Alibaba’s long-awaited China stock link may provide timely boost
- The new source of funds via the so-called southbound link could support the firm’s shares, which have underperformed rival Tencent Holdings
Chinese investors finally being able to buy shares of Alibaba Group Holding may provide a much-needed boost for the e-commerce firm’s stock, with an inflow of up to about US$20 billion into next year.
The company first hatched the plan for an upgrade to a primary listing in Hong Kong two years ago amid heightened tensions with the US. It may at last be realised by the end of the month, paving the way for it to join a programme that connects the Shanghai and Shenzhen bourses to the Hong Kong exchange.
This new source of funds via the so-called southbound link could support the shares, which have underperformed those of key rival Tencent Holdings amid concerns over the impact of competition and sluggish China consumption.
“We think the addition of Alibaba to the Stock Connect would have a positive impact on the stock and can help stabilise sentiment given that it is a household name among mainland investors,” said Marvin Chen, an analyst with Bloomberg Intelligence. Mainland holdings of the stock could reach double-digit percentages, similar to other tech giants, Chen added.
Shares of Alibaba are up only 2 per cent so far this year in Hong Kong, while major peers Tencent and Meituan are up 25 per cent each. China’s weak retail sales have hurt Alibaba’s key business, and price wars in cloud services are curbing the growth of a potential new driver. Alibaba’s American depositary receipts (ADRs) rose as much as 5.8 per cent Friday, their largest intraday gain since May.
