Which will be the least volatile in 2023?

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The past year has been turbulent for investors in a volatile macroeconomic environment that has seen central banks around the world raise interest rates to control runaway inflation. On top of that, geopolitical turmoil between Russia and Ukraine and strained diplomatic relations between the United States and China have put global stock markets in jeopardy.

Indeed, a confluence of these factors has led to supply chain disruptions and weakened demand for different products ranging from electronics to cars in different markets across the world, specifically in the United States.

China, the global manufacturing hub, has had a rocky start to this year as COVID cases surged in the country even as it backed away from its zero COVID policy which had seen strict lockdowns across the country.

Developments in China meant that Chinese stocks listed on US stock exchanges had a volatile year. Many US-listed Chinese stocks have also come under increased regulatory scrutiny over the past year.

Even the crypto markets have not been immune to the global rout. This market has put crypto investors on edge as it has been rocked by scams, bankruptcies, and blockchain attacks.

In this scenario, let’s look at two different asset classes, one of the stocks of Chinese e-commerce giant, Alibaba, and Bitcoin, the cryptocurrency that has been exceptionally volatile over the past year, and what 2023 might look like. predict for them.

Alibaba (BAB)

Alibaba shares have fallen more than 13% in value over the past year, beating the S&P500 (SPY) which has lost 17.1%.

By comparison, other Chinese stocks fared relatively better, with BABA’s peer JD.com (JD) losing just 9.3%, while Pinduoduo (PDD) saw its stock rise over 65% in course of the last year.

The stock has been battered over the past year amid a sell-off in Chinese stocks and increased regulatory scrutiny from Chinese and US regulators.

Alibaba, owned by Jack Ma, has come under increasing regulatory scrutiny over the past two years. In 2021, it was fined $2.8 billion by China’s antitrust regulator for abusing its dominant position over competitors and merchants on its e-commerce platforms.

In addition, Chinese billionaires’ criticism of the Chinese government in 2020 also led to the scuttling of the world’s largest IPO of BABA subsidiary Ant Group.

However, there are signs of improvement for BABA with the stock already up more than 20% in the past five days.

Even Morgan Stanley analyst Gary Yu is bullish on BABA stock with a buy rating and $150 price target. Yu said investors have “underestimated Alibaba’s leverage for a consumer recovery in China” as the company strengthens its retail leadership in consumer product categories such as clothing and cosmetics.

In addition, the analyst also expects BABA’s cloud business to see renewed growth in the first quarter of next year and expects regulatory scrutiny to ease for BABA.

Yu also approved Jack Ma’s divestiture of control of Ant Group and its $1.5 billion capital raise.

Besides Yu, other analysts remain bullish on BABA stock with a strong buy consensus rating based on 15 unanimous buys.

Bitcoin has had an exceptionally difficult year, with the value of the cryptocurrency more than halving. 2022 was the weakest year for crypto, as digital assets saw inflows of $433 million, a massive 95% year-over-year decline, according to a report from CoinShares.

The FTX-Sam Bankman Fried saga has only put crypto investors on edge. Another crypto brokerage, Genesis is also considering bankruptcy as crypto exchange, Coinbase Global (COIN) proceeds with another round of layoffs. The many risks associated with the crypto market have heightened the need for regulation.

Looking at this scenario, will bitcoin just inflate further? This does not appear to be the case as on Monday the coin broke through the 17,000 level, its highest level since mid-December.

Over the past five days, while BTC has gained more than 2%, in contrast, the altcoin Ethereum (ETH-USD) has risen more than 6%.

This prompted Jiang Zhuoer, CEO and co-founder of Bitcoin mining service B.TOP to tweet, I expect #Ethereum (ETH) to start rising sooner than #Bitcoin (BTC) as the leader of the next bull market. This should happen between March and May 2023, the price of ETH would definitely be out of the current low range.

It remains to be seen if Bitcoin will be able to sustain its recent rally for the rest of the year.

Conclusion

While the jury is still out when it comes to bitcoin and the overall cryptocurrency market, I think BABA is a relatively safer bet as China eases its COVID-zero policy and talks economic policies. favorable to trade.

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