Firms in Alibaba empire surge, drawing up to 16-fold rise in investor demand

Trading volume for Alibaba Pictures has leapt to the highest level in more than 3 years, while Alibaba Health has recorded a 60 pc gain over the past 6 sessions

PUBLISHED : Thursday, 24 May, 2018, 9:33pm
UPDATED : Thursday, 24 May, 2018, 9:34pm

Shares of a group of companies controlled by China’s tech giant Alibaba Group soared on Thursday in Hong Kong, led by the film studio unit Alibaba Pictures which drew the biggest buying interest since 2014 after Morgan Stanley gave an upbeat forecast in its initial coverage.

The company closed up 31.5 per cent at HK$1.21, the top percentage gainer on Hong Kong stock market for the day. The stock also recorded the biggest daily trading volume since March 2014, as 1.1 billion shares changed hands, a 16-fold increase from Wednesday’s 69.3 million.

Earlier in the day, Morgan Stanley initiated its coverage of Alibaba Pictures with a projection that the firm will post a compound annual growth rate (CAGR) of 25.7 per cent from 2017 to 2021, driven by box office revenue and market share growths.

In particular, revenues from the online ticketing segment are expected to rise to 5.4 billion yuan (US$845.9 million) by 2020, reflecting a 17 per cent CAGR from 2017.

The Wall Street investment bank gave the company a neutral rating, implying that it expected the stock to deliver a return on par with the industry’s average over the next 12 to 18 months.

Alibaba Health Information Technology, the pharmaceutical e-commerce arm, also extended its winning streak on Thursday to a sixth straight session, gaining 1.5 per cent to HK$6.89, the best level it has seen in almost three years. Some 182 million shares were traded, up nearly 50 per cent from Wednesday.

The stock had risen 60 per cent in the past six sessions, after the company said it generated an adjusted annual profit of 8 million yuan for the first time, swinging from a loss of 98 million yuan in the previous year.

“I think investors, particularly some funds, have been hyping up these Alibaba concept stocks,” said Linus Yip, Hong Kong-based chief strategist at First Shanghai Securities.

“Alibaba Health was the first [target], followed by Alibaba Pictures.”

Alibaba Health’s better-than-expected results was one trigger for the revival in investor interest, while another could be the valuation levels, Yip said.

“These Alibaba concept stocks have been hovering around low levels in the past two years. Now they [investors] think it’s a good time to hype them up.”

These Alibaba concept stocks have been hovering around low levels in the past two years. Now they [investors] think it’s a good time to hype them up
Linus Yip, First Shanghai Securities

Yunfeng Financial Group, a securities firm co-founded by Alibaba executive chairman Jack Ma, also jumped 5.4 per cent to HK$5.30, while its trading volume tripled to 8.16 million shares from Wednesday.

Lottery firm AGTech Holdings, indirectly controlled by Alibaba and Ant Financial, rose 7 per cent to 92 Hong Kong cents. A total of 82.6 million shares were traded, compared with four million shares on Wednesday.

Similarly, a number of portfolio companies held by Alibaba posted an advance on the mainland Chinese market.

Hypermarket operator New Huadu Supercenter soared by the daily limit of 10 per cent to 10.34 yuan. Rival Sanjiang Shopping Club gained 5.9 per cent to 20.46 yuan. Silkroad Visual Technology also rose 10 per cent to 24.70 yuan. Retailer and software developer Hundsun Technologies added 5.4 per cent and 3.8 per cent, respectively, to 14.65 yuan and 63.55 yuan.

Alibaba Group owns the South China Morning Post.