China tech pullback offers alternatives

This year’s correction of China’s e-commerce stocks “has been relatively healthy” and Alibaba in particular, at 21 or 22 times earnings, is “looking very attractive,” said Catherine Yeung, a Hong Kong-based investment director with Fidelity International.

According to Morningstar Inc. data, Fidelity’s $6.6 billion China Consumer Fund picked up more than $200 million worth of Alibaba shares listed in Hong Kong and New York over the first four months of 2021. As of April 30, Alibaba was the fund’s biggest holding, with a 9.6% weighting.

The company’s still got an “incredibly deep moat,” Ms. Yeung said. It remains an e-commerce leader, its ecosystem has a lot of breadth and depth and its management team remains visionary and capable in terms of expanding into areas outside of its primary e-commerce focus, she added.

Likewise, China’s regulatory response, initially seen as a takedown of Mr. Ma, has come to be judged as relatively healthy as well.

Beijing chose a moment when China’s e-commerce players were being buoyed by a pandemic-related tailwind to pursue a regulatory tightening that was inevitable, given the sector’s phenomenal growth, said Guan Shao-Ping, head of Greater China equity with Goldman Sachs Asset Management in Hong Kong.

In this instance, China’s regulators just moved to “make sure that the big players are not squeezing out the chance for small innovators to participate in the market as well” — ultimately good for competition and not much different from what regulators elsewhere are looking to do, said Alexander Treves, Hong Kong-based managing director and investment specialist with J.P. Morgan Asset Management.

The argument was that Alibaba would cut out merchants that worked with competing platforms, which is anti-competitive “any way you slice and dice it,” agreed Jason Hsu, founder, chairman and chief investment officer with Rayliant Investment Research. In that regard, China’s government sitting down with 34 large e-commerce players shouldn’t prove grist for the mills of conspiracy theorists arguing that regulators there are looking to punish success, he said.

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