Alibaba dealing with fraud allegations is 'not a China problem'

Give Alibaba a break.

That’s what MKM Partners’ Rob Anderson is telling investors in a note Thursday.

Shares of the Chinese e-commerce company are down nearly 21% year-to-date, and MKM attributes some of this decline to allegations of fraud that have hit the company.

A quick rundown: The Chinese government said Alibaba isn’t doing enough to crack down on merchants selling fake stuff on Taobao, its biggest online selling platform. Another report said Alibaba vendors allegedly pay people to buy products and give positive feedback on the site — a practice known as “brushing.”

But Anderson writes that anywhere big money is moving around, there’s bound to be fraud:

The policing of fraud will be a constant battle for the company, as it is in every large marketplace. This is not a China problem, the US is bursting with fraud. Credit card fraud is over $US7bn per year in this country, more than the rest of the world combined. Insurance fraud is over $US40bn per year (excluding healthcare) and Medicare fraud alone is estimated to be over $US100bn annually.

Anderson adds that Alibaba remains one of MKM’s “most compelling large cap growth stories in any region or any sector.”

MKM rates the company a “Buy” with a 12-month price target of $US125. Shares were higher and little changed at around $US82 in pre-market trading.

Earlier, analysts at Stifel had said concerns over fraud have died down for now.

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