Alibaba Shares Rise on Hopes for Higher Demand From Mainland Investors
Investors in mainland China will be able to directly trade in Alibaba’s Hong Kong-listed stock via the Stock Connect program
Alibaba Group’s 9988 5.11%increase; green up pointing triangle shares surged in Hong Kong on expectations that easier access for mainland Chinese investors may boost demand for the e-commerce giant’s stock.
Shares rose 4.7% to 81.95 Hong Kong dollars, equivalent to US$10.51, early Tuesday. The stock was the top gainer on the benchmark Hang Seng Index and outperformed the index, which was recently up 0.2%.
The gains came after Alibaba Group’s Hong Kong shares were included by the Shanghai and Shenzhen stock exchanges in the Stock Connect scheme. The program links the Shanghai and Shenzhen stock exchanges with Hong Kong’s bourse, allowing mainland investors to trade eligible Hong Kong shares.
The southbound Stock Connect inclusion will attract new buying interest for the stocks from mainland-based investors, Daiwa analysts said.
Goldman Sachs analysts said in a recent note that the inclusion of Alibaba in the program could attract around US$2 billion to US$3 billion of mainland liquidity by the end of this year.
Over a two- to three-year period, total inflows could reach US$11 billion, following the liquidity trajectory of peers Tencent, Meituan and Xiaomi, the Goldman Sachs analysts said.
Alibaba is the largest company in terms of market capitalization among the 13 companies that have secondary listings in Hong Kong. As of Sept. 9, southbound shareholding accounted for 10% of Tencent’s total Hong Kong shares, 14.5% for Xiaomi and 12.8% for Meituan, according to data provider Wind.
Although Chinese equities have faced challenging market liquidity amid stricter market regulations and weak faith in the country’s economy, southbound net buying has been “exceptionally strong,” Goldman Sachs analysts said.
Alibaba’s Hong Kong shares have risen 8.0% so far this year.