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On 13 November, Alibaba Group (NASDAQ: BABA) announced plans to sell shares on the Hong Kong market. Shares are set to start trading the week of 25 November, with the Chinese e-commerce giant aiming to raise US$15 billion through the offering.
Alibaba is the first company to apply for a secondary listing under Hong Kong’s new regulations. The company is already listed in the US, and this new listing will allow investors in Hong Kong, but more importantly China, to finally invest in one of China’s most profitable companies.
As things stand, Alibaba is poised to be a powerhouse stock for investors around the globe. Here are two reasons why I believe Alibaba’s stock is a good bet for Hong Kong and Chinese investors.
#1 Consumer spending in China sets Alibaba up for success
Alibaba going public on the Hong Kong market allows Mainland China investors, through the Hong Kong Stock Connect schemes, to access one of the most powerful e-commerce companies in the world. And this is a great thing, since Alibaba has had a phenomenal 2019 and still has room to grow.
The company just broke sales records on Single’s Day, the biggest shopping day in China, raking in over US$30 billion in gross value merchandise (GMV) in less than 24 hours. This marks a 26% increase over the prior year, far exceeding any numbers seen in the US.
This trend of Chinese consumer spending is set to continue. The disposable income of Chinese households tripled between 2010 and 2020. As a result, Alibaba is looking at more customers and more consumer spending.
An IPO in Hong Kong will only help it expand its market, effectively growing its brand.
#2 Hong Kong listing will help Alibaba grow its brand
Already a well-known, everyday site within China, Alibaba is becoming more famous internationally. Alibaba’s listing on the NASDAQ in 2014 helped with this, allowing investors in the US access to China’s massive e-commerce market.
But now, Alibaba has the chance to go on tour again, attracting even more investors from both Asian and international markets. The company announced that it would be kicking off a press tour to encourage investor interest.
And this brand recognition will also be helpful as the company seeks to break into foreign markets.
In July 2019, Alibaba launched a buissness-to-buisness (B2B) online marketplace in the US, aiming to compete with American e-commerce giant Amazon (NASDAQ: AMZN). The company’s multiple forays into international markets will help it capitalise on opportunities outside of China.
Alibaba launching in Hong Kong is nothing but good news for investors. The company’s phenomenal performance in 2019 is set to continue in the future with Chinese consumer spending on the rise and more consumers making daily purchases through their mobile devices.
Beyond that, the company is now going to have even more international exposure. Being listed on the Hong Kong market, will allow Mainland Chinese investors to invest in one of China’s most powerful companies. This will help grow the brand’s publicity as Alibaba moves forward and seeks to expand both abroad and within China.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Alex Perry doesn't own shares in any companies mentioned.