Scan to Download ios&Android APP


BABA share price revives as Chinese tech companies get a boost


Updated

Share this article
In this article:
  • BABA
    Alibaba
    90.87 USD
    1.07 +1.190%

What You Need to Know

The week ahead update on major market events in your inbox every week. Subscribe
women online shopping with her credit card
Is Alibaba a good buy? - Photo: Getty Images

Alibaba Group (BABA) shares have gained almost 20% in the past month, surpassing not only Chinese e-commerce stocks but also big global names. Much of this momentum can be credited to the potential loosening of Chinese government policy on the tech sector – however, it’s the group's expansion strategy which may help it sustain this rally.

During the current climate of global stock market decline, the e-commerce giant’s shares have surpassed both S&P 500 (US500) and the Hong Kong 50 (HK50).

Much of the rally occurred recently as there were signals from the Chinese government that they might be loosening some of the sweeping regulations brought in during 2021 to address tech monopolies in the region.

Alibaba (BABA), S&P 500 (US500) and Hong Kong 50 (HK50) – 6-month performance 

stock price performance Six month performance chart - Credit: TradingView

Although this news has given many Chinese firms a boost, Alibaba’s (BABA) performance remains superior when compared with other big global names such as Shopify (SHOP), Amazon (AMZN), JD.com (JD), Etsy (ETSY) and eBay (EBAY)

Alibaba dominates Chinese markets, with 80% control of the region while also making moves to gain global market share. It has also gained investor confidence in its earning potential by raising its share repurchase program from $15 bn to $25 bn during the first quarter of 2022. Analysts have high earning expectations for the company in the coming year.

What is your sentiment on BABA?

90.87
Bullish
or
Bearish
Vote to see Traders sentiment!

E-Commerce companies’ six month performance 

stock price performance of Alibaba’s (BABA), Shopify (SHOP), Amazon (AMZN), JD.com (JD), Etsy (ETSY) and eBay (EBAY)Six month performance chart - Credit: TradingView

The King of Chinese market 

Over the past few years, Alibaba has taken aim at gaining market dominance in the Chinese market. Following are some of the strategies it followed

  •  Largest e-commerce market share on the Chinese market

Among some of the e-commerce companies operating in China such as JD.com  (JD) and Pinduoduo (PDD),  Alibaba serves the largest amount at almost 80% of the market.

All Asian markets have shown great growth potential for all e-commerce companies.  In an investor note seen by capital.com, analysts at Zacks equity research believe that “China is now leading the race in terms of maximising the potential of the Internet compared with the West. The low-cost, widely available telecommunication infrastructure in China has increased the popularity of online shopping Therefore, Alibaba, which dominates the world’s largest e-commerce market has an edge over its competitors.”

  • Multiple business lines

Beyond running its main website, the company also runs Taobao and Tmall.

Taobao is Alibaba’s most profitable arm, with 80% of total group revenues coming from this area. The site sells imported luxury goods to the Chinese market.

Tmall is a spin-off of Taobao, where global companies can directly sell their merchandise to Chinese customers.

  • “New Retail”

Alibabahgas also launched a “new retail” strategy, which has been gaining traction in recent months.  This plan aims to bring together digital payments, e-commerce, logistics, food delivery and other parts of online businesses into one space.

This has been gaining traction in recent months and analysts at Zacks believe that “These look promising and will not only reshape the retail landscape but also help Alibaba fend off competition”

Alibaba (BABA) share price

China says relax

During the second half of 2021, the Chinese government introduced a number of sweeping regulatory decisions aimed at reducing  monopolies of online and tech businesses. Reuters reports the government even accused Alibaba (BABA) and Tencent (0700) for false advertising in order to gain a monopoly.

A few months on, in the backdrop of a slowing economy, the Chinese government appears to have relaxed their views on this. With reports of government officials meeting top executives to find resolution. The government allows new gaming licences to be issued, notably none for Tencent per Reuters

In an interview with CNBC, fellow company JD.com’s CEO Xin Lijun said that the new government policy effects should show up in the second half of 2022, when he believes the Chinese economy will also pick up.

 

Alibaba outlook 

As per analyst notes from Zacks, Alibaba’s one year expected earnings are set to come in above the sector average and the S&P 500 average. The group’s recent announcement of increasing its share repurchase program has also sent a positive signal to the market.

 The group does not appear to be content relying on just one market, even though it is a source of huge profits. Alibaba also has plans to move to gain global market share, which is where its future growth potential may come from.

Analysts at Zacks believe that “The company has been looking to international markets to expand its business and its current strategy is to generate earnings through investment in the U.S. In pursuance of this strategy, Alibaba operates a low- profile website with an American name — 11Main.com — a platform for smaller sellers to hawk their wares. The e-commerce market in the U.S. are expected to grow at double-digit rates over the next few years and this is the potential that the company wishes to tap”

Read more

What You Need to Know

The week ahead update on major market events in your inbox every week. Subscribe
The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?


Join the 427.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account

2. Make your first deposit

3. You’re all set. Start trading