Alibaba stock jumps after inclusion on China’s mainland stock exchanges

Alibaba (NYSE:BABA) shares have risen more than 2% premarket Tuesday as investors reacted to the news of its inclusion on China’s mainland stock exchanges.

Alibaba announced its inclusion in the Southbound (SB) Connect late on Monday.

It comes after the Chinese e-commerce company upgraded its listing in Hong Kong to primary status last month, paving the way for it to be added to China’s Shanghai and Shenzhen stock exchanges Stock Connect Scheme.

The scheme, which integrates BABA into a system linking the Shenzhen and Shanghai stock exchanges with the Hong Kong stock exchange, allows mainland Chinese investors to purchase Alibaba’s stock.

Reacting to the news, analysts at Morgan Stanley said it is in-line with their previous expectation on the SB inclusion timeline
(report).

“We estimate net inflows could be US$17-37bn for Alibaba from SB investors over a one-year period, assuming 8%-17% SB ownership,” said the investment bank. “We see incremental short-term positive catalysts on BABA recently, with a major regulatory overhang removed on completion of a 3-year antitrust rectification, Taobao/Tmall to fully integrate Tenpay and the roll out of software service fees in Sep.”

The bank adds that this will “potentially narrow the CMR and GMV growth gap into 2H24.”

Even so, they believe the major market focus still remains on potential intensified industry competition by PDD following the second-quarter results and weak consumption.

Morgan Stanley is monitoring the upcoming CMR growth trend as a potential near-term catalyst. The investment bank maintained an Equal Weight rating and a $90 per share price target on the stock.