Ahead of its anticipated inclusion in the Stock Connect program, Alibaba Group Holding Ltd. BABA has made a strategic change to its listing status in Hong Kong.
What Happened: Alibaba Group announced it will change its listing status in Hong Kong, a strategic move that will enable the technology giant to offer shares to the 220 million investors on mainland China’s stock market, South China Morning Post reported on Friday.
According to the report, this new designation will make Alibaba’s shares eligible for the Stock Connect cross-border investment channel. The exchange operators of Shenzhen and Shanghai will review additions to the programme on Sept. 5. If approved, mainland investors could start trading Alibaba shares as early as Sept. 9.
Dai Ming, a fund manager at Huichen Asset Management in Shanghai, according to the report stated, “It will bring a tailwind to Alibaba’s shares for sure, and inject liquidity” into the stock. This move is expected to significantly impact Alibaba’s trading volume and liquidity.
Alibaba’s journey to this point has been nearly a decade in the making. The company’s founders have long desired to share capital gains with China’s domestic investors. The Stock Connect programme, introduced in 2014, has become a popular channel for Chinese investors to diversify their portfolios.
“The main reason for us to proceed with the dual primary listing is because we want to tap into the southbound capital flows through the Stock Connect programme,” said Joe Tsai, co-founder and chairman of Alibaba, in an interview in May, according to the report.
Alibaba’s shares have risen 8% in Hong Kong this year, but still lag behind Tencent Holdings‘ TCEHY 29% gain.
Why It MattersAlibaba’s decision to change its listing status comes at a crucial time for Chinese tech companies. Recently, Walmart Inc. WMT sold its stake in JD.com Inc. JD, raising questions about the true value of Chinese stocks. CNBC’s Jim Cramer highlighted Alibaba as one of the few Chinese companies with real liquidity.
Additionally, Alibaba and Tencent Holdings have been ramping up their investments in artificial intelligence startups. Since 2023, nearly a third of their deals have been aimed at AI, despite a general decrease in their overall investments due to regulatory challenges and a slowing Chinese economy.
Moreover, Alibaba’s recent fiscal first-quarter earnings report showed mixed results, with revenue growth of 4% year-on-year to $33.47 billion, slightly below analyst estimates. However, adjusted earnings per ADS of $2.26 topped the consensus estimate. Analysts remain optimistic about Alibaba’s cloud and digital commerce segments.
Lastly, Alibaba’s fintech affiliate, Ant Group, is eyeing an expansion into the healthcare sector with the potential acquisition of Haodf.com. This move aligns with China’s growing healthcare market, projected to reach $20 billion by 2030, with AI playing a pivotal role.
Price Action: Alibaba Group Holding Ltd’s stock in Hong Kong rose by 0.18% today, closing at HK$ 81.80, marking a 9.50% gain year to date.
Meanwhile, Alibaba’s ADR in the U.S. declined by 0.68% to $82.96 on Thursday’s market close, with a slight dip of 0.06% in after-hours. The ADR has seen a 10.97% increase year to date, according to data from Benzinga Pro.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
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