Alibaba looks on course for a turnaround amid renewed investor frenzy for Chinese stocks

E-commerce giant Alibaba Group Holding appears on course to turn around a years-long slump on the back of Beijing's sweeping stimulus measures, according to analysts, as some foreign investors have pledged to go all in on Chinese stocks.

"Alibaba may gradually become more attractive to some long-only funds because it is, after all, the largest e-commerce stock in China," said Shawn Yang, senior analyst at Arete Research. "The expectations of macro improvement may be passed on to these consumer stocks. Alibaba is the largest among them, and its situation is improving."

Alibaba, owner of the South China Morning Post, is among a number of Chinese technology stocks that received a boost this week, following surprise market-support measures initiated by the People's Bank of China that included mortgage rate cuts and an unprecedented US$114 billion stock-buying facility.

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The company's stock on Thursday closed up 10.07 per cent in New York to US$105.07, while its Hong Kong shares gained 4.86 per cent to reach HK$102.50 on Friday. Shares of Nasdaq-listed e-commerce rivals PDD Holdings, operator of discount shopping platforms Pinduoduo and Temu, rose 13.57 per cent on Thursday, while JD.com climbed up 14.39 per cent.

Alibaba Group Holding's global headquarters in Hangzhou, capital of eastern Zhejiang province. Photo: Handout alt=Alibaba Group Holding's global headquarters in Hangzhou, capital of eastern Zhejiang province. Photo: Handout>

While scepticism abounds, some prominent Wall Street figures have declared 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 was buying more of "everything" related to China, having snapped up more shares of Alibaba, JD.com, Baidu and PDD.

The renewed positive market sentiment for Alibaba reflects its resilience after struggling in recent years, owing to Beijing's 32-month crackdown on Big Tech firms and the mainland's shaky post-pandemic economic recovery.

Those challenges resulted in the Hangzhou-based company's shares, in both New York and Hong Kong, losing nearly half their value over the past five years.

China's largest operator of online shopping platforms and a major domestic artificial intelligence (AI) technology player, Alibaba recently won praise from the State Administration for Market Regulation for complying with rectification measures, ending more than three years of regulatory scrutiny that has hung over the company's operations.

State news agency Xinhua this week published an article lauding Alibaba's latest milestone, ranking No 8 on US media company Fortune's 10th annual Change the World list for using AI to help doctors detect pancreatic cancer.

Alibaba Cloud's resources and capabilities were on display at Apsara Conference held in Hangzhou, capital of eastern Zhejiang province, from September 19 to 21, 2024. Photo: Xinhua alt=Alibaba Cloud's resources and capabilities were on display at Apsara Conference held in Hangzhou, capital of eastern Zhejiang province, from September 19 to 21, 2024. Photo: Xinhua>

A major advantage of Alibaba over other prominent Chinese tech stocks, according to Yang of Arete Research, is that its businesses have significantly expanded beyond the realm of online retail.

"Alibaba has a lot of other things, such as cloud services and international expansion," Yang said. "Cloud services now have a stable profit margin, although for a long time this operation was not as valued compared to the core e-commerce business."

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

Alibaba's cloud computing services unit last week announced at an event in Hangzhou the release of more than 100 large language models - the deep-learning technology underpinning generative AI applications like ChatGPT - to the global open-source community and a new text-to-video model, as the company showed its rapid progress in this field.

At the same event, Alibaba Cloud and semiconductor powerhouse Nvidia unveiled a joint AI initiative that will enable Chinese carmakers to advance the autonomous driving experience for smart vehicle owners.

"Alibaba Cloud is investing, with unprecedented intensity, in the research and development of AI technology and the building of its global infrastructure," Alibaba chief executive Eddie Wu Yongming, who also serves as chairman and chief executive 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 saw Alibaba as being well-positioned to benefit from China's latest economic-stimulus measures.

"If there are efficient measures to stimulate the economy and stabilise the property sector, China's GDP and consumers' wealth would increase, increasing consumption," Tam said. "An improving economy should drive discretionary spending and consumption upgrades, with Alibaba expected to benefit more compared to some of its competitors."

Earlier this month, Alibaba founder Jack Ma called on employees of the business empire he created 25 years ago to "believe in the future" and "believe in the market" amid stiff competition, according to an internal letter published on September 10.

Ma, who has resigned from all corporate roles at Alibaba but remains a key shareholder, said this was expected because "no company can always stay on top in any field forever". He added: "We must constantly [be reminded] not to lose ourselves" amid the competitive pressure.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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