Hong Kong Stock Review: Starting to Fall Behind

Starting to Fall Behind

Today, Tencent's stock price was exceptionally strong, rarely outperforming Meituan, while Alibaba began to fall behind.

If consumer recovery occurs, Meituan's local services/tourism will benefit the most, and it also has development directions such as real-time retail and overseas expansion, making its growth potential naturally the highest. Moreover, it has shown sufficient business capability by growing even in adverse conditions.

Tencent, benefiting from advertising and fintech services that account for half of its revenue, is also closely benefiting from the recovery. At the same time, it has created a new growth space through AI, the commercialization of video accounts, and WeChat mini-games.

In contrast, while Alibaba's e-commerce will benefit from the recovery, it is relatively mild compared to Meituan, and the competitive landscape is also relatively fierce, with profitability visibility not as strong as Tencent's. Therefore, this round of correction from high positions is greater than the other two, and there is continuous buying from southbound funds increasing Alibaba's holdings, which clearly reflects market preferences.

Earlier, Alibaba agreed to pay $430 million to settle a shareholder class action lawsuit, which has basically eliminated the negative impact of Ant Group's failed IPO. Additionally, at the beginning of the year, the People's Bank of China also agreed to the change of Alipay to have no actual controller, but there seems to be no timetable for when it can go public.

On the other hand, with the rise in stock prices, Alibaba's daily repurchase amount has significantly decreased. In early September, it was about $60 million per day, which then dropped to $40 million after being included in the Hong Kong Stock Connect, and within a few days further fell to $20 million. After half a month without repurchases due to policy stimulus, it only restarted repurchases when the stock price fell below $100, but the amount remained at $20 million.

Previously, Alibaba's stock price could remain strong for so long, to some extent, due to repurchase support, but now it seems it will rely on the strength of southbound funds. In July, Alibaba still had about $26 billion in repurchase capacity under its repurchase plan, valid until March 2027, allowing for about $35 million in repurchases per day.

In the short term, Alibaba's stock price momentum will depend on this quarter's performance, such as whether CMR growth gradually matches GMV growth or benefits from the integration of Taobao and JD.com. The overseas development situation is a potential catalyst, while AI is a medium to long-term advantage. If only looking at the domestic Taobao business, the current valuation is only slightly lower than JD.com and Pinduoduo