Alibaba’s Hong Kong shares surge 12% on split-up plans, leading China tech rally

Alibaba's stock jumped as much as 16 per cent to HK$98, the most since November. PHOTO: REUTERS

HONG KONG – Alibaba Group Holding’s massive overhaul plan boosted Chinese tech stocks, with investors betting the sector is in for an overdue revaluation as the regulatory environment improves.

Shares of Alibaba soared as much as 16 per cent in Hong Kong on Wednesday, before closing up 12.23 per cent at HK$94.55. Among its peers, Meituan rallied 4 per cent while Tencent Holdings and Baidu ended nearly 2 per cent higher.

The index heavyweight lifted the Hang Seng Tech Index by 2.5 per cent, while also sending the Hang Seng benchmark up 2.1 per cent.

Affiliates of Alibaba also rallied on Wednesday. Alibaba Health Information Technology and Alibaba Pictures Group both surged before paring gains to 5.2 per cent.

Alibaba’s plan to split its US$220 billion (S$292 billion) empire into six business units promises to yield several initial public offerings (IPOs), while allowing quicker response to a rapidly changing market environment. Analysts say the plan, which came in the wake of Mr Jack Ma’s return to China after more than a year abroad, offers another indication that the crackdown may be done and dusted.

“Investors could get hyped on the positive side in the short term,” said Mr Willer Chen, a senior research analyst at Forsyth Barr Asia. “Alibaba’s shake-up plan may also lead investors to think of the potential for other tech firms like Tencent to follow suit.”

The plan comes as Chinese regulators vow to boost support for private enterprises after a years-long crackdown, which has burned investors and hurt market sentiment. Since the abrupt halt of Ant Group’s IPO in November 2020, foreign investors in particular deemed the sector as fraught with risks, leading to huge valuation discounts.

Alibaba’s forward earnings multiple rates the stock cheaper than utility firm CLP Holdings and on a par with China Telecom Corp.

The Chinese authorities are keen to boost growth as the world’s second-largest economy emerges from Covid-19 curbs. However, multiple pledges to support private enterprise for that purpose have failed to fundamentally reverse investor wariness.

“The big tech platforms, which have been under pressure over the last couple of years and shedding staff, are key to helping the government boost employment,” Mr Vey-Sern Ling, managing director at Union Bancaire Privee, said in a Bloomberg TV interview. “So from that angle, I think it is possible to assume that the government can be more supportive of these platforms going forward.” BLOOMBERG

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