Alibaba, Tencent earnings to be watched for clues on consumer sentiment in China as trade war swirls

Alibaba Group Holding and Tencent Holdings will both report quarterly earnings on May 15, followed by Baidu on May 16, which will be closely scrutinised for any indication that growing trade tensions between the world’s two-biggest economies are impacting consumer sentiment in China.

Alibaba

China’s largest e-commerce operator blew past profit estimates in the previous quarter on growth in gross merchandise volume (GMV) and its cloud services business despite a slowing domestic economy.

Alibaba’s earnings are primarily driven by its core e-commerce engine, consumer services, entertainment and cloud computing – not exports – meaning the health of domestic consumption is always a key factor. Investors will also scour the earnings report for any sign that growing competition from the likes of group-buying platform Pinduoduo is biting.

China's improved consumer sentiment in the March quarter is expected to benefit results though and consensus analyst estimates are for sales growth of 48 per cent in the fourth quarter, up from 41 per cent growth in the third, helping Alibaba meet its fiscal 2019 sales guidance of 375-383 billion yuan, according to a poll by Bloomberg.

“Although e-commerce remains the core, Alibaba’s growth is driven by synergy effects from its entire ecosystem and this means that side businesses such as cloud, local consumer services and new retail will remain as important areas for the company,” said Danny Law, a Hong Kong-based research analyst at Guotai Junan International Holdings.