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Alibaba Leads Rebound In Chinese E-commerce Stocks

Alibaba jumped 6.3% to $166.82 in New York on Wednesday. The rally came after it reported a slower but still robust 41% rise in revenue for the quarter ended December, compared with a year earlier.

  • Asian stocks were largely higher, with Japan’s Nikkei 225 and Hong Kong’s Hang Seng both up more than 1%.
  • China guided the yuan to 6.7025 to the dollar, the strongest in six months.
  • The Shanghai Composite ended 0.4% higher.

The tech giant is Asia’s second-most-valuable public company after and the dominant player in China’s huge, and still growing, e-commerce industry. It operates China’s two largest online retail platforms, Taobao and Tmall, and has also diversified into grocery stores, food delivery, cloud computing and other services.

Wednesday’s jump means Alibaba’s stock has gained 22% in January—putting it on course for its best month since October 2015. Smaller rivals and whose shares also trade in New York are up 18%, 38% and 28%, respectively. Alibaba-backed electronics retailer Suning.Com Co., which owns bricks-and-mortar stores and trades in Shenzhen, rose nearly 6% in January. Tencent-backed food a key rival of Alibaba’s food-delivery unit Ele.me, rallied more than 21% in Hong Kong.

In recent months, analysts had cut sales forecasts for the sector, on worries over slower economic growth and tighter regulation. But Beijing is trying to boost the economy—weighed by burdens including a trade row with the U.S.—by stimulating domestic consumption. It has introduced tax cuts for businesses and individuals, as well as other initiatives to boost spending on durable goods, including cars and home appliances.

Many investors see Alibaba as a bellwether for the wider economy. “Alibaba is a good proxy for online retailing and business activity from small and medium enterprises,” said Choonshik Yi, a fund manager at UBP Asset Management Asia Ltd.

Mr. Yi said he believes the operational environment for e-commerce companies will improve this year. He expects a lot of good news from Beijing, as it seeks to boost consumer spending and make life easier for smaller companies.

Jefferies analyst Karen Chan said Alibaba’s results were reassuring, noting that sales growth at Tmall outpaced the overall industry as middle-class buyers continued upgrading to pricier products. Tmall sells goods including branded cosmetics, clothes and home furnishings.

Christopher Wood, global equity strategist at CLSA, said he expects China’s consumer sector to benefit from tax cuts and solid income growth. Chinese spending on goods and services grew by a healthy 8.4% in 2018 to 19,853 yuan per head, not adjusting for inflation.

Meanwhile, e-commerce is growing ever more important. Online merchandise sales rose 25% to 7.02 trillion yuan (US$1.05 trillion) in 2018, representing 18% of total retail sales, compared with 11% in 2015, according to the National Bureau of Statistics.―Viral Stuff

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