Alibaba
and
JD.com
stocks were rising on Monday, but the price action didn’t seem to be driven by sales results from the closely-watched annual Singles Day event.
Alibaba
(ticker: BABA) was up 2.5% in U.S. premarket trading, with shares in e-commerce peer
JD.com
(JD) gaining 3.5%, beating out futures tracking both the
S&P 500
index and tech stock-heavy
Nasdaq.
Both companies capped off their annual Singles Day events last Friday, which is China’s version of Black Friday, and the world’s largest shopping spree. The sales results from Singles Day are closely watched by investors and play an important part in overall revenue in the fourth quarter of each year.
Alibaba and JD.com were expected to eke out another batch of record sales, even if it only meant mild year-over-year growth following months of depressed consumer spending linked to severe Covid-19 restrictions in China. But investors were left stumped after both companies declined to release detailed numbers for the first time, noting that sales were comparable to last year and raising fears among investors that both tech giants may have seen declines.
It may not matter to the stock market Monday. Hong Kong’s
Hang Seng Index
tore 1.7% higher in Asian trading, firmly outpacing other major indexes across the region, which notched losses. It has nothing to do with Singles Day.
Instead, upbeat action in Chinese stocks broadly is linked to positive news on two issues that have been consistent headwinds over the past 18 months: the indebted Chinese property sector and restrictive Covid-19 policies that have weighed on growth.
China’s central bank and the banking and insurance regulator over the weekend detailed a 16-point plan to support the domestic property market and value chain, including shoring up developer financing and stabilizing distressed asset managers. The move saw the Hang Seng Properties Index rip 6.8% higher.
“After several rounds of more meager support, this more comprehensive and centralized approach could mark a turning point, with developers set to benefit in particular from the ‘temporary’ easing of bank financing caps,” wrote Mark Haefele, the chief investment officer at UBS Global Wealth Management, in a Monday note. “This should help lift overall market sentiment on Chinese equities in the near term, in our view.”
The boost to Chinese investor sentiment came on the heels of a move last Friday to ease disruptive Covid-19 measures including mandatory quarantine for inbound travelers and rules around contact trading.
Waves of lockdowns in China have hammered economic growth in the country this year, seeing consumer spending shrivel and companies like Alibaba and JD.com post some of their gloomiest quarterly earnings on record. Stocks have consistently rallied on even rumors that these rules will be eased.
“The suite of changes is one of the biggest pullbacks from the country’s stringent zero-COVID policy, and we take this as a positive sign that China intends to move towards a more targeted Covid-19 control regime and eventual reopening,” said Haefele, referring to the recently-announced easing.
But investors would be wise to manage expectations. Coronavirus cases continue to surge across China and authorities are still quick to use lockdowns to stem the spread of the virus.
“We maintain the view that a meaningful reopening, which we define as a permanent end to snap lockdowns and other domestic mobility curbs, is most likely to take place in [the third quarter of 2023],” Haefele said.
Write to Jack Denton at jack.denton@barrons.com
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