Alibaba Group Holding Ltd.’s recent decision to alter its listing status in Hong Kong could pave the way for the tech giant’s inclusion in the Southbound Bond Connect program as early as September, according to Goldman Sachs analyst Ronald Keung. This shift in listing status from secondary to primary listing could enable mainland Chinese investors to trade Alibaba shares through the Stock Connect cross-border investment channel.
Keung highlights that Alibaba’s primary listing in Hong Kong by the end of August could trigger its inclusion in the Southbound Connect program during the September review period. The exchange operators of Shenzhen and Shanghai are scheduled to review additions to the program on September 5th. If approved, mainland investors could begin trading Alibaba shares as early as September 9th.
Goldman Sachs remains optimistic about Alibaba’s future, citing significant shareholder return policies, including a $10.6 billion share repurchase program for the first half of 2024. The firm also anticipates customer management revenue growth fueled by adtech tool upgrades and software service fees, which could stabilize earnings in the second half of fiscal 2025. Keung believes this will narrow the gap between gross merchandise value and customer management revenue, potentially leading to a resurgence in revenue growth.
This strategic move by Alibaba to change its listing status in Hong Kong comes as a significant development for the company, offering access to a vast pool of potential investors in mainland China. With a market capitalization of over $220 million, the Chinese stock market presents a significant opportunity for Alibaba to expand its investor base and potentially unlock new growth avenues.
Goldman Sachs maintains a Buy rating on Alibaba, expressing confidence in the company’s future prospects. The firm believes Alibaba’s valuation remains attractive, particularly in light of the potential benefits of its Hong Kong listing and the anticipated growth in its customer management revenue.