Investors positive at BABA, say that shutdowns will be beneficial

Signage at Alibaba Group Holdings Ltd.’s headquarters in Hangzhou, China, Wednesday, March 24, 2021.

Qilai Shen | Bloomberg | Getty pictures

Shutdowns in China could be a boon for companies like Alibaba, said Sam Le Cornu of Stonehorn Global Partners, who said his company was buying more shares in the Chinese technology giant.

“We are increasing our position in Alibaba,”[ads1]; Le Cornu, CEO and co-founder of the investment management firm, told CNBC’s “Street Signs Asia” on Thursday. “Based on valuations and earnings prospects, we see that it is a buying opportunity.”

As the pandemic extends into its third year, China continues to push hard in its strict zero-covid strategy, with lockdowns implemented in cities following the discovery of only a handful of infections. At the end of December, the large Chinese city of Xian was locked down despite a confirmed number of Covid cases that are much lower than what other cities abroad have reported.

Such situations could benefit e-commerce platforms such as Alibaba’s Taobao and Tmall, as consumers still need to buy goods but have limited access to brick-and-mortar stores, Le Cornu said.

‘Take what happened last time then there [were] lockdowns, when it first emerged in China – Tencent, Alibaba, JD, Pinduoduo did well, “he said.” You look at Alibaba and I think there is a great opportunity with these lockdowns. “

The investor also said he was “quite impressed” with how Alibaba navigates some of the macro headwinds.

In addition to concerns that a decline in consumer spending in China could affect sales for companies such as Alibaba, China’s domestic technology sector has also come under heavy pressure in the middle of a month-long regulatory investigation from Beijing.

Asia is lagging behind

The Asian markets, especially Hong Kong’s Hang Seng Index, had a “tough year” in 2021, the CEO pointed out.

The city’s benchmark index fell around 14% in 2021, and was the worst market in the Asia-Pacific.

“You have the price to order in this market at the 30-year lowest level or almost the lowest level of all time, and if you look at the composition of it, there are many … undervalued, oversold positions,” he explained. The price-to-book ratio compares a stock price with its book value, and is usually used to measure the value of a stock.

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The broader Asian region also appears to be “relatively undervalued” at a time when major US indices are reaching all-time highs.

As a result, there may be a rotation away from the developed markets to emerging markets, Le Cornu said, pointing out that it comes as China appears to be at the center of politics, while the Federal Reserve proposes the start of a tightening cycle. in the United States

US markets fell on Wednesday after the release of the Fed’s minutes of December, which showed that central bank officials were ready to aggressively reduce political aid. Sales continued in Asia and Europe on Thursday, with tech stocks and cryptocurrencies falling sharply.

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