Imagine living in America but not being allowed to buy stock in American companies like Amazon because they are listed overseas. This premise may sound farfetched, but for Mainland Chinese investors, it was a reality for over a decade when they wanted to buy Alibaba’s stock. Alibaba and many other China internet companies historically chose to list on overseas exchanges, first in New York and then in Hong Kong, to avoid tighter regulatory hurdles and foreign ownership limits back home. These overseas listings have made China internet stocks virtually inaccessible to their core user demographic until now.

On September 10th, 2024, Alibaba’s Hong Kong-listed shares became available for trading in Southbound Stock Connect, a mutual market access program between the Mainland exchanges (Shanghai and Shenzhen) and the Hong Kong Stock Exchange.

In this edition’s theme highlight, we discuss the implications of the inclusion of Alibaba’s shares in Southbound Stock Connect and the potential for other KWEB holdings to follow suit.

China Internet Recent Highlights:

• China instituted a 15% consumer subsidy for 8 types of home appliances and nearly doubled the existing consumer subsidies for both electric and gas-powered vehicles following the Third Plenum in July.¹ This represents a much-needed consumption push that could significantly benefit China’s leading E-Commerce platforms, especially JD.com, due to its strength in appliances and online vehicle marketplace Autohome.
• Alibaba has added Tencent’s WeChat Pay as a payment method within its Taobao and Tmall E-Commerce platforms in China, which may help the platforms support more users and represents a welcome integration in China’s vast digital payments ecosystem.
• Baidu’s “Apollo Go” autonomous vehicle program switched to fully driverless operations in Wuhan, reducing costs by -50% year-over-year.²

China Internet Earnings Report Contents:

• China Internet Sector recent Highlights
• Subsector Analysis
• Theme Highlight – Mainland Buyers: A New Performance Driver for China Internet
• KWEB Top 10 Holdings Earnings Update

Citations:

1. Shunshuke, Tabeda. “China injects $41bn to subsidize car, appliance purchases,” Nikkei Asia. July 25, 2024.
2. Data from Baidu Apollo as of 7/31/2024.