Surprise management shuffle sends Alibaba shares lower

Shares of Alibaba (9988) fell after the e-commerce giant said its chief executive and chairman Daniel Zhang Yong will step down from his roles to focus on its cloud division.

It comes as Morgan Stanley forecast Alibaba will benefit the most from China's US$7.4 trillion (HK$57.7 trillion) worth of artificial intelligence market.

The chief executive role will be handed over to Eddie Wu Yongming, chairman of Alibaba's Taobao and Tmall Group, while executive vice chairman Joseph Tsai will take over Zhang as chairman.

Both appointments take effect on September 10, Alibaba said.

Some non-executive directors are said to resume executive roles.

This came as Chinese tech news outlet LatePost reported that Alibaba founder Jack Ma Yun convened a meeting with leaders from Taobao and Tmall Group where he highlighted Alibaba's e-commerce business is facing huge competition. At the meeting, Ma cited examples such as Nokia and Kodak to show how a once-leading company in an industry can deteriorate and potentially cease to exist within six months to a year, according to the report.

It follows after Alibaba posted its third consecutive quarter of single-digit revenue growth, reinforcing concerns that a Chinese consumer spending rebound may be farther out than anticipated."The good thing is that the new chief executive and chairman are all co-founders of the company and the closest to Jack Ma. That means Ma remains the spiritual leader of Alibaba," said Kenny Wen, head of investment strategy at KGI Asia.

Wu, an Alibaba co-founder, is credited with helping the development of the company's digital advertising platform, Alimama and its PayPal-like Alipay, now part of Ant. It is unclear whether the new management will reconsider ways to hive off the most valuable parts of the Alibaba empire via separate listings.

Alibaba's shares closed 1.5 percent lower in Hong Kong yesterday.

Zhang's unexpected departure comes after Alibaba announced a six-way restructuring to try and juice growth and create a family of standalone leaders in businesses from cloud computing and logistics to international commerce.

Meanwhile, analysts at Morgan Stanley said tech giants, including Alibaba, Baidu (9888), and Tencent (0700) will benefit from China's AI development.

China is at an inflection point in AI development and is catching up with the US despite regulatory and semiconductor constraints, which will drive changes in consumer behavior and business transformation, they said in a report.

Jefferies said that it expects AI to be a priority for all business lines of Alibaba and maintains a buy rating for Alibaba.