Alibaba Group Holding’s shares are expected to benefit significantly from joining the cross-border Stock Connect programme, following the historical performance of other Chinese tech giants like Tencent, Meituan, and Xiaomi. These companies saw substantial growth in stock value after their inclusion, and analysts predict Alibaba will follow a similar trajectory.
The Stock Connect programme allows mainland Chinese investors to trade Hong Kong-listed stocks, such as Alibaba, through the southbound channel. With at least 500,000 yuan (US$70,218) in assets, mainland investors can now access Alibaba’s shares, marking a significant milestone for the e-commerce giant.
Historically, Chinese tech companies have seen a surge in stock value after joining Stock Connect. Tencent, Meituan, and Xiaomi recorded gains between 12% and 23% within six months of their inclusion. Over 12 months, Meituan and Xiaomi experienced a more dramatic rise, with their shares doubling in value.
Investor Confidence in Alibaba
Alibaba’s stock surged by 4.2% on the first day of trading through Stock Connect, marking the second-best performance on the Hang Seng Index. The trading volume also quadrupled, with 207 million shares changing hands, reflecting the excitement surrounding its inclusion in the programme.
According to resources, Alibaba’s transparency, dividends, share buybacks, and strong investor communication make it more appealing to mainland investors than its rival PDD Holdings. This distinction, alongside recent positive regulatory developments, could boost investor confidence in the company.
Morgan Stanley predicts mainland investors could pour between US$17 billion and US$37 billion into Alibaba’s shares in the coming year. This projection assumes that onshore holdings will account for 8% to 17% of the company’s stake.
Tencent, which joined Stock Connect in 2014, saw its stock rise 23% within six months, while Meituan and Xiaomi both saw significant net inflows after their inclusion in 2019. Analysts expect Alibaba to attract similar buying interest from mainland investors, bolstering its stock performance.
Alibaba also benefits from recent regulatory tailwinds, as China’s antitrust regulator officially ended its three-year review of the company. This development has alleviated concerns and is expected to catalyse the stock’s future growth. With Alibaba’s shares up 16% from a July low, the company is poised for further gains as it continues to capitalise on improved liquidity and investor interest.
