What happened
Shares of Alibaba (BABA 2.61%) climbed 5.5% on Tuesday after reports surfaced that the Chinese e-commerce titan's founder was not, in fact, missing.
So what
After multiple news outlets noted that Alibaba founder Jack Ma had not been seen publicly since October, when he criticized Chinese regulators for stifling innovation, speculation erupted regarding his whereabouts. That speculation died down, however, after CNBC reported that Ma was not missing and was simply "lying low for the time being." The news helped ease investors' concerns that Chinese regulators were planning to come down hard on Alibaba in retaliation for Ma's comments.
Alibaba's stock rallied on Tuesday. Image source: Getty Images.
Tuesday also brought news that the New York Stock Exchange no longer plans to delist three Chinese companies. The NYSE had previously thought it necessary to do so to comply with an executive order issued by President Donald Trump, which sought to prevent Americans from investing in companies that allegedly support the Chinese military. Although Alibaba was not one of the three companies that the NYSE had planned to delist, the news helped to reduce investors' fears that U.S. regulators would enact a broader crackdown on Chinese companies.
Now what
Investing in Chinese stocks offers the potential for attractive returns, due in part to the massive size and rapid growth of China's economy. Unfortunately, it also comes with sizable risks, including the possibility of harsh crackdowns from both Chinese and U.S. regulators. While Alibaba appears to have avoided these troublesome scenarios in the near-term, investors should be aware that regulatory risk remains.
