Alibaba sales outperform expectations, causing Chinese technology stocks to rise

Despite an economic slowdown caused by Beijing's Covid-19 lockdowns, Chinese technology shares rose after solid earnings from online companies, including better-than-expected sales at e-commerce major Alibaba.

Despite a faltering economy, the Hangzhou-based company's sales and earnings results for the first quarter exceeded experts' expectations, and it outperformed local rivals such as Tencent. In the first three months of the year, revenue increased by 9% to 204 billion yuan (£24 billion).

Alibaba's Hong Kong-listed shares jumped over 12%, a day after its New York-listed shares rose more than 14% to close at $92.48.

Its strong performance restored confidence in the industry, which has been rocked by regulatory crackdowns in recent months. The Hang Seng Tech index comprising Hong Kong's 30 largest technology companies increased by 3.6 percent, while the wider Hang Seng index increased by 2.8 percent.

Baidu, a Chinese search engine company, saw its stock soar nearly 15% in Hong Kong after it announced a 1% increase in sales, boosted by its cloud and artificial intelligence businesses. JD.com, China's largest online retailer, saw its stock rise more than 5% after reporting an 18% increase in quarterly revenue.

Alibaba, on the other hand, warned of the impact of Beijing's zero-Covid policy on its business and declined to provide a projection for the current year due to coronavirus concerns.

According to the report, the restrictions hampered merchants' capacity to ship items and caused consumers to prioritise buying needs.

"As Alibaba's massive scale mirrors the overall macro economy, we believe it will be the primary beneficiary of a potential favourable policy rollout in terms of lockdown measures and consumption stimulus," Daiwa Capital analysts said.

Beijing proposed measures to support the economy this week, following two months of Covid lockdowns that stifled consumer spending.

Following significant gains on Wall Street, most Asian stock markets ended the week higher. The CSI 300 index of Shanghai and Shenzhen-listed stocks in China gained 0.2 percent, while the Australian market rose more than 1%.

"The wave of cautious optimism seeped through to the Asian markets and were reinforced as revenue growth from Alibaba beat expectations, supporting tech shares," said Richard Hunter, head of markets at interactive investor. Furthermore, the reported easing of tensions between China and the United States, as well as the prospect of greater stimulus from the former to help the local economy, bolstered the good developments."

Following a series of warnings from Chinese policymakers about the economy's health, the technology sector's robust performance comes as a welcome surprise. Li Keqiang, China's premier, claimed this week that the situation is "to some degree worse" than it was when the coronavirus pandemic began in 2020.