Why Alibaba Stock Dived by Nearly 4% Today


An apparent effort at muscling into the e-commerce market of a neighboring country wasn’t very impressive to Alibaba (NYSE: BABA) investors on Thursday. They traded out of the Chinese online retailer’s stock, to the point where its U.S.-listed shares closed the day down by 3.9%. In contrast, the slumping S&P 500 index shed only 0.3% of its value.

A renewed push in South Korea?

Nikkei Asia, quoting a report from South Korea’s Yonhap News Agency, published an article stating that Alibaba is to invest $1.1 billion in that country. The intent is to establish a logistics network in order to compete with that country’s e-commerce leader Coupang.

Alibaba will apparently leverage its ability to offer low prices, and with a strong logistics effort it will get goods to customers rapidly.

Alibaba’s AliExpress brand already has a presence in South Korea; it was rolled out in 2018. The company’s plans would expand AliExpress’ footprint significantly — for example it plans to build a logistics hub on a 180,000 square meter lot near the national capital of Seoul. The article stated that the company is currently in the process of choosing a location.

Other plans include a 300-employee call center, and a purchasing division that will sell Korean products abroad.

Alibaba has not yet officially commented on the report.

One tough market

Although South Korea is geographically far smaller than China, it nevertheless has a well-established and thriving market economy full of hardened competitors. And while Alibaba already has a foothold in that market, it’s going against that country’s 300-pound online retail gorilla. Assuming the company follows through with these apparent plans, many pairs of investor eyes will be on it to see if it can garner meaningful share from Coupang.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Coupang. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.

Why Alibaba Stock Dived by Nearly 4% Today was originally published by The Motley Fool

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