Investors and financial advisors like Brian Bonar, one of the men behind Dalrada Financial Corporation, knows that what looks like a great investment one day could turn into a nightmare the next. Bonar and Dalrada invest money in foreign stocks as long as the research shows they are going to be long-term investment winners for their clients. China stocks have been a good place to invest money over the last couple of years, but those investment were hard to come by based on the regulations the Chinese government put in place. When the China stock market lost about 40 percent of its value recently, Bonar and his investors weren’t hurt because the Chinese market was almost closed to foreign investors at that time.
Most of the people that lost money were Chinese citizens, according to Bonar. But there is one Chinese company that was the goose that lays golden eggs to some foreign investors, and that company took a hard hit during the crash. Alibaba Group Holding LTD looked like a sure thing when it went public. The company had a virtual lock on China’s e-commerce business and the shares of the company increased 76 percent in just 60 days because of that lock. Then the company was called out by a Chinese government agency and the company started to crumble.
When China’s economy started to wobble, it hurt Alibaba’s customer base, and the stock started a slide. Almost a $128 billion in market value was wiped out, and according to Bonar that money is gone for good. Economists say e-commerce growth in China will recover, but that won’t happen anytime soon. Bonar thinks e-commerce growth will be slow right through 2016.
Investors like Brain Bonar wonder if Alibaba’s investors will ever recover because Chairman Jack Ma is not the kind of guy that tries to please investors. Investors rank third after customers and employees as far as Ma is concerned. Ma still says he and his partners are in it for the long term, and some investors believe him. Some investors believe Ma because he is still making deals. His recent deals amount to $15 billion. Bonar thinks it’s hard not to stand behind a guy like Ma and his company Alibaba, but he still thinks it’s a very risky investment and one his clients like to avoid.
Alibaba’s new deal may start to make sense since Ma is focusing on sports and entertainment along with e-commerce. But the company still has to deal with the government and the allegations made against them about counterfeiting. Alibaba says all those allegations are false.
Investors know e-commerce is still growing in China and they also know Alibaba has enough money behind them to survive. The only thing investors aren’t sure of is the Chinese government. But some people like Bonar say the government needs Alibaba and will keep will help the company once it is finished spanking them in public.