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

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.