Alibaba’s Split-Up Brings Back Cash Inflow Into China’s Bourses

• Alibaba Group Holding Limited’s (NYSE: BABA) recent restructuring has been pivotal in driving foreign investors toward China’s bourses.

• Exchange data shows net foreign buying of mainland-listed stocks daily since Alibaba shared its plans to split up and float its business units last week, Reuters reports.

• The stock gained 17% in the last half after losing over 16% last year.

• The inflow may reflect a shift in sentiment among foreign investors who have been notably absent while China’s markets and economy roared back to life after Beijing abruptly lifted its stringent zero-COVID policy in December.

• Chinese ETFs with exposure to Alibaba, like IShares MSCI China ETF (NASDAQ: MCHI), KraneShares Trust KraneShares CSI China Internet ETF (NYSE: KWEB), IShares China Large-Cap ETF (NYSE: FXI) and SPDR S&P China ETF (NYSE: GXC) gained 4%-5% YTD.

• Derrick Irwin, a portfolio manager at U.S. asset manager Allspring Global Investments, said the Alibaba breakup and founder Jack Ma’s return to China reflect the government’s effort to extend an olive branch to entrepreneurs. “This may reignite investment in the private sector,” he said.

• Rob Brewis, a portfolio manager at U.K.-based asset manager Aubrey Capital Management Ltd, said the firm had moved back into Chinese equities this year, mainly based on economic recovery hopes and cheap valuations.

• China has since late 2020 waged a crackdown on a broad range of industries, castigating tech companies for monopolistic behavior, among other issues, and levying hefty fines.

• Also, Premier Li Qiang assured foreign investors about China expanding market access and optimizing the business environment.

• Price Action: BABA shares traded higher by 1.75% at $100.11 on the last check Tuesday.

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