On September 10th, Alibaba was officially included in the Southbound Trading of the Hong Kong Stock Connect, with its share price increasing by 2.17% at the opening, quoted at 80 Hong Kong dollars, with a total market capitalization of 1.54 trillion Hong Kong dollars. As of press time, Alibaba's intraday quote was 81.45 Hong Kong dollars per share, up by more than 4%.

On September 9th, the Shanghai and Shenzhen stock exchanges issued a notice stating that due to the adjustment of the constituent stocks in the Hang Seng Composite LargeCap Index, MidCap Index, and SmallCap Index, the list of stocks included in the Southbound Trading of the Hong Kong Stock Connect (hereinafter referred to as "Stock Connect") has been adjusted and will take effect from the next trading day of the Stock Connect. Alibaba, SF Holding, and Zhejiang Xingye Automobile Technology, among 33 other stocks, were included in this list of Stock Connect targets. The aforementioned announcement implies that as of today, Southbound capital can purchase Alibaba and other stocks through the Stock Connect.

The industry is paying attention to how much capital inflow Alibaba will receive as a result of being included in the Stock Connect. Previously, a Goldman Sachs research report estimated that after being included in the Stock Connect targets, Southbound capital could bring a potential capital inflow of 15 to 16 billion US dollars to Alibaba. A Morgan Stanley research report mentioned that in the long term, the proportion of Southbound capital holdings might stabilize at around 10%, providing considerable incremental support to the company's value.

Advertisement

However, Morgan Stanley stated that in the first six months, the proportion of Southbound capital holdings might be around 7%, with a maximum inflow of 12 billion US dollars. At the same time, Morgan Stanley believes that the inclusion in the Stock Connect will not significantly help in increasing Alibaba's valuation, as Southbound capital has now shifted more towards the financial and telecommunications sectors.

Currently, Alibaba is focusing on "revitalizing" its core e-commerce business, while also considering Alibaba Cloud as another core driver for Alibaba's future growth. At present, the revenue growth rate of Alibaba's main business is still under pressure. In the second quarter of 2024, Alibaba achieved a revenue of 243.236 billion RMB, a year-on-year increase of 4%. The revenue from Alibaba's China retail commerce decreased by 2%, but Taobao's GMV grew at a high single-digit rate year-on-year, and the order volume increased by double digits year-on-year, with market share gradually recovering. Alibaba Cloud's revenue was 26.549 billion, a year-on-year increase of 6%; the adjusted EBITA was 2.34 billion, a year-on-year increase of 155%.

Over the past year, Alibaba has been continuously "slimming down." In February of this year, when answering a question about "selling non-core assets," Alibaba Group Chairman Joseph Tsai stated that as of the current fiscal year 2024, Alibaba has completed the exit of 1.7 billion US dollars in non-core assets over a period of 9 months. The company is also actively looking at how to exit listed stocks and has established a dedicated team. "Currently, there are still some traditional physical retail businesses on Alibaba's balance sheet, which are not the core focus of the business. It is reasonable for Alibaba to exit, but considering the current market situation, the exit may take time to achieve."

At the same time, Alibaba is also reducing its investment footprint. On September 2nd, Alibaba continued to reduce its holdings in NetEase Cloud Music, cashing out 52.57 million Hong Kong dollars. This is the fourth time Alibaba has reduced its holdings in NetEase Cloud Music this year, with Alibaba's shareholding ratio decreasing from 9.32% to 4.91%.

With Alibaba's focus on its main business, the management previously stated in the earnings call that, in addition to core businesses such as Taobao and Tmall, Alibaba International Digital Business, and other loss-making businesses like Alibaba Local Life, they are improving monetization capabilities and operational efficiency. It is expected that most of the loss-making businesses will achieve break-even within 1 to 2 years and gradually begin to contribute to scaled profitability.