Alibaba Beats! (Along With NetEase & Vipshop)

Alibaba Q4 Earnings Overview

Alibaba beat analyst expectations in its financial results, reported this morning, despite challenges from reopening and resulting infections and consumer hesitancy. As zero COVID went across China, it led to severe disruptions in delivery as delivery people called in sick, for instance. Key in the call were comments from CEO Daniel Zhang, who stated that consumer and business confidence is rising. The International Monetary Fund (IMF) raised China’s GDP forecast to 5.2% based on lifted COVID restrictions. Zhang will take the lead on Alibaba’s cloud computing unit, which had moderate growth though it was highlighted as a growth driver for the company. It is important for the company that China’s consumers are coming back online, as management stated that they expect continued consumer sentiment and economic activity recovery. Net cash increased +9% while free cash flow increased +15% year-over-year.

• Revenue increased +2% to RMB 247B ($35.92B) versus analyst expectations of RMB 245B ($35.53B)
• Adjusted Net Income RMB 50.3B ($7.29B) versus analyst expectations RMB 44.4B ($6.44B)
• Adjusted EPS RMB 19.26 ($2.79) versus analyst expectations RMB 15.99 ($2.32)
• Bought 45.4mm ADRs in the Quarter costing $3.3B

NetEase Q4 Earnings Overview

• Revenue RMB 25.4B ($3.68B) versus analyst expectations RMB 25B ($3.63B)
• Adjusted Net Income RMB 22.8B ($3.31B) versus analyst expectations RMB 5.2B ($750M)
• Adjusted EPS RMB 34.60 ($5.02) versus analyst expectations RMB 7.95 ($1.15)

Vipshop Q4 Earnings Overview

• Revenue RMB 31.76B ($4.61B) versus analyst expectations RMB 31.4B ($4.55B)
• Adjusted Net Income RMB 2.2B ($320M) versus analyst expectations RMB 1.99B ($290M)
• Adjusted EPS RMB 3.65 ($0.53) versus analyst expectations RMB 3.27 ($0.47)
• Q1 Revenue Forecast RMB 25.2B ($3.65B) to 26.5B ($3.84B)

Key News

Asian equities were mixed as Taiwan, South Korea, and Indonesia gained, while Japan and Singapore were off more than 1%. Japan was closed for the Emperor’s birthday.

The Asia dollar index managed a slight James Bond gain of +0.07% versus the US dollar, which is only the 4^th positive day out of the last 14 days. China’s CNH was off slightly versus the US dollar. It is worth pointing out that US-listed Chinese stocks managed a small gain yesterday amid a host of negative headlines from Western media. The funny thing about the “news” is its subjective nature: regulators “may” ask Chinese firms with sensitive information not to use US accounting firms, China’s government shouldn’t give military aid to Russia in the future, President Xi “may” visit Russia, etc. And yet stocks went up the wall of worry! A promising sign, right?

Baidu’s US shares were down -2.63% after great results that beat analyst expectations, though we may have had a “buy the rumor, sell the news” situation. Meanwhile, regulatory oversight of ChatGPT’s AI chat bot in China could be a potential factor. JP Morgan is reported to have restricted staff use of the bot.

Hong Kong’s most heavily traded stocks by value were Tencent, which was flat, Alibaba, which gained +2.37% in advance of today’s financial results, Techtronic Industries, which fell -18.97% on a short sale research report distributed by a firm I’ve never heard of, Meituan, which fell -0.64%, JD.com, which gained +1.79%, and Baidu, which fell -0.5% as local investors were far less pessimistic than US investors. Mainland China was off on little news and light volumes. The Shanghai Composite’s decline of -0.11% cannot quite punch through the 3,300 level, which is a resistance level, closing at 3,287. Shenzhen Component fell -0.24% as ChatGPT regulation took the steam out of related names. Gree Electronic Appliances gained +2.63% and Midea gained +1.12% on a broker upgrade from reopening. NetEase and Vipshop also reported this morning with strong results as well.

Have you seen any comparisons between Taiwan and Cuba? Me neither. From a geographic perspective, there are some striking similarities. The Wall Street Journal is reporting that the US will increase troops on the island.

The Hang Seng and Hang Seng Tech indexes diverged to close -0.35% and +1.18%, respectively, on volume that declined -10.42% from yesterday, which is 82% of the 1-year average. 217 stocks advanced, while 249 stocks declined. Main Board short turnover declined -26.13% from yesterday, which is 64% of the 1-year average, as 14% of turnover was short turnover. Growth factors outperformed value factors as small caps outpaced large caps. The top-performing sectors were consumer discretionary, which gained +1.26%, technology, which gained +0.76%, and healthcare, which gained +0.4%. Meanwhile, real estate fell -1.03% and industrials fell -0.36%. The top-performing subsectors were food/staples, healthcare equipment, and retail, while consumer durables, insurance, and telecom were the worst. Southbound Stock Connect volumes were very light as Mainland investors bought $106mm of Hong Kong stocks, with Kuaishou a small net sell, and Meituan and Tencent were small net buys.

Shanghai, Shenzhen, and STAR Board diverged to close -0.11%, -0.24%, and +0.28%, respectively, on volume that increased +3.1% from yesterday, which is 89% of the 1-year average. 1,777 stocks advanced, while 2,805 stocks declined. Growth and value factors were mixed as large caps outpaced small caps. The top sectors were industrials +0.27%, discretionary +0.21%, and energy +0.19%, while communication -1.22%, staples -0.82%, and healthcare -0.64%. The top sub-sectors were power generation equipment, household appliances, and diversified financials, while software, computer hardware, and telecom. Northbound Stock Connect volumes were light/moderate as foreign investors sold -$311mm of Mainland stocks. CNY was down a negative James Bond -0.07% versus the US dollar to 6.89, Treasury bonds sold off, copper off, and steel up.

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Last Night’s Performance

Last Night’s Exchange Rates, Prices, & Yields

• CNY per USD 6.90 versus 6.90 yesterday
• CNY per EUR 7.32 versus 7.33 yesterday
• Yield on 10-Year Government Bond 2.92% versus 2.92% yesterday
• Yield on 10-Year China Development Bank Bond 3.10% versus 3.09% yesterday
• Copper Price -0.37% overnight
• Steel Price +0.38% overnight