Alibaba Group Holding Ltd. – Page 2

Chinese fast fashion retailer Temu overtakes Shein to dominate Japan and South Korea apps

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A package from Temu is seen in front of a screen with the Temu logo. (Photo by Nikos Pekiaridis/NurPhoto via Getty Images)

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Chinese low-cost retailer Temu is dominating app stores in Japan and South Korea in its category, dethroning rival Shein after its successful expansion in Western markets.

“Temu has rapidly expanded its footprint beyond the U.S. and into a number of international geographies and we believe is now available in 40+ countries … where we continue to see opportunities for growth in the quarters ahead,” said Goldman Sachs in an Oct. 4 report.

The investment firm estimated that Temu, which is owned by PDD Holdings, “now generates more than $1 billion of [monthly transaction value]” and expects “continued growth into second half 2023.”

Its rival Shein was estimated to be on track to hit $30 billion in transaction value in 2022, according to media reports.

Temu has overtaken Shein in Japan and South Korea by staying at the top of shopping app rankings in those locations for a longer period of time, according to data.ai analysis shared with CNBC.

Since its July launch in Japan to Nov. 2, “Temu has ranked #1 by daily iOS & Google Play shopping app downloads in Japan for 101 days out of 124 days,” said the app analytics and data company.

By comparison, Shein spent just 17 days topping the two app stores in the same period in Japan.

Temu was the fastest to reach four million downloads in Japan, taking around 121 days, compared to Shein which took 155 days, according to data.ai. Japanese marketplace Mercari took 427 days and Amazon 660 days, the data showed.

Similarly, in South Korea, Temu ranked No. 1 by daily iOS & Google Play shopping app downloads for 65 days out of 93 days from Aug. 1 to Nov. 2, overtaking Alibaba‘s AliExpress (25 days) while Shein ranks among the top 5.

Among the top shopping apps in South Korea, Temu was the fastest to reach 2 million downloads at around 88 days. Shein took 382 days while AliExpress took 366 days to hit the same milestone.

Temu and Shein’s rivalry extend outside the e-commerce space to the courtroom. Shein sued Temu in December over intellectual-property infringement while Temu accused Shein in July of threatening and forcing manufacturers into exclusivity agreements. But recent documents showed that both parties have applied to end their lawsuits against each other.

Temu’s rise

Temu is backed by Nasdaq-listed Chinese tech giant PDD Holdings, which also owns China-based e-commerce app Pinduoduo.

Launched in the U.S. in September 2022, Temu was PDD’s first major push overseas and quickly found success among budget-conscious consumers.

In just a few weeks, the Chinese ecommerce app rose to the top of app stores and subsequently expanded rapidly across countries such as Australia, New Zealand, France, Italy, Germany, the Netherlands, Spain, and the U.K.

Headquartered in Boston, Massachusetts, the Chinese online retailer focuses on selling made-in-China goods, from fashion to household products, at low prices to overseas consumers. Similarly, Shein relies on contracted manufacturers, mostly in China, to design, produce and ship its low-priced products.

Temu made its foray into Asia through Japan and South Korea in July. It then entered the Philippines on Aug. 26 before launching in Malaysia on Sept. 8.

“We believe the main reason for [PDD’s] 131% year-on-year growth in transaction service revenues and 135% year-on-year growth in cost of goods sold in second quarter 2023 was related to fast ramp of Temu performance,” Citi analysts said in a Aug. 29 report.

The platform has been expanding rapidly since its launch by leveraging its parent company’s strength in supply chain and marketing.

“Much of PDD’s incremental investment dollars have been deployed to make Temu happen,” said Bernstein analysts in a Sept. 15 report, adding that Temu’s multi-million Super Bowl advertisement “solidified Temu’s mind share for a number of its target customers.”

“We believe that Temu’s rapid rise in popularity was supported by the company’s elevated marketing investments, its low prices and focus on promotions, and to the success of its referral campaigns,” said Berstein’s analysts.

The analysts said they expect to see “an increase in the number of active users and order volume” in Temu contributing to non-U.S. transaction value and “increasingly contributing to growth from here.”

In June, the U.S. House Select Committee alleged that Shein and Temu violated import tariff law by importing goods into the U.S. without paying import duties or making shipments subject to human rights reviews.

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November 9, 2023

Huawei, Tencent among top cybersecurity patent holders as China fosters own tech, report says

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A Chinese flag flies outside a residential compound in Beijing on April 30, 2017.

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Chinese companies have gained ground in global patent holdings in the cybersecurity technology sector amid growing U.S.-China tensions, according to a report from Nikkei Asia on Sunday.

Chinese firms such as Huawei and Tencent accounted for six of the top 10 global patent holdings in the cybersecurity technology sector as of August, based on data compiled by Nikkei in cooperation with U.S. information services provider LexisNexis. The data took into account patents registered across 95 countries and regions.

The report said that U.S. computer manufacturer IBM came out top with 6,363 patents followed by Huawei and Tencent with 5,735 and 4,803 patents respectively.

Among the top 10 include Alibaba’s financial arm Ant Group in sixth place with 3,922 patents, as well as Alibaba Group Holding with 3,122 patents, the Nikkei said. Sovereign wealth fund China Investment Corp. had 3,042 patents, it added.

This comes as escalating tensions between the U.S. and China have pushed the latter and its homegrown firms to seek self-reliance in science and technology. For example, the U.S. recently tightened restrictions on artificial intelligence chip exports to China over growing concerns that Beijing could use those chips to advance its military capabilities.

Hiroko Osaka, head of marketing in Asia for LexisNexis Japan’s intellectual property department, was quoted as saying there’s been a “dramatic increase in filings by Chinese firms in general, especially since 2018.”

Huawei has been at the center of U.S. sanctions aimed at securing U.S. networks and supply chains since the U.S. tightened export controls on high-tech firms five years ago. //ok?

In 2018, the U.S. banned its agencies from obtaining Huawei equipment or services. In 2019, Huawei was placed on the U.S. trade blacklist, which restricts American firms from doing business with the Chinese company. The U.S. also limited Huawei’s access to foreign-produced semiconductors made with U.S. technologies.

“The importance of IP protection was reaffirmed in the battle for supremacy over advanced technology and data, which may have sparked the surge of application filings by Chinese firms,” Osaka told Nikkei Asia.

Read more about China’s growing patent filings in the Nikkei Asia report.

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November 5, 2023

Chinese tech giant Alibaba launches upgraded AI model to challenge Microsoft, Amazon

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An Alibaba Group sign is seen at the World Artificial Intelligence Conference in Shanghai, July 6, 2023.

Aly Song | Reuters

Alibaba on Tuesday launched the latest version of its artificial intelligence model, as the Chinese technology giant looks to compete with U.S. tech rivals such as Amazon and Microsoft.

China’s biggest cloud computing and e-commerce player announced Tongyi Qianwen 2.0, its latest large language model (LLM). A LLM is trained on vast amounts of data and forms the basis for generative AI applications such as ChatGPT, which is developed by U.S. firm OpenAI.

Alibaba called Tongyi Qianwen 2.0 a “substantial upgrade from its predecessor,” which was introduced in April.

Tongyi Qianwen 2.0 “demonstrates remarkable capabilities in understanding complex instructions, copywriting, reasoning, memorizing, and preventing hallucinations,” Alibaba said in a press release. Hallucinations refer to AI that presents incorrect information.

Alibaba also released AI models designed for applications in specific industries and uses — such as legal counselling and finance — as it angles in on businesses.

The Hangzhou-headquartered company also announced the GenAI Service Platform, which lets companies build their own generative AI applications, using their own data. One of the fears that businesses have about public generative AI products like ChatGPT is that data could be accessed by third parties.

Alibaba and other major cloud players are offering tools for companies to build their own generative AI products using their own data, which would protected by these providers as part of the service package.

Microsoft’s Azure OpenAI Studio and Amazon Web Service’s Bedrock are two rival services.

While Alibaba is the biggest cloud player by market share in China, the company is trying to catch up with the likes of Amazon and Microsoft overseas.

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October 31, 2023

Shares of Tencent-backed J&T Express fall in lackluster Hong Kong debut

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Shares of Indonesia’s J&T Express fell 1.33% when it went public on Friday.

The logistics service provider traded at 11.84 Hong Kong dollars ($1.51) on Friday morning, after opening at HK$12.

The HK$3.92 billion ($500 million) IPO is the second largest listing in Hong Kong this year, after premium Chinese liquor company ZJLD Group. The Chinese “baijiu” maker, backed by KKR, plunged nearly 18% on their first day of trading on April 27.

Investors include Chinese tech giant Tencent, U.S.-based venture capital firm Sequoia, Chinese private equity firm Boyu, SF Express and Singapore’s sovereign wealth fund Temasek.

J&T Express is listing in an uncertain economic environment, characterized by hiking inflation, high interest rates and ongoing conflict such as the Israel-Hamas war and Ukraine invasion.

“In the third quarter of 2023, global IPO activities remained sluggish due to macroeconomic and geopolitical uncertainties. Hong Kong’s global IPO ranking dropped to eighth following a historically slow third quarter,” said KPMG in a report published on Oct. 9.

“The Hong Kong market has not recovered as much as we would like,” Irene Chu, partner at KPMG China, told CNBC, highlighting that the third quarter “continued to be very soft.”

J&T had initially aimed to raise at least $1 billion in the IPO but halved the target amount on weak investor demand, according to Reuters.

Companies that want to go public have “become more realistic” in their pricing, said Ringo Choi, Asia-Pacific IPO leader at EY. “The IPO pricing is dropping significantly by more than 50% or even 70%.”

China is J&T’s largest market, where it delivered nearly 83% of its total parcels last year, serving the likes ecommerce giants like Pinduoduo and Alibaba’s Taobao and Tmall. It held a 10.9% market share by parcel volume in 2022, the company said in its prospectus, citing Frost & Sullivan.

In May, it acquired China-based Fengwang Express for 1.18 billon yuan from largest domestic player SF Express, building on its acquisition of express delivery business from Chinese logistics firm Best in late 2021.

The Indonesian logistics provider delivered a total of more than 14.5 billion parcels in 2022 across China and Southeast Asia, up from 11.5 billion in 2020. In Southeast Asia, it is the largest operator with a 22.5% market share in terms of parcel volume, based on Frost & Sullivan data. Alibaba-owned Lazada, GoTo’s e-commerce arm Tokopedia and Sea Limited‘s Shopee, are among its customers, the prospectus showed.

‘Immaterial’ impact from TikTok Shop ban

Analysts warn that TikTok Shop’s ban in Indonesia, which disallows social media platforms from facilitating e-commerce purchases, could impact J&T Express.

TikTok Shop is the e-commerce feature of popular short-video app TikTok.

“There is some sharp short-term pain for J&T in Indonesia because of the TikTok Shop ban, as J&T was (profitably) carrying the majority of the TikTok Shop’s millions of orders a day in Indonesia prior to the ban,” said Momentum Works in a Oct. 17 blog post.

J&T Express acknowledged in its filing that “there remain significant uncertainties” on how the new rules would impact different e-commerce and social media platforms in Indonesia, “some of which are our customers.”

But the company said it will not be adversely impacted as the revenue from social e-commerce platforms in Indonesia “remained immaterial” to the business.

In 2022 and the first six months of this year, revenue from social e-commerce platforms in Indonesia contributed only 4% and 6% to the company’s revenue respectively, said J&T.

“We believe that although [the new e-commerce regulation] may have an impact on our customer composition in Indonesia in the near term, this new regulation will not have a material adverse effect on our business operations and financial performance in the long term.”

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October 26, 2023

With China playing catchup with the U.S., these 3 charts show the top countries for fintech in 2023

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Chinese and US flags fly outside a hotel during a 2012 U.S. presidential election results event organized by the US embassy in Beijing on November 7, 2012.

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From the U.S. to China, countries around the world are battling it out to lead on financial technology, a heavily lucrative industry that has grown over the years taking everything from retail banking to wealth management online.

Since the 2008 financial crisis, thousands of new firms have been set up with the aim of taking on the financial incumbents and providing more accessible services to both consumers and businesses alike.

In the U.K., startups like Monzo and Starling took the banking world by storm with their digital-only offerings, while in China, Alibaba and Tencent launched their own respective mobile wallets, Alipay and WeChat Pay.

In August, CNBC, in partnership with Statista, launched a list of the world’s top fintechs. To choose the top global firms, Statista used a rigorous method that evaluated a few key business metrics and fundamentals, including revenue and number of employees.

Statista identified 200 of the top companies globally, across nine categories including neobanking, digital payments, digital assets, digital financial planning, digital wealth management, alternate financing, alternate lending, digital banking solutions, and digital business solutions.

Using additional data provided by Statista, CNBC analyzed the top nations overall when it comes to financial technology, splitting the analysis into three main areas of focus:

The countries with the most valuable fintech industries based on market capitalization.
Overall number of top fintech firms, as identified by Statista.
The amount of “unicorn” companies with valuations of $1 billion or more across different countries.

So, which countries are at the top of their game when it comes to fintech? In three charts, here’s what we found.

U.S., China home to most valuable fintechs

The U.S. is home to most valuable financial technology companies in the world in 2023, according to Statista data — but China isn’t far behind with mega-payments firms like Tencent and Ant Group making the country a solid second.

The valuation data is up to date as of April 2023, with the exception of Ant Group, Stripe, Nubank, Checkout.com, Revolut, Chime, Polygon, Rapyd, Ripple, Blockchain, and Plaid.

Combined, the U.S. produces the most value in terms of fintech, with eight of the top 15 highest-valued financial technology companies in the world worth a combined $1.2 trillion based stateside.

Visa and Mastercard are the two biggest fintech firms by market value, with a collective market capitalization of $800.7 billion.

China is home to the second-most highly valued fintech industry, with its financial technology giants worth a combined $338.92 billion in total market capitalization.

UK has second-biggest number of top fintech firms

The U.S. was home to 65 of the top fintech companies, according to CNBC’s list of world’s top 200 fintech companies. The U.K. was a close second with 15 of the top 200 fintech names globally, while the European Union is home to 55 top fintech companies.

The U.S. has a vibrant fintech market, not least thanks to its deep-pocketed investors.

Silicon Valley is a natural home for the sector given its storied history in birthing some of the world’s largest technology companies, like Apple, Meta, Google, and Amazon, and a well-established venture capital ecosystem with major players such as Sequoia Capital and Andreessen Horowitz present.

In the U.S., some of the top global fintech companies on Statista’s list include names like Stripe, PayPal and Intuit. These are all companies with significant shares in their respective markets and hallmark products used by thousands, if not millions, of businesses both big and small.

The U.K., similarly, has a prominent fintech industry.

Buoyed by forces many — from innovation-driven regulars like the Financial Conduct Authority, to growing pools of capital, including venture and private equity, to a government that has tried to rank fintech firmly high up on its agenda — the U.K. has managed to produce significant in the fintech world, from digital banking behemoth Monzo to listed payments firm Wise.

In China, which was another standout fintech player identified by Statista, the market for digital financial services is massive.

WATCH: CNBC’s full extended interview with Robinhood CEO Vlad Tenev on AI, credit cards and more

Tencent’s WeChat Pay and Ant Group’s Alipay have cornered the market for mobile payments, providing ample competition to its fragmented, less built-up banking sector. Consumers in China tend to have a closer relationship with digital platforms like WeChat than they have with incumbent lenders.

But the fintech industry is faced with a number of challenges — not least macroeconomic headwinds.

Among the top roadblocks the sector faces right now, dwindling liquidity in venture capital is well up there.

In Europe, a combination of the Russian invasion of Ukraine, the aftermath of Covid-19 lockdowns, and resulting interest rate increases have impacted most major economies.

In the U.K., meanwhile, the technology industry’s problems generally have been compounded by Brexit, which critics argue is limiting foreign investment.

“The venture environment is generally struggling,” Nick Parmenter, CEO of business management consultancy Class35, told CNBC. “IPOs are fewer and lower in valuation, funds are struggling to raise from LPs and valuations are down throughout the venture cycle.”

“This makes raising growth capital a lot tougher, which makes management teams more conservative in their cash consumption. This has had a trickle-down effect on the fintech market — consumers have less discretionary income to invest or spend, which limits revenue potential for consumer-focused fintechs and small businesses alike.”

U.S. top for fintech unicorns, UK second

The U.K. again flexes its fintech muscles when it comes to the number of richly-valued “unicorn” companies in the country — Britain stands only second to the U.S., which hosts most of the world’s fintech unicorns. Unicorns are defined as venture-backed companies with a valuation of $1 billion or more.

In the U.K., some of the biggest unicorns include online banking startup Revolut ($33 billion) crypto wallet provider Blockchain.com ($14 billion), and digital payments groups Checkout.com ($11 billion), Rapyd ($8.75 billion) and SumUp ($8.5 billion).

Stateside, meanwhile, the largest fintech unicorns are Stripe ($95 billion), Chime ($25 billion), Ripple ($15 billion), Plaid ($13.5 billion), Devoted Health ($12.6 billion, and Brex ($12.3 billion).

Other leading ecosystems for fintech unicorns include India, on 17 unicorns, and China, on eight. France, Brazil and Germany each have six fintech unicorns.

Standing in 8th place is Mexico, with five fintech unicorns, Singapore, also with five, and the Netherlands, which has four in total.

WATCH: U.S. ranks first for top global fintechs in new report from Statista and CNBC

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October 25, 2023

Veteran EM investor Mark Mobius reveals the 2 tech giants that are key to any portfolio

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October 1, 2023

Once dubbed a ‘zombie’ exchange, this Asian stock market is trying European-style trading to reinvent itself

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TOPSHOT – People pass by as the city skyline is reflected in a puddle leftover from earlier rain in Singapore on February 8, 2022. (Photo by Roslan RAHMAN / AFP) (Photo by ROSLAN RAHMAN/AFP via Getty Images)

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The Singapore Exchange has become the first exchange in Asia to offer trading in “structured certificates” — but analysts say it’s not clear if the new offerings will benefit SGX significantly or boost its trading volumes.

Structured certificates are financial instruments issued by a third party, that are based on underlying assets — their returns depend on the performance of the asset, which can be a single stock or an equity index.

It’s still “too early to say whether there will be demand for the specific securities introduced,” said Thilan Wickramasinghe, Maybank’s head of research in Singapore.

Singapore began offering listed structured certificates on Aug. 30, with its inaugural issue being one linked to Hong Kong-listed shares of Chinese tech giant Alibaba Group Holding.

“We think this market will take a period of months … to figure out what investors’ appetite are for various names,” Michael Syn, senior managing director and head of equities at the SGX told CNBC’s “Street Signs” in late August.

“So tech names, Hong Kong names, U.S. names, Japanese names. I think there’s lots of possibilities there. But the first few, I think, appeal quite broadly.”

Serene Cai, SGX’s head of securities trading, told CNBC on Tuesday that since the launch a month ago, the exchange has seen “increased interest from both issuers and distributors keen to incorporate this product into their offerings.”

SGX sees this as a positive development, she said, as this broadens the range of investment options available to the market.

Will it revive SGX?

The SGX has sometimes been deemed “boring” and “unexciting.” It was once even referred to as a “zombie” bourse due to its thin trading volumes.

In 2022, there were more delistings than IPOs on the exchange.

Even before the pandemic, the exchange more saw delistings than listings. From 2009 to 2019, there were 302 delistings, while only 279 companies were listed, according to the finance minister at that time, Tharman Shanmugratnam.

Singapore’s IPO market has seen listings worth only $18.6 million so far this year, putting it on track to have the worst showing since 2011, according to aggregator Inside Venture Capital.

SGX’s move to broaden its equity-linked product base “could drive incremental market interest,” including offering depository receipts and structured certificates, Wickramasinghe told CNBC.

“This will give investors a wider choice of market and thematic exposure, beyond what has been available before,” he added. “We have observed success in SGX’s derivatives business where exposure to a wide variety of geographies and underlying asset classes are offered in an Asian time zone.”

In the near term, structured certificates are not likely to have a material impact on the earnings of SGX, he said, but they could give exposure to underlying securities in other markets, with easier and more convenient access through SGX, Wickramasinghe said.

Still nascent

Speaking to CNBC in late August, Syn said he’s confident the market will develop and mature as the SGX lists more of these structured certificates.

One of the benefits of listing structured certificates is transparency, Syn said. There is daily pricing with listed certificates and investors can liquidate their positions if they wish to — which is harder when the certificates are in an “over-the-counter” position.

But it will take “significant efforts from all involved to grow this market in the short term,” Adam Reynolds, Asia-Pacific CEO from Saxo told CNBC.

According to Reynolds, under the OTC distribution model, structured products are typically distributed to high-net worth clients by private banks, and would involve embedded fees for the creator, as well as fees for the bank or distributor.

However, with listed certificates, he said there will still be fees paid to the creator but no fees paid to the distributor. “This might disadvantage the growth of the listed certificate market [compared to] the OTC market distributed through the private banks.”

Why Asia?

Structured certificates are more more popular in Europe, as investors there are “broadly speaking, very yield focused,” Syn told CNBC.

The structured certificate market in Asia is “very vibrant,” but until now, it was only available OTC and from private banks to accredited investors, he added.

“The difference with listing it on the exchange is that it comes with a broader distribution perimeter, meaning you don’t have to be a private bank client, or an accredited investor,” Syn said.

In addition, he said Singapore’s status as a wealth management center means investors are more sophisticated and there is a “great desire” for yield enhanced products.

Syn noted, “In the current market environment, yields are up, base rates are up, the curves are flat, equities aren’t going anywhere. So any kind of yield enhanced product for range-bound trading is very, very popular with investors.”

How do they work?

Some structured certificates, like the one offered by SGX, are designed with an autocall feature, and is a yield enhancement certificate which means it expires after a set time and investors holding the certificates then are assured of a fixed coupon rate, or a return, when it expires.

For example, if a structured certificate comes with a 10% coupon, an investor buying the certificate will get a 10% return upon expiry, even if the value of the stock goes up more than 10%.

“So it’s a trade-off of believing that it won’t go up more than 10%, but in return getting some sort of assured return at the end of the period,” Syn told CNBC.

This works well if an investor expects markets to be range bound, as the coupon is likely to be higher than the capital gains.

Should the stock price go south, the shares will be delivered to the investor when the structured certificate expires and the investor holds the shares at current market value.

As such, Syn explained that investors must have the view that they want to buy the stock before they purchase the structured certificate: “You did not think it was going too high, you’re willing to collect a coupon. But if it does go down, then you’ll own the stock.”

Correction: The headline for this story has been updated to accurately reflect that the SGX was previously dubbed a ‘zombie’ stock exchange.

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September 28, 2023

Chinese e-commerce giant Alibaba plans to list its logistics unit Cainiao in Hong Kong

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An Alibaba Group sign is seen at the World Artificial Intelligence Conference in Shanghai, July 6, 2023.

Aly Song | Reuters

Alibaba plans to list its logistics unit Cainiao on the Hong Kong Stock Exchange, the Chinese e-commerce giant said in a regulatory filing on Tuesday.

Alibaba will continue to hold more than 50% of the shares of Cainiao after the spinoff.

The move is part of one of the most radical shake-ups in Alibaba’s history. In March, the company said it will split its structure into six business units, the majority of which will be able to raise outside funds and go public.

Cainiao is the first of these businesses to officially file for an initial public offering (IPO).

Alibaba said the Hong Kong Stock Exchange has confirmed that the Cainiao listing may go ahead. The exchange did not immediately respond to a CNBC request for comment.

Details have yet to surface on the pricing of shares or on the expected listing date.

This is a breaking news story. Please check back for more.

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September 26, 2023

Alibaba CEO warns of being ‘displaced’ if the Chinese tech giant doesn’t keep up in AI

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Signage at the Alibaba Group Holding Ltd. booth at the Smart China Expo in Chongqing, China, on Monday, Sept. 4, 2023.

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Alibaba needs to be “user first” and “AI-driven,” new CEO Eddie Wu told employees on Tuesday, as he laid out the strategic priorities for the Chinese tech giant.

Wu, who is just three days into the job as Alibaba chief executive, called for the e-commerce firm to “adopt a start-up mindset” as he looks to steer the company back to growth following one of the most tumultuous times in its 24-year history.

“Times are changing, and so must Alibaba! As the world progresses, Alibaba needs to evolve even faster!,” Wu said in a letter to employees that was seen by CNBC.

Wu, one of Alibaba founder Jack Ma’s close confidants, started as CEO on Sept. 10, taking over from Daniel Zhang, who stepped down from the role to focus on heading up the cloud computing business. However, in a surprise move, Zhang this week quit as CEO of the cloud business with Wu taking over in the interim.

It comes months after Alibaba split its company into six different business groups, the biggest shakeup in its history.

Wu said Alibaba’s two main strategic focuses will be “user first” and “AI-driven.” The company will “reinforce” its strategic investments in three areas.

The first it calls “technology-driven internet platforms.” Wu said that Alibaba’s business should “seek out the most open and collaborative relationships,” even with competitors. This is a different approach from Alibaba which has tended to try to keep users within its ecosystem of products.

Wu also touted the need to invest in artificial intelligence. Alibaba’s cloud unit has tried to position itself as a leader in AI inside China as it looks to reignite growth in the business.

“Each of our businesses generates massive numbers of use cases; therefore, we must transform these use cases into applications for AI technology, driving breakthrough user experience and business models through technology innovation,” Wu said.

“If we don’t keep up with the changes of the AI era, we will be displaced.”

Alibaba Cloud has its large language model called Tongyi Qianwen, released earlier this year. An LLM is an AI model trained on huge amounts of data and underpins chatbot applications. It’s the same type of model that OpenAI’s ChatGPT is based on.

Wu also said Alibaba needs to continue to invest in “globalization.”

Alibaba will also look to promote younger talent. Within the next four years, the company will promote those born after 1985 and the 1990s “to form the core of our business management teams,” Wu said.

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September 12, 2023

Shares of Alibaba tumble over 3% after outgoing CEO unexpectedly quits cloud business

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Alibaba CEO Daniel Zhang Yong speaks during the launching ceremony of Alibaba Rural Vitalization Fund on May 17, 2021 in Lanzhou, Gansu Province of China.

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In a surprise leadership reshuffle in June, Alibaba announced that Zhang was bowing out as both CEO and chairman on Sept. 10 to focus on the cloud intelligence business.

Co-founder Wu would become CEO and director, while another co-founder, Joseph Tsai, will be chairman from September, the e-commerce giant said at that time.

Zhang was Alibaba Group CEO since 2015 and the group chairman since 2019. He has also been chairman and CEO of the Alibaba Cloud Intelligence Group since 2022.

“The board of our Company expresses its deepest appreciation to Mr. Zhang for his contributions to Alibaba Group over the past 16 years,” Alibaba said in the Sunday statement.

Zhang will continue to contribute to Alibaba by “channeling his expertise differently,” according to an internal letter to staff seen by Reuters, which reportedly said Alibaba will invest $1 billion in a technology fund that Zhang would establish.

“The Company will continue to execute its previously announced plan to spin off Alibaba Cloud Intelligence Group under a separate management team to be appointed,” subject to the restructuring plan and relevant approvals, Alibaba has said.

In May, Alibaba also announced plans to spin off its cloud division as a separate, publicly traded company.

In a major restructuring plan in March, Alibaba split into six business groups in March, paving the way for each unit to raise outside funding and go public.

Alibaba has faced slowing economic growth at home and tougher regulation from Beijing, resulting in billions being wiped off its share price.

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September 10, 2023

Bank of America: Asian buybacks just hit a 20-year high — and these stocks are a buying opportunity

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September 3, 2023

Sea pivoted to growth over profits as it faced rising competition from TikTok, Lazada, analysts say

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Forrest Li, chief executive officer of Sea Ltd., in Singapore, on Wednesday, May 3, 2023.

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Shares of Southeast Asian tech giant Sea plummeted this week after missing revenue expectations and saying it would focus on growth over profits — a reversal from recent cost-cutting measures in the face of economic uncertainty. But analysts said the pivot is a move to defend market share.

On Tuesday, the company reported revenue that missed analyst expectations, coming in at $3.1 billion versus the $3.2 billion expected, according to a Refinitiv consensus estimate.

While Forrest Li, Sea’s chairman and group CEO, said the company has “achieved self-sufficiency” and is “now on firmer footing,” he said Sea will now “reaccelerate investments in growth.”

The stock plunged after Tuesday’s earnings report, ending the session 28% lower.

Just last year, Sea overhauled its business to focus on profitability amid high inflation and interest rates. At the same time, investors were pressuring tech firms to move toward profitability. Other regional tech giants like GoTo and Grab slashed costs by conducting mass layoffs and reducing customer incentives.

Sea’s top management gave up their salaries, while the company froze salaries for most employees and paid out lower bonuses. Local media reported the company laid off more than 7,000 employees in six months.

Defending your market share is the right strategy in e-commerce. You don’t want to give a foot in the door to the new player. That’s what we think Sea’s doing.

Sachin Mittal

Head of telecom, media and technology researh, DBS Bank

As a result, Sea posted positive net income for the first time in the fourth quarter of 2022 and that figure has remained in the black since. Before that, Sea was largely unprofitable, amassing billions of dollars in losses since its inception.

“The good news for them is that they have built up sort of a buffer to increase some of its spending, with all of its segments now profitable,” said Woo.

Boosting e-commerce

In particular, Li said the company has “started, and will continue, to ramp up our investments in growing the e-commerce business across our markets.” JPMorgan said those investments could take the form of expensive shipping subsidies and discount vouchers.

“Given the weakening macro environment and increasing competition from Lazada and TikTok Shop, Sea probably did not have much of a choice but to start spending to at least maintain its market share in the region,” said Jonathan Woo, senior research analyst at Phillip Securities Research.

Sea’s decision to accelerate ecommerce investments in growth is likely to materially weigh on its earnings and share price in the near-term.

JPMorgan

Head of telecom, media and technology research, DBS Bank

Shopee remains the market leader in the region, with a gross merchandise volume of $47.9 billion in 2022, according to a report from Momentum Works. Lazada’s GMV came in at $20.1 billion in the same year.

“In our view, the pivot could be driven by competition along with Sea positioning itself for an increase in consumer spend, and to grow live-streaming and in-house logistics,” said JPMorgan analysts.

Right strategy?

But Sea’s decision to ramp up investments is likely to impact earnings, said JPMorgan. The bank downgraded Sea’s rating from “overweight” to “neutral” with a price target of $40.50, representing 2.56% upside from the stock’s Thursday close of $39.49.

“Sea’s decision to accelerate ecommerce investments in growth is likely to materially weigh on its earnings and share price in the near-term,” said JPMorgan.

“Sea could potentially incur heavy investments in second half of 2023 (a busy campaign period) resulting in earnings decline in second half.”

Sachin Mittal, head of telecom, media and technology research at DBS Bank, is bullish on Sea. The firm has a price target of $90 for Sea, representing roughly 160.9% upside.

“Defending your market share is the right strategy in e-commerce. You don’t want to give a foot in the door to the new player. That’s what we think Sea’s doing,” said Mittal.

But TikTok Shop is “not such a large threat” to Shopee, he said.

“TikTok doesn’t have in-house logistics. They use third-party players to provide e-commerce packages,” Mittal said on CNBC’s “Squawk Box Asia” on Wednesday. Unlike TikTok Shop, Shopee and Lazada have their own logistics networks of warehouses and fulfilment centers around the world.

“This is one of the ways to compete with TikTok. TikTok is still very small. It’s not such a large threat,” said Mittal. TikTok Shop’s current GMV is only a fraction of Shopee and Lazada’s.

— CNBC’s Michael Bloom contributed to this report.

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August 18, 2023

What China’s big earnings say about the consumer

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Tencent sign is seen at the World Artificial Intelligence Conference (WAIC) in Shanghai, China July 6, 2023.

Aly Song | Reuters

BEIJING — Corporate earnings releases are picking up on a few bright spots for China’s consumer in a competitive market where people are less willing to open their wallets.

JD.com, Tencent and Alibaba this month reported results for the three months ended June that pointed to a steady pick-up in consumer spending that quarter, but with less clarity on whether that growth has continued.

Here’s where companies said they saw consumer-related growth, according to public disclosures and FactSet transcripts of earnings calls:

JD.com

Electronics and home appliance revenues rose by 11.3% to 152.13 billion yuan ($20.98 billion) in the three months ended June.

But general merchandise revenue fell by 8.6% from a year ago to 81.72 billion yuan.

Marketing revenue rose by 8.5% to 22.51 billion yuan.

Tencent

Livestreaming e-commerce saw 150% year-on-year growth in gross merchandise value in the second quarter to an unspecified number. GMV measures total sales value over a certain period of time.

On an annualized basis, that livestreaming GMV “is in the tens of billions” yuan.

WeChat Mini program e-commerce has GMV “in the trillions” of yuan on an annualized basis. GMV for physical products has exceeded 1 trillion yuan on an annualized basis.

Advertising revenue across all categories — except automotive — is up double-digits from a year ago in recent weeks. Ad sales rose by 34% to 25 billion yuan in the quarter ended June.

Overall, Tencent reported earnings for the quarter that missed expectations, but showed a third-straight quarter of revenue growth.

Alibaba

Direct China commerce sales, primarily from Tmall Supermarket and Tmall Global, grew by 21% year-on-year to 30.17 billion yuan.

The overall Taobao and Tmall Group saw revenue grow by 12% to 114.95 billion yuan.

A recovery in offline shows and the movie theater box office boosted Alibaba’s ticketing and movie studio units. Video platform Youku also saw subscription revenue rise. In all, digital media and entertainment revenue surged by 36% year-on-year to 5.38 billion yuan — and its first profitable quarter.

Local services revenue rose by 30% to 14.5 billion yuan. That was driven by orders on food delivery app Ele.me and growth in Alibaba’s map app Amap, which sells services such as ride-hailing and hotel booking.

Alibaba management did not provide much detail on the state of the consumer since the end of June.

Overall, Alibaba’s earnings soundly beat expectations for the quarter.

China consumption amid sluggish growth

Data for July have pointed to a slowdown in China’s economy, including a modest 2.5% year-on-year increase in retail sales.

Theme parks, however, have done well as tourism has picked up domestically.

Shanghai Disney saw record high revenue, operating income and margin during the latest quarter, the company said.

Adidas

Revenues in Greater China grew 16% in the second quarter, reflecting double-digit sell-out growth in both wholesale and its own retail outlets.

Anta

The Chinese sportswear company said its Anta brand retail sales value rose by high single digits in the second quarter from a year ago. Its Fila brand saw high teens growth year-over-year. The company’s Descente, Kolon Sport and other brands saw growth of 70% to 75% year-on-year.

Apple

Apple CEO Tim Cook said the iPhone maker saw “an acceleration‘’ in China, with 8% year-on-year quarterly sales growth to $15.76 billion. That’s a reversal of a 3% year-on-year drop in the prior quarter.

The company said it saw “a June quarter record in Greater China” in the wearables, home and accessories category, as overall product group saw sales increase by 2% year-on-year to $8.3 billion.

Li Ning

Starbucks

China comparable store sales increased 46%, but the average ticket size was slightly smaller, down 1%.

— CNBC’s Arjun Kharpal contributed to this report.

Disclosure: Comcast is the owner of NBCUniversal, parent company of CNBC.

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August 17, 2023

Stocks making the biggest moves midday: SolarEdge Technologies, Humana, Starbucks, Robinhood and more

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A Solarpro employee installs a SolarEdge Technologies Inc. inverter at a residential property in Sydney, May 17, 2021.

Brendon Thorne | Bloomberg | Getty Images

Check out the companies making the biggest moves midday:

SolarEdge Technologies — The solar stock tumbled about 19% after the company reported $991 million in revenue, missing analysts’ estimates of $992 million, according to Refinitiv. SolarEdge also issued disappointing third-quarter revenue guidance.

CVS Health — The retail pharmacy stock gained 4% during midday trading Wednesday after the company posted strong earnings and revenue for the second quarter. CVS reported earnings of $2.21 per share on revenue of $88.9 billion, while Wall Street analysts expected $2.11 per share on earnings of $86.5 billion, according to Refinitiv.

Norwegian Cruise Line — The cruise stock sank 3.2%, a day after reporting weaker-than-expected guidance for the third quarter. Its second-quarter earnings, however, topped analysts’ estimates. Shares were also downgraded by Susquehanna to neutral from positive. The Wall Street firm said Norwegian’s return to pre-pandemic EBITDA margin will take some time.

Emerson Electric — Shares rallied 4% following Emerson Electric’s earnings and revenue beat for its fiscal third quarter. The company reported adjusted earnings per share of $1.29, topping the $1.10 expected from analysts polled by StreetAccount. Revenue was $3.95 billion, compared to the $3.88 billion expected by Wall Street.

Pinterest — The social media platform slid 4.9% despite beating expectations on revenue for the second quarter. Pinterest posted $708 million against FactSet’s $696.4 consensus estimate. Pintrest’s third-quarter revenue growth forecast, however, missed expectations.

Starbucks — Shares added 2.6% following the coffee giant’s earnings report was released. Starbucks adjusted earnings per share for the fiscal third quarter was $1, versus the 95 cents expected by analysts, per Refinitiv. However, revenue fell short at $9.17 billion compared to the $9.39 billion expected.

Advanced Micro Devices — The chipmaker’s shares declined 7.4% in reaction to its second-quarter earnings release on Tuesday after the bell. While the company posted better-than-expected earnings in the prior quarter, its forecast for the third quarter was weaker than analyst estimates amid a weak PC market. Several Wall Street firms, including Bank of America and JPMorgan, said that the company may be nearing the peak of its rally.

Humana — Shares popped 6% after the health insurer reported second-quarter adjusted earnings per share of $8.94, topping the $8.76 per share anticipated by analysts, per StreetAccount. Humana forecasted its Medicare Advantage business will grow by about 825,000 members in 2023.

Generac — Shares dropped nearly 24% after the company posted a second-quarter earnings miss. Adjusted earnings per share came in at $1.08, versus StreetAccount’s estimate of $1.16. The company also lowered its forecast for residential product sales in the second half, citing a softer-than-expected consumer environment.

Scotts Miracle-Gro — The stock sank 18% after the maker of consumer lawn, garden and pest control products reported an earnings and revenue miss for its third quarter. Scotts also forecast a bigger-than-expected revenue decline for the fiscal 2023 year.

Freshworks — Shares popped nearly 19% after the software-as-a-service company beat expectations for both earnings and revenue. Canaccord Genuity upgraded the stock to buy from hold and hiked its price target to$25 from $15, suggesting 37% upside from Tuesday’s close.

Robinhood — The retail brokerage’s stock shed more than 4% ahead of the company’s quarterly results, due after the bell. Analysts are expecting a quarterly loss of 1 cent, according to StreetAccount.

Paycom Software — Shares tumbled 18.6% despite the payroll provider’s earnings and revenue beat after the bell Tuesday. However, the company’s revenue guidance for the third quarter was $410 million to $412 million, compared to the $412 million expected from analysts polled by StreetAccount.

Chinese tech stocks — Shares of Chinese technology stocks dropped after regulators in China proposed limits on smartphone use for minors. U.S.-listed shares of JD.com, Baidu, Alibaba and Tencent Music were all down roughly 5%.

— CNBC’s Hakyung Kim, Pia Singh and Alex Harring contributed reporting.

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August 2, 2023

Chinese stocks pop as Beijing vows more measures to boost weak economy

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A Nanjing Road pedestrian street on October 1, 2022 in Shanghai, China.

Yan Daming | Visual China Group | Getty Images

Chinese stocks soared Tuesday as Beijing pledged to ramp up measures to bolster China’s sputtering economy.

Hong Kong’s Hang Seng Index surged more than 3%, China’s tech-heavy ChiNext rose 1.8% and the Shanghai Composite Index increased 1.81% on Tuesday morning in Asia.

Chinese property developers Country Garden and Longfor soared 14.3% and 20.7% respectively. Sunac rose 12.5%, China Vanke was up 11.02% and China Overseas Land and Investment grew 11.39%.

A day earlier, Chinese real estate stocks tumbled on renewed debt fears. The Chinese government cracked down on the property sector’s debt levels in August 2020.

The stock rebound comes after China’s top leaders pledged on Monday to ramp up policy support to boost domestic consumption as the post Covid rebound has been slower than expected.

According to official data, China’s gross domestic product in the second quarter increased 6.3% from a year ago, performing worse than the 7.3% economists predicted. This was a 0.8% growth from the first quarter, and was slower than the 2.2% quarter-on-quarter pace recorded in the January to March period.

China’s top leaders met Monday for the much-anticipated Politburo meeting and hinted at moves to “adjust and optimize” property policy in what the leadership called a “torturous” economic recovery.

State news agency Xinhua quoted the 24-member Politburo as saying “the economy is facing new difficulties and challenges.” That’s mainly due to weak domestic demand, operational challenges for companies as well as “a grim and complex external environment,” it said.

“The meeting emphasized that it is necessary to actively expand domestic demand, give full play to the basic role of consumption in driving economic growth, expand consumption by increasing residents’ income,” according to Xinhua.

How China is using automation to reshape its economy

“It is necessary to boost the consumption of automobiles, electronic products, and home furnishing, and promote the consumption of services such as sports, leisure, and cultural tourism,” said the report.

Hong Kong-listed shares of internet giants rose on Tuesday. Alibaba shares soared 4.7%, while Tencent was up nearly 4%. Meituan and Baidu shares were higher by 5.7% and 6.8% respectively.

In the electric vehicle space, Xpeng soared 11%, Li Auto was up 4.15% and BYD rose 2%.

China has announced a slew of measures to bolster its economy. Here’s what we know so far

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China has announced in the past week a series of measures aimed at boosting its economy ahead of a key Politburo meeting later this week focused on reviewing the first half performance of the world’s second-largest economy.

Str | Afp | Getty Images

China is ramping up measures aimed at boosting its economy ahead of a key Politburo meeting this week which will review the country’s first half economic performance.

In the past week, authorities have announced a series of pledges targeted at specific sectors or aimed at reassuring private and foreign investors of a more favorable investment environment — but they were largely broad measures, with some lacking concrete details.

Chinese leaders have also signaled in recent weeks they are likely to be judicious and targeted in their policy support.

Here are some of the key measures released by the Chinese government in recent weeks.

Private businesses

On Monday, China’s economic planning agency announced a series of measures to promote private investment.

This follows a rare joint pledge on Wednesday, between the Chinese government and the Communist Party, which vowed to treat private companies the same as state-owned enterprises. Beijing also pledged to ensure fair treatment in areas ranging from intellectual property and land rights to financing and labor supply.

In a 17-point statement Monday, the National Development and Reform Commission pledged to attract more private capital to participate in the construction of major national projects and key industrial chain supply chain projects.

After making life more difficult for many private firms in recent years, China’s leadership is shifting course and has made high-level pledges to improve the business environment.

Julian Evans-Pritchard

Capital Economics

The NDRC said it will support private investment in sectors — such as transportation, water conservancy, clean energy, new infrastructure, advanced manufacturing and modern agriculture facilities.

The agency is also encouraging private investment projects to issue real estate investment trusts (REITS) in the infrastructure sector to promote asset diversification and further broaden investment and financing channels for private investment.

The People’s Bank of China and the State Administration of Foreign Exchange last Thursday adjusted their cross-broader financing guidelines to allow companies to borrow more from foreign sources.

Business sentiment has generally soured amid lackluster economic growth after China’s initial recovery following its exit from “zero Covid” faltered.

The last three years have also seen heavy-handed crackdowns on internet platform companies including ecommerce giant Alibaba; the education and gaming sectors as well as real estate developers.

“After making life more difficult for many private firms in recent years, China’s leadership is shifting course and has made high-level pledges to improve the business environment,” Julian Evans-Pritchard, head of China Economics at Capital Economics, wrote in a Friday note.

“But although parts of the service sector would benefit from a more supportive official stance, much of the current caution among private firms reflects wider economic headwinds against which regulatory tweaks are of limited use,” he added.

Consumption

Former Morgan Stanley Asia Chairman on China's deflationary worries

Last Monday, official data showed China’s GDP for the second quarter grew 6.3% from a year ago, missing market expectations for 7.3%. It marked a 0.8% growth compared to the first quarter, and was slower than the 2.2% quarter-on-quarter pace recorded in the January to March period.

Even with a low base from last year, given the Covid lockdown in Shanghai at that time, retail sales growth slowed significantly to 3.1% in June from a year before, compared to 12.7% in May.

Household goods

Last week, within hours of the NDRC statement, China’s Commerce Ministry followed with an joint announcement with a dozen other government departments, announcing an 11-point plan to boost the domestic consumption of household consumer goods and services.

This included a directive to local governments to step up the renovation of old homes, a pledge to encourage improvements to online commercial platforms, and developing the concept of “15-minute cities.”

Cars and electronics

During a special press conference on Friday, the NDRC released a 10-point plan to increase car ownership, particularly for “new-energy” vehicles.

This will include improving the capacity of rural power grids, reducing the costs associated with purchasing and charging electric vehicles.

In June, Beijing extended tax breaks for the purchases of electric vehicles.

These 5 stocks are on Goldman’s ‘conviction buy’ list — and it gives one more than 50% upside

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July 23, 2023

These funds were the best performing in the first half — and here are their favorite stocks

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July 5, 2023

SoftBank to shift from ‘defense mode’ to ‘offense mode,’ says CEO Masayoshi Son

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Masayoshi Son, chairman and chief executive officer of SoftBank Group Corp.

Kiyoshi Ota | Bloomberg | Getty Images

SoftBank Group chairman and CEO Masayoshi Son on Wednesday said that the Japanese investment firm plans to shift from “defense mode” to “offense mode” and wants to capitalize on the AI revolution.

“Now, the time has come to shift to offense mode,” Son said during a shareholders’ annual general meeting.

“In the past few years, we focused on being [on] ‘defense.’ Three years ago, we didn’t have a lot of cash on hand. But because we have been in defense mode, we have built our cash on hand to five trillion yen ($35.3 billion),” Son said.

“We are ready to shift to offense mode. I am excited about that,” said Son.

The tech conglomerate, which engages in venture capital investing through its Vision Fund, has had its fair share of ups and downs. It was in “defense mode” as it halted new investments and trimmed its stake in Alibaba. In May, the Vision Fund reported a record $32 billion loss.

“What I am interested in most, what I am working on most, is the AI revolution. I believe that mankind is going to be exceeded by computer or AI,” said Son.

“We would like to be [in] the leading position for the AI revolution,” said Son.

SoftBank shares rose 2.63% in Wednesday morning trade.

Alibaba announces Eddie Wu to succeed Daniel Zhang as CEO in surprise move

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The logo of the Alibaba office building is seen in downtown Huangpu District in Shanghai, China, June 16, 2023.

Costfoto | Nurphoto | Getty Images

Eddie Wu will succeed Daniel Zhang as chief executive of Alibaba Group, while Joe Tsai will take Zhang’s place as the group’s chairman, China’s largest e-commerce company announced Tuesday.

Wu is one of Alibaba’s co-founders and currently chairman of Taobao and Tmall Group. Brooklyn Nets owner Tsai is currently Alibaba’s executive vice chairman.

Zhang will continue to lead the Alibaba Cloud Intelligence Group as chairman and chief executive after this change, which the company said will take effect Sept. 10.

This surprise succession announcement comes after Alibaba said in March it will split its company into six business groups. The company explained at that time that this will allow each business group to raise outside funding and go public in the most significant reorganization in the Chinese e-commerce giant’s history.

Wu has held a multitude of roles in his time at the company, including heading technology at Alibaba’s inception, as well as chief technology officer at Alipay and Taobao. He was also director of Alibaba Health Information Technology and founded Vision Plus Capital, a venture capital firm focused on investing in advanced technologies, enterprise services and digital healthcare.

This is breaking news. Please check back for updates.

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June 19, 2023

Tag: Alibaba Group Holding Ltd.

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