Alibaba Group Holding’s market value has slumped to only about half that of rival Tencent Holdings as the former’s e-commerce-centric business faces sluggish demand and intensified competition.

Alibaba, whose other main business line includes cloud computing, has a market capitalisation of US$201 billion, while Tencent, focused on social media and gaming, boasts US$391 billion, according to data compiled by Bloomberg. Alibaba’s shares now trade around eight times forward earnings multiples, about half of Tencent’s 16 times. 

Alibaba on Thursday (Nov 16) abruptly ended its plan to spin off the cloud unit, citing heightened US restrictions on chip sales to China. The announcement, along with lower-than-expected domestic e-commerce sales in the September quarter, sent the stock tumbling about 10 per cent in Hong Kong, its sharpest drop this year. 

The companies’ value divergence points to other regulatory and macroeconomic issues that have troubled Alibaba. In recent years, China has sought to rein in the country’s tech giants, with regulators probing Alibaba affiliate Ant Group and imposing a US$1 billion fine on the fintech company backed by Jack Ma. Its market value had largely been higher than Tencent before China’s crackdown started in late 2020. 

“China’s tepid consumption recovery and the heightened competition in the e-commerce space all make it harder for Alibaba’s business environment,” said Willer Chen, a senior analyst at Forsyth Barr Asia. “There were also greater regulatory concerns for Alibaba earlier that weighed on investors’ sentiment.” BLOOMBERG