Alibaba Group Holding Limited (BABA) is set to join the Stock Connect program by September 9th, a move that could unlock up to $3.2 billion in investment capital for global markets, according to Bloomberg Intelligence estimates. Stock Connect, a Mutual Market Access program, enables investors in mainland China and Hong Kong to transact shares listed on other markets through domestic stock exchanges and clearing houses.
The inclusion of Alibaba in Stock Connect is expected to free up foreign exchange quota currently used by domestic institutional investors to purchase Alibaba shares. This released quota can then be used to invest in other markets, potentially benefitting equities in Japan and the United States. Analysts anticipate the full impact of the quota release to be realized within three years.
Alibaba has faced challenges in recent months, with its stock price declining by 12% in the past year. The company has struggled to generate value amid a sluggish domestic economy and intense competition in the e-commerce sector. However, Alibaba remains dedicated to its artificial intelligence ambitions despite the impact of U.S. sanctions, which it believes can drive shareholder value.
In its recent fiscal first-quarter report, Alibaba announced revenue growth of 4% year-on-year, reaching $33.47 billion, though slightly missing analyst expectations. Adjusted earnings per ADS of $2.26 exceeded analysts’ estimates, while net income dropped 29% year-on-year to $3.34 billion. Adjusted net income decreased 9% year-on-year to $5.6 billion.
Investors seeking exposure to the Chinese e-commerce giant can consider ETFs like Avantis Emerging Markets Equity ETF (AVEM) and Global X Artificial Intelligence & Technology ETF (AIQ).
As of Wednesday’s premarket trading, BABA stock was down 0.38% at $81.14.
