Alibaba's breakup lifts hopes China's regulatory winter is thawing

Alibaba Group's plans for a major revamp have been taken as a signal that Beijing's regulatory crackdown on corporates is ending, propelling its shares higher and boosting investor confidence in prospects for Chinese tech firms.

The Jack Ma-founded conglomerate said on Tuesday it was planning to split into six units and explore fundraisings or listings for most of them, marking the biggest restructuring in its 24-year history.

Its Hong Kong-listed shares closed up 12%, tracking a rally in its U.S.-listed shares overnight , and giving the group a market value of about $255 billion. Those gains led the Hang Seng Index and other markets in the region higher.

​Many investors have seen a wave of regulatory blitzes over the last couple of years that have hit its internet, private education and property sectors hard as a major cloud hanging over China's private sector.

"We think this is likely a sign that we are moving closer to the end of the regulatory scrutiny...and we would expect that the company moves back into the good graces of the regulators and policy makers after this," said Jon Withaar, head of Asia special situations at Pictet Asset Management.

Alibaba will discuss the plan at a conference call on Thursday.

Alibaba said it would split into six units - Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group and Digital Media and Entertainment Group.

The group has been planning to spin off individual business units for a long time, according to two sources familiar with the company's thinking.

"There was a consensus within and outside Alibaba that the stock was trading at a major discount to the inherent value of the businesses," said one of the people, adding that the company had become "too bloated".

The person said there would be five initial public offerings from the units, while Taobao and Tmall, Alibaba's core revenue drivers, would remain with the current listed entity.