perform the worse your own child ranks, so you have to play the game too. Note: This isn’t only a China problem, but rather is prevalent across East Asia. Ten years ago, South Korea similarly cracked down on its own after-school tutoring system (i.e. “cram schools”), where over ~70% of all students are enrolled. The private tutoring sector alone was equivalent to ~50% of the total public education budget, and the extreme mental stress students faced was often blamed for the high suicide rates and low birth rates.

It’s clear that China has taken some of the lessons from South Korea, in enacting its own policies. This dynamic has led to tremendous pricing power among the after-school education companies, which in turn led to these profits accruing to shareholders (EDU & TAL being the most notable). In the CCP’s eyes, the majority of Chinese families are subsidizing and suffering immense pressure, just for these resources to ultimately line the pockets of the few (already wealthy) shareholders. The government sees this as a form of rent-seeking, without adding value to society (it’s a zero-sum game). It’s also because of this immense financial pressure, that China’s population is declining. It’s an issue for the country, since a smaller working population needs to support a bigger retiree population (who historically, have relied upon offspring as a retirement policy, and elders often live with their adult children). This despite the one-child policy being modified to a two-child policy in 2015, raising the limit to three-children on May 31, 2021, and being completely abolished just a few weeks ago on July 20, 2021

Combined with this, China’s housing prices have also risen astronomically over the decades. There are several reasons for this, including rising prosperity + capital controls & distrust of local stock markets, meaning that excess savings are invested into real estate. Whatever the case, the fact is that home prices have risen ~8% y/y over the last 20 years, and even more in Tier 1 cities (Beijing, Shanghai, Guangzhou, Shenzhen). The rise in home prices have also outpaced the rise in incomes – thus making home-ownership (a cultural prerequisite for marriage in China) ever- harder6. Housing prices are also intertwined with education, since where you live determines where your kids go to school (much like public schools & property taxes, in the United States). Families in Tier 1 cities are buying up 800sqft shanty apartments for over $1 million + additional renovation costs, just to ensure their (unborn) child will be able to go to a good public school

High child raising costs, high property costs, and long working hours (9am-9pm, 6 days a week, i.e. “996”) in many tech companies, are creating a unsustainable life for the middle class. These factors are all why marriage and birth rates continue to fall. So what’s the cultural reaction to this high-pressure, rat-race lifestyle among the younger generations? To give up and “lie-flat” (“躺平”)... The younger generations no longer have the optimistic hope in a better future, and a belief in upward mobility that their parents did during China’s previous decades of meteoric growth7.

Many Chinese youth are choosing to leave this rat-race, forgo marriage / children, have lower ambitions, move out of expensive Tier 1 cities back to their hometowns or countryside, and prioritize their own time / freedom over material possessions. Of course, this new trend also worries the CCP, as it creates a negative virtuous cycle, which affects the productivity and future trajectory of society as a whole (especially as China’sgovernment has global leadership ambitions). In fact, the trend is so concerning that the phrase “lie-flat” itself is censored by China’s internet regulators.

So these are just some of the issues that China’s government are trying to tackle. And viewed through this lens, it’s easy to see that these recent actions are about fixing China’s internal problems, rather than purposefully trying to harm foreign investors (they’re the collateral damage). The country is trying to steer capital towards the fueling the right areas, where it views it’s most needed for advancement and betterment of the country.

China is a state capitalist system, which by definition, capital is meant as only a tool to serve the interests of the majority of society. Especially with President Xi’s historic 3rd term re-election coming up in 2023 (China’s two-term presidential limits were abolished in 2018), the government is especially cognizant of trying to enact these fixes in a timely manner (which have been generally well-received by China’s broader population in recent weeks).

If you plan on investing in any foreign countries, you first need to understand the history, culture and context of its people first. This is especially important in China, where the state has greater control over the economy, and the health of the capital markets will always play a subservient role to the greater needs of society at large. Hopefully by providing this background, other investors will at least understand the “rules of the road” better while searching for investments in China.
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#9

Many well known Value investors include Munger and Mohesh Pabraj have purchased Alibaba.

I knew the valuation trigger that motivated their decision but held back.

There will be a better time and moment.

Alibaba is almost a cannot be missed opportunity. The sprawling empire with Taobao, Aliexpress, Alibaba, Ant Group, Weibo, Youku,  and cloud services represents a wide cross section of businesses that will succeed. Jack Ma simply copied the Western successful businesses and grew them in China....knowing they will not be able to penetrate China's market.

The question is not whether to buy but when ....


I, being poor, have only my dreams; I have spread my dreams under your feet; Tread softly because you tread on my dreams.
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#10

“Jack Ma and the Chinese tech titans’ mission to give away billions“




Like that Alibaba can still be profitable?

Laughing
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#11

Time to scoop up…across the board…scared money don’t make money
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#12

Sell weekly calls at $170 strike.
This is a Money printing machine.
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#13

Can go in under turtle trades.

100 units cost S$2,700.
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#14

Put higher then the buying and selling price by 0.70 cents also have to que?
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#15

if you read the article above ...nothig about Alibaba is good

so if wage, delivery workers and small business = less profit for BABA

anti monopoly = advantage is gone

Ant is in smokes

the consumer data they held which is valueble, will be taken and put to a gov cloud . so BABA cloud business drops

Is it still a falling knife or the last puff?
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#16

I have bought at 156.1...but trading is still choppy but selling pressure has faded.

I, being poor, have only my dreams; I have spread my dreams under your feet; Tread softly because you tread on my dreams.
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#17

How come poems, the transaction cannot go through even if the purchase price is higher? I just leave it there and wait.
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#18

Suddenly jumped up.
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#19

Miss the boat for today.
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#20

(30-08-2021, 10:01 AM)theold Wrote:  How come poems, the transaction cannot go through even if the purchase price is higher? I just leave it there and wait.

If this is for long term you don't need to pick exact bottom.

I, being poor, have only my dreams; I have spread my dreams under your feet; Tread softly because you tread on my dreams.
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#21

(30-08-2021, 10:16 AM)sgbuffett Wrote:  If this is for long term you don't need to pick exact bottom.

Mine is always short term. That is why it is difficult to answer to the bank where the money come from.

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Poems: There is a delay of 15 mins and also cannot set too high a purchase price.
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