Alibaba jumps most since Hong Kong listing as China tech rebounds

[SHANGHAI] Alibaba Group Holding soared by the most since its 2019 listing in Hong Kong, leading a rebound in Chinese tech stocks, as bargain hunters piled in amid improved sentiment following Beijing's move to bolster the economy.

Shares of the e-commerce giant advanced as much as 12 per cent on Tuesday, tracking a rally in its American depositary receipts. The stock - which dropped to a new low on Monday in Hong Kong - provided the largest boost to the Hang Seng Tech Index, which gained as much as 4 per cent. The benchmark Hang Seng Index climbed 2.7 per cent.

China's central bank announced late Monday it will reduce most banks' reserve requirement ratio next week, unleashing US$188 billion of liquidity. The move is seen as a sign of policymakers' concern over economic growth, raising hopes for more easing measures to follow and a possible end to the tech crackdown.

"The trajectory towards more easing by mainland China bodes well for further rate cuts by the authorities, which are needed to lift retail sales in 2022," said Bloomberg Intelligence analyst Catherine Lim. Such easing will eventually benefit e-commerce companies like Alibaba, she added.

Tuesday's rebound came after Alibaba's Hong Kong shares fell to the most oversold level since its floating in Hong Kong.

The stock's valuation dropped to a record low of 12 times 12-month projected earnings, making it one of the cheapest shares in the Hang Seng Tech Index.

Alibaba has been grappling with slowing revenue growth amid weak consumer spending as China's economy loses momentum. Beijing's months-long crackdown on the technology sector targeting areas including monopolistic practices and data security has also hurt investor sentiment.

Its stock slumped 58 per cent through Monday from a February high, with declines accelerating over the past month after it reported disappointing earnings for the September quarter. Didi Global's decision to pull from the New York Stock Exchange also added pressure on shares of other US-listed Chinese firms on fear that they could follow suit.

Major Alibaba investors have already started swapping its US-listed shares for Hong Kong stock to contain risks from a potential American delisting and Sino-US tensions. About 70 per cent of the company's shares under registration within Hong Kong's Central Clearing and Settlement System can be classified as equities listed in the city as of this month, versus less than 20 per cent in 2019, BNP Paribas said.

Chinese investors still don't have access to Alibaba's shares in Hong Kong as dual-listed equities are not included in the trading link between the city and the mainland. If Beijing approves their addition, this "could introduce a new source of investors from the mainland China market," analysts including Jason Lui wrote in the note.

BLOOMBERG