Monday Is Singles Day, the Biggest Shopping Day of the Year. Here's What It Could Mean for Alibaba and China's Economy
Alibaba is preparing for Singles Day, the biggest shopping day of the year, and a stock listing on the Hong Kong exchange.
The e-commerce behemoth, meanwhile, is also moving toward a stock listing on the Hong Kong exchange.
“Chopping hands” is a term used by young Chinese to describe their fanatic desire for online shopping—so out of control that they want to cut off their own hands to stop bleeding more money.
On Monday, many Chinese will be doing exactly that as they embrace the Singles Day shopping festival that falls on Nov. 11. How much is spent will be an indicator not just of the health of e-commerce behemoth Alibaba Group Holding (ticker: BABA)--the company that created the event—but also the broader Chinese economy.
Singles Day was first coined in China in the early 1990s—so called for the four ones in the date—as a protest against Valentine’s Day and a celebration of being single. E-commerce giant Alibaba adopted the concept in 2009 and started the shopping festival to invite Chinese consumers to buy gifts for themselves.
The total transaction volume has surged from $7 million in 2009 to $30.8 billion in 2018—more than the volumes on Thanksgiving Day, Black Friday, Cyber Monday, and Amazon Prime Day combined, or the equivalent to each of Alibaba’s 640 million users spending $48, writes David Dai, an analyst with Bernstein.
This year, fund managers and analysts are expecting another blowout shopping record—even amid a backdrop of a slowing Chinese economy and the trade war with the U.S.
Alibaba’s latest earnings report could offer some clues. For the three months ended in September, the company reported 40% revenue growth from the year-ago period and 36% higher earnings per share. Both numbers came ahead of Wall Street expectations, as Chinese consumers remained resilient despite slowdowns in manufacturing and exports.
Alibaba expects revenue to reach 500 billion yuan ($71.5 billion) for its fiscal year 2020 that ends in March. Singles Day sales would contribute a big part.
If Singles Day is indeed another blowout, Alibaba’s stock—already up 36% for the year—could see another lift. But if the numbers come in soft, it would surprise investors and hurt the share price.
Investors may have more things to celebrate after the Singles Day. Alibaba, which is currently listed in the U.S., recently said it is reviving a planned offering in Hong Kong as soon as this month.
The move came amid a new system that lets Chinese businesses listed abroad to issue shares in China—and could be an effort to allow Alibaba’s customers to actually own some of its shares. Alibaba expects to seek approval from Hong Kong’s stock exchange next week.
The fund-raising goal, however, has been lowered to a range of between $10 billion and $15 billion, from an original target of $20 billion earlier this year. The listing was pushed back in the summer as protests in Hong Kong created political and market instability in the city.
The listing comes against a backdrop of improving market optimism over a U.S.-China trade agreement. The two countries appear to be moving closer to an initial trade deal, which could boost Chinese purchases of American farm products, and roll back some existing tariffs.
Still, many investors fear a decoupling of the world’s two largest economies—not just for technology, but also in terms of capital. Several proposals are making their way through Congress, including a push to restrict U.S. government pensions from investing in China and an effort to increase scrutiny of Chinese companies listed in the U.S. and possible de-listings.
Alibaba’ Hong Kong listing could be an effort to mitigate the potential risk of those proposals coming to fruition. Last month, Jane Sun, chief executive of Ctrip (CTRP), another U.S.-listed Chinese company, told Barron’s that if the U.S. did take actions to restrict capital to Chinese companies, there are always other exchanges as an alternative.
Fund managers don’t expect such actions—if they indeed take place—to have much of an impact on stock prices. Managers that invest in Chinese companies have increasingly been taking an all-China approach, diversifying between U.S.-listed Chinese stocks, those listed in Hong Kong, and A-share stocks listed in mainland China as Beijing loosens its rules on public offerings to keep innovative domestic companies at home. Index provider MSCI has been adding more of those Chinese A-share companies to the benchmark MSCI Emerging Markets index.
Reshma Kapadia contributed reporting.
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