Alibaba to benefit more from cross-border link, trading history of Tencent, Meituan shows

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Tencent gained 23 per cent in the six months after joining Stock Connect, while Meituan and Xiaomi more than doubled over 12 months

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Zhang Shidongin Shanghai

Published: 7:30am, 12 Sep 2024

Alibaba Group Holding shares have more room to run after becoming accessible to mainland investors, according to a historical analysis of how other large Chinese tech stocks performed after joining the cross-border Stock Connect programme.

The other three Hong Kong-listed Chinese tech companies of comparable scale that joined Stock Connect all recorded strong gains and net inflows afterward, according to data compiled by the Post.

Tencent Holdings, Meituan and Xiaomi rose between 12 and 23 per cent six months after their inclusion, the data shows. Over a 12-month horizon, the rally was even more pronounced for some stocks, with Meituan and Xiaomi more than doubling in that span.

Exposure to mainland buyers is likely to instil investor confidence in Alibaba, which has lost more than 70 per cent of its market capitalisation from a peak in 2020, putting it at risk of being surpassed in value by PDD Holdings, the operator of the budget e-commerce platform Pinduoduo.

Alibaba turned in a stellar performance on the first day it was available via the scheme on Tuesday with a 4.2 per cent rise, making it the second-best performer on the Hang Seng Index. Turnover also spiked to almost quadruple the 30-day average, with 207 million shares changing hands, according to Bloomberg data.

Through the southbound channel of the connect programme, mainland investors with 500,000 yuan (US$70,218) worth of assets in broker accounts can trade Alibaba’s shares and other qualified Hong Kong-listed stocks.

“The inclusion in the Stock Connect programme is appealing for the fact that it allows mainland investors to invest in Alibaba for the very first time,” said Chelsey Tam, an analyst at US research firm Morningstar. “There are also a few reasons that go beyond this novelty factor. For example, mainland investors who favour companies with higher levels of transparency, dividends, share buy-backs and investor communication are likely to favour Alibaba over PDD despite the latter having higher growth.”