The e-commerce giant Alibaba Group's shares surged in Hong Kong following Chinese media reports that Jack Ma endorsed the firm's current leadership in an internal memo. This endorsement from Jack Ma, one of the co-founders of Alibaba, helped boost investor confidence and led to a 5.4% rally in the company's shares to HK$74.25 – its highest level in nearly a month. The positive news also contributed to a 2% surge in the Hang Seng index, reaching a near one-month high.
According to Chinese media reports, Jack Ma praised the restructuring efforts undertaken by CEO Eddie Wu and Chair Joseph Tsai in the internal memo posted on Alibaba's network. This memo marked a year since the e-commerce giant announced plans to restructure its core businesses. While the initial plan for a six-way split of core units was dropped, Alibaba has implemented various measures over the past year to leverage the growing interest in artificial intelligence and boost sales amid weakening consumer demand in China.
In addition to restructuring its core businesses, Alibaba has also focused on its cloud division as a key component of its AI ambitions. The firm has reduced the prices of its cloud products for the third time in 12 months to meet the increasing demand for computing power in the AI industry. However, the cloud unit has faced challenges with weak sales over the past two years due to rising interest rates impacting technology investments.
Alibaba's restructuring efforts were not only aimed at driving growth but also at addressing concerns raised by Chinese regulators. The company has been under scrutiny for nearly three years for antitrust violations, leading to a series of regulatory challenges. Additionally, Alibaba continues to face pressure on the e-commerce front, with sluggish sales in China amidst fierce competition and subdued consumer spending due to the economic slowdown.
While the endorsement from Jack Ma has provided a boost to Alibaba's shares in Hong Kong, the company continues to navigate challenges in the market and regulatory landscape. Despite the positive developments in restructuring and focus on key growth areas like AI and cloud, Alibaba will need to address the underlying issues affecting its sales and market position in order to sustain its growth momentum.