Alibaba shares jump 4% after joining the mainland’s Stock Connect Scheme

By Casey Hall

SHANGHAI (Reuters) – Alibaba Group shares rose 4.2% on Tuesday as investors welcomed the company’s listing on mainland China stock exchanges after the e-commerce giant last month upgraded its Hong Kong listing to primary status.

The move to dual main listing paves the way for the company to be added to the Stock Connect Scheme, which allows mainland Chinese investors to buy shares of the country’s largest e-commerce company at market value. Alibaba announced the inclusion late Monday.

Morgan Stanley analysts predicted that Alibaba’s addition to Stock Connect would be an “imminent catalyst for share price appreciation,” with estimated net capital inflows from mainland Chinese investors expected to be between $17 billion and $37 billion for Alibaba over the next 12 months.

However, UBS analysts noted that the market reaction was rather muted.

“While some estimates suggest that $12 billion of domestic funds could flow in, there has been almost no response to equities,” they wrote in a note, adding that mainland trading now accounts for about “one-third” of Hong Kong’s $5 trillion daily market turnover.

Support from mainland Chinese investors would certainly be welcomed by Alibaba, whose Hong Kong-listed shares have fallen more than 70% since a multi-year regulatory crackdown began in 2020.

China’s recently sluggish consumer market, hit by a prolonged housing slump and concerns about jobs and income security, has hampered e-commerce growth in the world’s second-largest economy – and low-priced competitors like PDD Holdings are fighting for market share.

In late August, Chinese regulators announced that Alibaba had completed a three-year recovery period following a record fine for antitrust practices in 2021, raising hopes that Alibaba could now put an end to a prolonged period of regulatory troubles.

Joining the Stock Connect program has helped boost turnover for companies such as smartphone maker Xiaomi, and about 10% of Tencent shares are now held by mainland Chinese investors through the program.

(Reporting by Casey Hall in Shanghai, additional reporting by Gu Li; editing by Miyoung Kim and David Evans)