Tag Archives: Alibaba

Alibaba Founder Jack Ma, China’s Richest Man, Is Now Officially a Member of Its Communist Party
November 27, 2018 12:01 pm|Comments (0)

Jack Ma, co-founder of China’s most valuable company, was officially confirmed as a member of the Communist Party in a state-backed newspaper recognizing business leaders for their contributions to the country’s development.

Ma, co-founder and chairman of e-commerce giant Alibaba Group Holding Ltd., is one of 100 people the Communist Party of China’s Central Committee will honor as part of a celebration marking 40 years since the country’s economic reform and opening up. The honorees also include Tencent Holdings Ltd. Chief Executive Officer Pony Ma, Baidu Inc. CEO Robin Li, basketball star Yao Ming and volleyball coach Lang Ping.

The lines between business and politics have become increasingly hazy in China as President Xi Jinping has led a campaign to ensure the Communist Party plays a leading role across all aspects of society. That has at time created tensions when the interests of private business people and the state have conflicted.

“We’re seeing an increasingly close relationship between China’s leading internet companies and government because government sees them as one of the most effective ways to realize its policy initiatives,” said Mark Natkin managing director of Beijing-based Marbridge Consulting. “Being a party member is essentially tipping your hat to the legitimacy of the party and it doesn’t necessarily denote any particularly high level of political activity.”

Under the leadership of Deng Xiaoping, China began launching economic reforms in 1978 that moved away from traditional Communist doctrine and allowed for private enterprise. That eventually led to robust growth that turned the country into the world’s second-largest economy, behind the U.S.

The list of 100 people to be recognized on the 40th anniversary is being made public for review until Nov. 30, according to the People’s Daily newspaper. Beyond business leaders and sports stars, the list includes scientists, astronauts and artists.

Ma is the richest man in China with a net worth of $ 38.4 billion, according to the Bloomberg Billionaires Index. Ma said in September he plans to hand the executive chairman role to CEO Daniel Zhang next year.

Alibaba, which dominates e-commerce in China and has expanded into a wide range of additional businesses, went public in 2014 in the largest-ever initial public offering in New York. At the time, Ma said that investors would be the company’s third priority, after customers and employees. Despite a slide in its stock price this year, Alibaba is valued at more than $ 400 billion and ranks among the top 10 most valuable companies in the world.

Ma has been a vocal backer of President Xi’s policies in the past few years. In 2016, he proposed that the nation’s top security bureau use big data to prevent crime, endorsing China’s effort to build unparalleled online surveillance of its billion-plus people.

After Xi last year indicated that tackling inequality was becoming as important as boosting economic growth, Ma was one of the first to respond. He told a state publication that entrepreneurs who’ve obtained affluence have a responsibility to help others catch up.

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China media group CMC raises $1.5 billion from Alibaba, Tencent
July 3, 2018 6:30 am|Comments (0)

SHANGHAI (Reuters) – Chinese state-backed media group CMC Inc said on Tuesday that it had raised around 10 billion yuan ($ 1.49 billion) in a fund-raising round from investors including rival tech giants Alibaba Group Holding Ltd and Tencent Holdings Ltd.

FILE PHOTO – Li Ruigang, Founding Chairman, China Media Capital (CMC), People’s Republic of China, attends the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland, January 18, 2017. REUTERS/Ruben Sprich

CMC, formerly CMC Holdings which stretches from sports to amusement parks, said the A-round fundraising was led by the two tech firms along with new investors such as property developer China Vanke Co Ltd.

CMC, founded by media magnate Li Ruigang in 2015, added the firm was valued at around 400 billion yuan after the round.

Reporting by Adam Jourdan; Editing by Muralikumar Anantharaman

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Alibaba: The Battle Enters Decisive Point
May 27, 2018 6:09 pm|Comments (0)

Alibaba’s (BABA) Ant Financial plans to raise fresh funds at a valuation of $ 150 billion, but it faces a number of headwinds. Alibaba recently suffered a setback when Walmart (WMT) dropped Alipay from all its stores in Western China. This step could be followed by a nationwide rollout in which all the Walmart stores in China accept only Tencent’s Tenpay. Walmart has 443 stores in China which include 406 Supercenters, 18 Hypermarkets, and 19 Sam’s Clubs.

Both Walmart and Tencent have a big stake in JD.com (JD), which is Alibaba’s biggest competitor in China. As the Chinese retail ecosystem is being fought over by Alibaba and Tencent, both big and small retailers have had to choose between either of the two goliaths. Tencent has some major advantages in this market which it is using to increase its market share.

According to a recent disclosure, Ant Financial Services group’s wealth management business has Rmb 2.2 trillion or $ 385 billion of assets under management. It has 600 million users. This makes it the biggest customer wealth management platform in the world. There are other financial products which can be introduced by Alibaba to maximize the potential of its payments ecosystem. If Alibaba is able to retain its market share in this very important segment, we should see huge upside potential for the entire platform and the stock.

Tencent makes up for its late entry

Tencent was quite late in entering the payments market. Alibaba’s Alipay has been used since 2004. By early 2014, Alipay had a 70% market share in China’s online payment market. But this has changed significantly in the past few years. Recent estimates by Beijing-based consultancy iResearch show that Alipay has 53% market share where Tenpay is close on its heels with 40% share.

Source: WSJ

The stakes for both Alibaba and Tencent are quite high. China is seeing a rapid increase in transaction volume through mobile payment as customers move away from bank cards and other payment options.

Source: WSJ

This means that over the next three years, we will not only see a doubling of total transaction volume but also a much higher share of mobile payments within the overall pie. Both the companies have realized the importance of this segment and are going full throttle in their expansion initiatives. Alibaba is at a minor disadvantage in this battle because all its competitors are moving under Tencent’s banner. Hence, even though Alibaba has a greater market share and a good growth runway due to its rapidly growing retail operations, it still needs to compete against a growing list of retailers that have started using Tenpay.

Tencent also has other advantages besides the fact that it is the only company which can challenge Alibaba. As the urban market gets saturated by payment options, both Alibaba and Tencent have started moving into rural areas. In these areas, Tencent already has a big customer base due to its WeChat application. Most of the potential customers for Tenpay would have already used WeChat and hence using the payment platform is a mere extension of the core app. On the other hand, the use of Alibaba’s e-commerce platform is not as widespread in rural parts as it is in urban areas.

Launch of new financial products

The payments market is just the beginning for Alibaba and Tencent. As they get greater customer data, they will be able to gauge the creditworthiness of a customer and provide tailor-made financial products using data mining. This can extend from loans and insurance to more exotic products. All these segments have much higher margins and significant growth potential within China. It must be noted that most of the customers in China skipped the entire credit card growth phase and have now settled with Alipay and Tenpay.

Source: FT

Alibaba formed Yu’e Bao in 2013 to manage the leftover cash from spending on its e-commerce platform. By 2017, this money market fund had amassed $ 165.6 billion under management. This number is now closer to $ 385 billion according to recent disclosure by the company. The rapid growth of this fund shows the future potential of Alibaba’s financial division and the innovative financial products it can bring to the market. The future growth in these products will closely follow the market share of Alibaba and Tencent within the payments ecosystem. Hence, it has become extremely important for Alibaba to defend its turf and build a strong moat.

The payments battle is not limited to China but extends in almost every part of the world. For example, Alibaba has a huge stake in Paytm which is the biggest payments player in India. This company has seen rapid growth in the last 30 months. It is highly possible that Alibaba is able to gain a decent footprint in the payments ecosystem of developed markets over the next few years. In order to avoid regulatory pushbacks, Alibaba is more likely to invest in unicorns and promising startups in developed countries instead of growing its own platform. A similar approach in India has allowed Alibaba gain a strong foothold through investments in Paytm and online grocer Big Basket.

What to expect in the next few quarters?

Alibaba’s “New Retail” initiative was a response to the expansion of Tencent/JD within offline retail. Alibaba has already made some big-ticket investments in brick and mortar stores. These include $ 2.9 billion investment in Sun Art, $ 2.6 billion in InTime and $ 4.6 billion in electronics retailer Suning. In February, Alibaba made RMB 5.45 billion or $ 867 million investment in Easyhome Furnishing for 15 percent stake. This pace of investments should continue for the next few quarters. Some of these are defensive purchases which are made to prevent future acquisition by Tencent.

We should also see a negative impact on the margins as more incentives are given to customers to lure them. When Tencent announced its recent earnings it mentioned that the company would “aggressively” invest in video and payment, which may hurt margins. This warning was enough to send the stock sliding down by 4.6% even though the net profit beat estimates.

A similar trend is possible within Alibaba which can lead to lower margins, even if the revenue growth is high. Alibaba also needs to make bigger investments in digital segment because it does not have a core social app like Tencent which can retain customers within its ecosystem.

Investor Takeaway

Alibaba has a decent lead over Tencent in the payments market. Also, Alibaba’s market share in payments is closely following the market share of the company within e-commerce. The penetration level of financial products in China is still quite low compared to U.S. and Western Europe. Alibaba can use its ecosystem to attract customers to new financial products and also use its market leadership to build a better moat against rivals.

Although we could see some margin contraction in the next few quarters, the long-term growth story for Alibaba is intact. Alibaba is a good buy-and-hold option for investors with long-term horizon.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Why Alibaba Group Holding Ltd (NYSE:BABA) stock will rise 60% the next two years
July 27, 2017 2:55 pm|Comments (0)

As seen, Alibaba Group Holding Ltd (NYSE:BABA) has quickly grown its cloud computing paying customer base. When compared to the likes of …


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Alibaba earnings: Cloud revenue expected to double in biggest quarter of the year
January 23, 2017 8:55 pm|Comments (0)

… is expected to highlight the growth of Single’s Day and the success of new business lines, such as its cloud computing and data center businesses.


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Alibaba, Infocomm tap the power of cloud to support start-ups
August 31, 2016 6:40 am|Comments (0)

Alibaba Cloud, the cloud computing arm of Alibaba Group, and Infocomm Investments Pte Ltd (IIPL) have signed a Memorandum of Intent (MOI) to …

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Mondelez International (NASDAQ:MDLZ) & Alibaba Group Holding (NYSE:BABA) Stock's Buzzers
July 11, 2016 12:55 pm|Comments (0)

In addition, it offers cloud computing services, counting elastic computing, database, storage and content delivery network, large scale computing, …


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Alibaba And Softbank Join Hands To Offer Cloud Services
May 16, 2016 6:55 am|Comments (0)

The cloud based services from the new joint venture will leverage technologies of Alibaba Cloud, the cloud computing division of Alibaba Group.


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Jack Ma vs Jeff Bezos: Alibaba will struggle to catch Amazon
May 8, 2016 12:20 am|Comments (0)

With soaring revenues, international expansion plans and even a cloud computing division, Alibaba could still prove to be Amazon’s biggest …


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