Here’s what China’s e-commerce giant is telling us about the economy

Beijing – Ali Baba Was once the poster child of investing in modern China. Now the e-commerce market that has driven its growth is slowing down, while new players are eating away at Alibaba’s market share.

This is reflected in the performance of the shares. since a clear Down in sentiment on major Chinese Internet names in mid-March.

pinduoduo Shares have more than doubled since then, while mituan shares have climbed 80%, and range Shares in Hong Kong are up more than 50%. kuaishou is up about 47%.

Ali Baba Shares are up about 42% in Hong Kong and 33% in New York. Tencent Only 25% up.

But except for Kuaishou and Pinduoduo, the stock is still down for the year.

“Our top picks in this area remain JD, Meituan, Pinduoduo and Kuaishou,” Bernstein analyst Robin Zhu and a team said in a report this week. “Interest in Alibaba remains, mainly from foreign investors, while the reaction to Tencent has been very negative.”

Bernstein expects consumer and regulatory trends to favor stock plays in “real” categories — e-commerce, food delivery and local services — and “virtual” ones — gaming, media and entertainment.

Over the weekend, total transaction volume rose 10.3% to 379.3 billion yuan ($56.61 billion) at the 6.18 shopping festival, led by JD.com. It’s a new high in price – but the slowest increase on record, According to Reuters.

According to a report on Sunday, traders who spoke with Nomura said the Covid lockdown disrupted apparel production, while consumer demand was generally low. Citing a trader, the report said that sales of the high-end product outperformed those of the mass market.

Alibaba, whose main shopping festival is in November, only said without disclosing figures that it had seen an increase in gross merchandise value since last year. GMV measures the total selling price over a given period.

“Online retail growth this year is likely to be slower than in 2020 and 2021, and its gains in penetration rates could weaken to an average of 2.6. [percentage points] during 2015-2021,” Fitch said in a report last week.

“This is due to weak consumer confidence on a large base, deep integration of online and offline channels … and concerns of a slowing economy and rising unemployment,” the firm said. Fitch expects online sales of food and home goods to outperform apparel.

In May, online retail sales of goods increased by more than 14% from a year ago, but overall Retail sales down 6.7% during that time.

Fitch expects China’s retail sales to grow by only low single digits this year, compared to 12.5% ​​in 2021. But the firm expects online sales of goods to increase its share of total retail goods to around 29% in 2022, compared to 27.4% in 2021 and 27.7% in 2020.

Last month, ByteDance Douyin more than tripled its e-commerce GMV claim in the last year, without specifying when that year ended. Douyin banned links to external e-commerce platforms in 2020.

While Douin dwarfs Kuaishou by the number of users, what sets it apart for investors looking to drive the short-video e-commerce trend is that Kuaishou is publicly listed.

Also in earlier calls to downgrade 28 “uninvestable” Chinese Internet stocks to JPMorgan in March, Analysts placed their only “overweight” on Kuaishou based on “management’s sharp focus on margin improvement, higher gross margin, larger user base and less competition risk”.

Users such as cosmetics livestreamer Zhao Mengche often describe Kuaishou as a “community”, adding that the app is trying to integrate more brands and mimic the village’s market square – online. Zhao has over 20 million followers on Kuasho.

During this year’s 6.18 Shopping Festival, fashion-focused social media app Xiaohongshu claimed that more merchants made their products available directly on the app, adding that users could also buy imported JD.com products through Xiaohongshu .