Feb 19, 2020 (China Knowledge) - When the Hong Kong Exchange (HKEx) said no to Alibaba (9988) (BABA) linking the Hong Kong Stock Connect program yesterday, its shares fell by 2%. This morning it rebounded 1%, and it will not matter in the coming weeks or months the fluctuation does not affect the corporate fundamentals. The Stock Connect is only icing on the cake for Alibaba’s share price upswings, at least, in the short-term.
China Mainland’s fund managers are generally optimistic about the long-term investment value of Alibaba. Like Tencent and Meituan Dianping, Alibaba is a unique and rare asset that is hard to find in China Mainland’s equity market.
In addition, Jefferies, Nomura, and other brokerages have been optimistic about the future performance of Alibaba which value at more than USD 570 bln is almost the largest market capitalization in HKEx.
Jefferies has just issued a research report pointed out that, because of the outbreak of the epidemic, Alibaba launched a series of supportive measures to help businesses to reduce cash flow pressure. It gave Alibaba a “Buy” recommendation with a target price of HKD 260. It said Alibaba's support includes facilitating merchant operations through exemptions and free services, providing financing support to merchants, subsidizing back-office personnel, and empowering merchants digitally.
In another research, Nomura said the e-commerce giant has introduced a series of support measures to help merchants survive the challenges. It said the epidemic outbreak has a small financial impact on Alibaba but could reduce the operating pressure on small businesses. However, Nomura reminded investors to be aware of the impact of the competition from Pinduoduo (PDD) could also affect Alibaba's commission growth.
Therefore, as long as Alibaba continues to keep sales and profits’ growth, it will be simply a timing issue to join the HK Stock Connect program. Current social instability sabotages and chaos caused by local dissidents worsen by recent coronavirus outbreak in the HK SAR will gradually subside and will soon create a more suitable timing to take on Alibaba to the stock connect program.
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