Alibaba expects the situation to change due to the renewed investor frenzy on Chinese shares

Analysts believe e-commerce giant Alibaba Group Holding is on track to reverse a years-long crisis thanks to Beijing’s sweeping stimulus measures, after some foreign investors pledged to invest fully in Chinese stocks.

“Alibaba may gradually become more attractive to some funds with long-term positions because, after all, it is the largest e-commerce company in China,” said Shawn Yang, senior analyst at Arete Research. “Expectations for an improvement in the macro situation may be transferred to these consumer companies. The largest of them is Alibaba, and its situation is improving.”

Alibaba, owner of the South China Morning Post, is among a string of Chinese technology stocks that have surged this week in the wake of surprise market support measures initiated by the People’s Bank of China, which included cuts in mortgage rates and an unprecedented $114 billion rally in stocks – a possible purchase.

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The company’s shares closed up 10.07 percent to HK$105.07 on Thursday on the New York Stock Exchange, while its Hong Kong shares rose 4.86 percent to HK$102.50 on Friday. Shares of Nasdaq-listed e-commerce rival PDD Holdings, operator of discount shopping platforms Pinduoduo and Temu, rose 13.57 percent on Thursday, while JD.com rose 14.39 percent.

Alibaba Group Holding’s global headquarters is located in Hangzhou, the capital of eastern Zhejiang province. Photo: Handout alt=The global headquarters of Alibaba Group Holding in Hangzhou, the capital of eastern Zhejiang province. Photo: Leaflet>

While skepticism is pervasive, some prominent Wall Street figures have expressed strong confidence in Chinese stocks. Billionaire investor David Tepper, who founded Appaloosa Management in 1993, said in an interview with CNBC on Thursday that he is buying more of “everything” related to China, acquiring more shares of Alibaba, JD.com, Baidu and PDD.

The renewed positive market sentiment for Alibaba reflects its resilience after struggling in recent years amid Beijing’s 32-month crackdown on Big Tech companies and the continent’s uncertain post-pandemic economic recovery.

These challenges have caused the Hangzhou-based company’s shares in both New York and Hong Kong to lose almost half of their value over the past five years.

Alibaba, China’s largest operator of online shopping platforms and a major domestic player in artificial intelligence (AI) technology, recently won praise from the State Administration for Market Regulation for its compliance with corrective measures, ending more than three years of regulatory oversight that had hung over the company’s operations.

This week, state news agency Xinhua published an article praising Alibaba’s latest achievement, ranking 8th on US media company Fortune’s 10th annual “Change the World” list for using artificial intelligence to help doctors detect pancreatic cancer.

Alibaba Cloud’s resources and capabilities were showcased at the Apsara Conference held in Hangzhou, the capital of Eastern Zhejiang Province, on September 19-21, 2024. Photo: Xinhua alt=Alibaba Cloud were showcased at the Apsara Conference held in Hangzhou, the capital of Eastern Zhejiang Province, from September 19 to 21, 2024. Photo: Xinhua>

According to Arete Research’s Yang, Alibaba’s main advantage over other leading Chinese technology companies is that its business has expanded significantly beyond online retail.

“Alibaba offers many other things, such as cloud services and international expansion,” Yang said. “Cloud services currently have a stable profit margin, although for a long time this operation has not been as valued compared to the core e-commerce business.”

“When market sentiment is positive, people may factor in these valuations,” Yang said. “This could be an advantage for Alibaba compared to other stocks.”

Last week, Alibaba’s cloud computing services unit announced at an event in Hangzhou the release of more than 100 large language models – the deep learning technology that underlies generative AI applications such as ChatGPT – and new text-to-video technology to the global open-source community. model as the company has shown rapid progress in this area.

At the same event, Alibaba Cloud and semiconductor giant Nvidia unveiled a joint artificial intelligence initiative that will enable Chinese automakers to improve the autonomous driving experience for owners of smart vehicles.

“Alibaba Cloud is investing with unprecedented intensity in the research and development of artificial intelligence technologies and building its global infrastructure,” Alibaba CEO Eddie Wu Yongming, who is also president and CEO of Alibaba Cloud Intelligence, said at the event.

Alibaba Group Holding founder Jack Ma. Photo: Shutterstock alt=Alibaba Group Holding founder Jack Ma. Photo: Shutterstock>

Morningstar senior equity analyst Chelsey Tam said Alibaba is well-positioned to benefit from China’s latest stimulus measures.

“If there are effective measures to stimulate the economy and stabilize the real estate sector, China’s GDP and consumer wealth will increase, boosting consumption,” Tam said. “An improving economy should drive discretionary spending and consumption growth, with Alibaba expected to benefit more compared to some of its competitors.”

Alibaba founder Jack Ma urged employees of the business empire he created 25 years ago to “believe in the future” and “believe in the market” in the face of fierce competition, according to an internal letter published on Sept. 10.

Ma, who has stepped down from all corporate positions at Alibaba but remains a key shareholder, said this was expected because “no company can always stay on top in any field.” He added: “We have to constantly (remind) us not to lose ourselves” in the face of competitive pressures.

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