BEIJING (BLOOMBERG) - Alibaba Group Holding Ltd. quarterly sales rose at the slowest pace in at least three years and transaction volumes missed analyst estimates amid a weakening Chinese economy. Shares fell in pre-market trade.

Revenue rose 28 per cent to 20.2 billion yuan (S$4.46 billion) in the three months ended June, down from an average of 56 per cent in the previous 12 quarters. The company also announced plans to buy back US$4 billion of stock.

The slowing growth stems from e-commerce market saturation in China's larger, wealthier cities and the company's strategy of shifting to services over smartphones and tablets, which generate less revenue from ads compared with desktop computers.

Investor confidence has been shaken, with the company's market value plunging US$100 billion, amid a domestic economy growing at the weakest pace since 1990 and lawsuits over counterfeits.

"Online shopping in larger cities in China has already reached saturation," Li Muzhi, a Hong Kong-based analyst at Arete Research Service LLP, said by phone before the earnings. "Alibaba needs to invest in new areas to search for other avenues of growth."

Alibaba fell to as low as US$69.08 in pre-market trading. The shares have never traded below the US$68 paid in September's initial public offering that raised a record US$25 billion.

The e-commerce operator will purchase its shares over a two-year period, mainly to offset dilutions such as from its compensation programs, in its first buyback since listing.

Gross merchandise volume, which measures transactions on its Chinese retail marketplaces, rose 34 per cent to 673 billion yuan in the quarter, short of the 38 per cent growth expected by analysts.

That hasn't dulled billionaire Chairman Jack Ma's appetite for expansion. On Monday, he announced a US$4.6 billion investment in Suning Commerce Group Co. to get more access to the electronics retailer's network amid intensifying competition from online shopping site JD.com Inc.