China’s tech stock comeback faces earnings test from Alibaba, Meituan amid slower growth and tougher regulations

Name: Singles’ Day 2021 in China shifts focus from consumerism to social responsibility
Uploaded: 2021-11-17T23:30:26.000Z
Duration: 2 min 26 s
Description: Singles’ Day 2021 in China shifts focus from consumerism to social responsibility

Alibaba, Meituan, Kuaishou, Baidu are expected to post weaker earnings in the quarter ended September 30

Report cards to test new-found optimism among tech fund managers after a 14 per cent rebound from this year’s low in October

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Visitors pass by the Alibaba booth during the China International Fair for Trade in Services in Beijing in September 2021. Photo AP

Zhang Shidongin Shanghai

Published: 7:30am, 18 Nov 2021

A 14 per cent rebound in Chinese tech stocks in Hong Kong from this year’s low in October is being challenged by potentially weaker earnings from industry bellwethers in the coming days. Can investors look past the report cards with valuations near record lows?

The first test will come from Alibaba Group Holding, when the e-commerce group releases its quarterly report on Thursday. Meituan and Kuaishou Technology are due to report next week. The trio are among the top five biggest Hang Seng Tech Index constituents, with more than 25 per cent of weightage combined.

Net income for Alibaba, the owner of this newspaper, probably fell 17 per cent to 24 billion yuan (US$3.76 billion) from a year earlier, according to consensus analyst forecasts tracked by Bloomberg. Meituan, China’s biggest on-demand delivery service operator, is expected to incur a 5.3 billion yuan loss based on US accounting standards, versus a 6.3 billion yuan profit previously.

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Singles’ Day 2021 in China shifts focus from consumerism to social responsibility

Kuaishou, the largest index member, may have incurred a loss of 8.6 billion yuan for the same quarter, according to Bloomberg data. It will report on November 23, three days ahead of Meituan’s earnings. At least 30 of the Nasdaq Golden Dragon Index members are also due to report later this month. They include search engine Baidu, which is expected to post an 82 per cent slump in net income.

The nation’s antitrust body fined Alibaba US$2.8 billion in April and Meituan US$533 million in October. Ride-hailing operator Didi Global is said to be relaunching its app by year end following a cybersecurity probe. Analysts now expect authorities to ease up on the Big Tech crackdown, removing a major market overhang and allowing investors to focus on fundamental value.

“Tech stocks in Hong Kong have fully reacted to the headwinds and valuations are close to historical lows,” said Chen Ping, a fund manager at HSBC Jintrust Fund Management in Shanghai. “Some of the internet giants will retain their core competitiveness. We continue to be positive on them in the long run.”

The forthcoming earnings reports will be crucial to traders who are enjoying a rare bounce in the Hang Seng Tech Index, which saw US$1 trillion of market value eroded during China’s year-long crackdown on the tech sector.