By Joyce Yu
Philadelphia, PA–Google has announced that it will invest $550 million in cash into Chinese e-commerce player JD.com, in a partnership to develop better retail infrastructure in multiple markets, including Southeast Asia. In return, Google will receive more than 27 million newly issued JD.com Class A ordinary shares. The two tech companies will develop retail infrastructure that can better personalize the shopping experience.
Opening a channel for JD.com to sell to consumers outside China, the deal is also expected to increase product visibility of the Chinese e-commerce company and make it easier for consumers to purchase them online. For Google whose search engine, Gmail and YouTube remain banned in China, this will bolster its shopping service, enabling Google to win back product searches from Amazon.
Stocks of both Google and JD.com rose sharply on Monday. This is compared to a market which suffered heavy losses in morning session. The Dow fell over 250 points at open, with Intel as the worst-performing stock in the index. Shares of Boeing and Caterpillar fell 0.9% and 1.5%, respectively for their large exposure of overseas business. The ongoing Sino-US trade spat has not reached the end, unfortunately, as U.S. officials are looking at another $100 billion of Chinese imports on which they could impose tariffs if desired.
Stocks “may continue to zig and zag through the summer as the Jekyll and Hyde sides of Trump struggle to dominate his persona,” said Ed Yardeni, president and chief investment strategist at Yardeni Research, in a note. “On the one hand, there’s Trump, the Deregulator and Tax-Cutter—his benevolent Dr. Jekyll persona. On the other is Trump, the Protectionist—his dark Mr. Hyde.”
“There are many problems with tariffs. They are intended to boost employment in the industries that benefit from such protectionism, but they immediately raise prices of the protected goods for all consumers,” Yardeni added.
Also concerning about the on-going trade frictions is UBS Group CEO Sergio Ermotti who said Wealthy investors are holding more cash just in case of full-blow trade war. Speaking on CNBC on “Squawk Box.”, Ermotti said, “Asset classes are priced quite high across the board. Expectations for business profitability are quite high. The financial markets are not ready for any major discontinuity … in commercial ties between countries.”
The chief executive at UBS, one of the world’s biggest managers of billionaires’ money, further added, “I’m really worried that … these things are going to get out of control. Somebody is going to announce something that then triggers a more serious issue,” Ermotti said, stressing trade risk “could come from any side, Europe, U.S., China; you name it.”