SoftBank’s stake sale drops Alibaba shares. The Financial Times claimed that Japanese technology investor SoftBank Group Corp (9984.T) sold all its Alibaba Group Holding Ltd (9988. HK) shares virtually, sending the Chinese e-commerce giant’s price plunging.

After two years of regulatory scrutiny, China’s big tech firms have started recovering, giving long-term investors like SoftBank a chance to reduce exposure to an economy battered by strict pandemic policies and Sino-U.S. tension.

SoftBank’s stock price tracked the market (.N225) on Thursday. After the announcement, SoftBank’s most valuable asset, Alibaba, fell 5.2% in Hong Kong before recovering to 2.8%.

After Tencent Holdings Ltd (0700. HK)’s main shareholder, Prosus NV (PRX.AS), suggested it may sell more shares, Chinese tech stocks fell 5.2% on Wednesday.

SoftBank has been trying to monetize its $20 million investment in Alibaba since almost two decades ago.

“They (SoftBank) have been clear that… they need to monetise profitable holdings,” said Jon Withaar, Pictet Asset Management’s Asia special circumstances head.

“Perhaps some expected that they may slow the pace of their selling in (Alibaba) now that their Arm IPO is moving closer to completion, but ultimately everything they are doing is within the scope of what they have told the market.”

Last month, individuals familiar with the matter told Reuters that SoftBank plans to float British chip manufacturer Arm this year in an IPO that would raise at least $8 billion.

The FT reported on Wednesday that SoftBank’s Alibaba shareholding would shrink to 3.8% from roughly 15% based on SEC filings.

The publication said Masayoshi Son’s Japanese business sold $7.2 billion in Alibaba shares through prepaid forward contracts this year.

The British tabloid stated that SoftBank said the trades were a “defensive mode” response to an uncertain economic climate. It will offer specifics in its quarterly financial results presentation in May.

SoftBank and Alibaba declined to comment to Reuters. Alibaba’s U.S. shares declined 1.3% after-market on Wednesday.

“China’s regulatory environment in the internet sector turned drastically tougher in recent years, and this is SoftBank simply responding to the changing environment, as it has already been doing,” said SBI Securities analyst Shinji Moriyuki. “It is well within the realms of expectations that the proportion of Chinese shares among its total investment will shrink further.”

SoftBank claimed a $34 billion gain last year by lowering its Alibaba investment to 14.6% from 23.7% to boost cash reserves after Vision Fund losses.

Vision Fund, which upended tech with massive bets on startups, lost 8 trillion yen ($60 billion) in calendar 2022 as market turbulence cut portfolio businesses’ values, forcing SoftBank to seek funds.

It also employed prepaid forward contracts to hedge risk.

Alibaba has lost over two-thirds of its worth since late 2020 due to heightened technology sector regulation. It includes a large punishment on Alibaba and scrutiny of founder Jack Ma’s corporate empire.