BEIJING (BLOOMBERG) - Alibaba Group Holding Ltd. surrendered the title of Asia's largest Internet company to Tencent Holdings Ltd., capping a 10-month slide for the e-commerce giant that wiped US$140.7 billion (S$200 billion) from its market value.
Shares of Alibaba fell 4.7 per cent to $60.91 in New York on Tuesday, making the online marketplace worth US$153 billion. That's below Tencent's value for the first time since billionaire Jack Ma oversaw Alibaba's record-breaking initial public offering in September 2014.
Alibaba's reliance on consumer spending in China, where it gets 83 per cent of its revenue, leaves it vulnerable to the domestic slowdown. Tencent is adding pressure by buying Hollywood content for its video platform, investing in cloud computing and on-demand mobile services, while forging an e- commerce alliance with JD.com Inc.
"Alibaba's second quarter earnings weren't that impressive, whereas Tencent has bright prospects of generating money from mobile advertising," said Jeff Hao, a Hong Kong- based analyst at China Merchants Securities Holdings.
"Alibaba also gave some negative guidance for its performance for this quarter."
The decline in Alibaba's market capitalization is almost equivalent to the entire value of Samsung Electronics Co.
Tencent is defying a three-month downturn in Chinese stocks by gaining 19 per cent this year in Hong Kong trading. The owner of China's most-popular messaging services WeChat and QQ rose 3.3 per cent Wednesday, reaching a market capitalization of HK$1.26 trillion (S$230.4 billion).
China may be lending Tencent shares a hand. Last month, the government cut rates for the fifth time since November and resumed intervening in equities, seeking to arrest a stock market rout that wiped out trillions of dollars in value. That's helped prop up stocks in neighboring Hong Kong.
Alibaba shares are going in the opposite direction as investors' early optimism over its prospects was superseded by worries about a Chinese economy headed for its slowest pace of growth in 25 years. It debuted Sept. 19 and surged 38 per cent the first day.
China Slowing On Tuesday, investor relations chief Jane Penner said gross merchandise value in the quarter ending September may come in lower than the company had forecast.
"We are observing some negative impact to the magnitude of the spending," Penner told the Citi Global Technology Conference in New York. "We believe that our September quarter GMV will be mid-single-digits lower than our initial expectations." The Hangzhou, China-based company has faced other obstacles that weighed on its share price, including slowing sales growth, criticism by the Chinese government about its business practices and lawsuits in the U.S.
Alibaba fell below its US$68 IPO price for the first time on Aug. 24. That prompted Chief Executive Officer Daniel Zhang to urge employees to focus not on the share price but rather the company's longer term prospects.
After blanketing urban China, the company wants to expand into rural areas and abroad, particularly Russia and Brazil. Ma said in March he wanted more than half of of Alibaba's revenue to come from overseas.
The company also is trying to help Chinese buyers gain more access to brands from the U.S. and Europe.
Tencent Messaging Tencent posted record quarterly profit in August. By comparison, Alibaba trailed analysts' revenue forecasts in two of the past four quarters, and its sales grew at the slowest pace in at least three years.
Tencent is capitalizing on the more than 1 billion users of WeChat and QQ. Billionaire Chairman Ma Huateng is finding new ways to make money through advertising, payment services and health care through the apps.
Advertising revenue almost doubled to 4.1 billion yuan last quarter, boosted by higher-cost video ads linked to hit shows like The Voice of China and NBA basketball games.
Tencent earns more than half its revenue from games, and in April invested $126 million in San Francisco-based maker Glu Mobile Inc.