Alibaba's Rally: Michael Burry's Investment Firm Boosts Stake, Shares Soar

Alibaba Group's (HK:9988) (NYSE:BABA) Hong Kong shares experienced a significant surge to a seven-month high on Friday following news of an increased stake by Michael Burry's investment firm, Scion Asset Management. The e-commerce giant's stock surged over 7% to HK$85.80, marking its highest level since October 2023 and emerging as the best performer on the Hang Seng index, which rose by 0.9%.

Increased Stake by Scion Asset Management

Scion Asset Management, headed by the famed investor Michael Burry, raised its stakes in both Alibaba and its peer JD.com (HK:9618) (NASDAQ:JD) in the first quarter, as revealed in a 13-F filing earlier this week. Notably, JD.com became the firm's largest holding after an 80% increase in its stake. Meanwhile, Alibaba retained its position as the second-largest holding, with Scion increasing its stake by 50,000 shares to 125,000 shares, amounting to approximately $9 million.

Strategic Bet on Chinese Technology Stocks

Burry's move to invest in heavily-discounted Chinese technology stocks over the past year reflects his belief in the sector's potential rebound amid a broader post-COVID recovery in the Chinese economy. Despite Chinese stocks facing challenges in 2023, Burry's strategy appears to be paying off in 2024, with Alibaba and JD.com witnessing significant gains of 14% and 21%, respectively.

Regulatory Outlook and Market Sentiment

The rally in Chinese stocks comes amidst a strong rebound in the broader Chinese stock market over the past two months, fueled by growing investor confidence and persistent government support. Additionally, China's efforts to ease regulatory pressures on its internet giants have contributed to the positive sentiment, as Beijing aims to stimulate economic growth through various measures.

Conclusion

Alibaba's surge to a seven-month high underscores the positive market sentiment surrounding the company, fueled by increased stakeholding from prominent investors like Michael Burry's Scion Asset Management. As Chinese stocks continue to gain momentum amid improving economic prospects and regulatory clarity, investors are closely monitoring opportunities for growth and stability in the market.

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