A sign at the headquarters of Alibaba Group Holdings Co., Ltd. in Hangzhou, China, Wednesday, March 24, 2021.
Seven Gods | Bloomberg | Getty Images
Sam Le Cornu of Stonehorn Global Partners said that China’s blockade may benefit companies such as Alibaba. He said his company is buying more shares in the Chinese technology giant.
“We are increasing our position in Alibaba,” Le Cornu, CEO and co-founder of the investment management company, told CNBC’s “Asian Signpost” on Thursday. “Based on valuation and earnings prospects, we think this is a buying opportunity.”
As the pandemic enters its third year, China continues to pursue its strict zero Covid strategy, implementing lockdowns in cities after only a few cases of infection have been detected. In late December, although the number of confirmed Covid cases was much lower than the number reported in other overseas cities, Xi’an, China’s major city, was still under lockdown.
Le Cornu said that this situation may benefit e-commerce platforms such as Alibaba’s Taobao and Tmall, because consumers still need to buy goods but have limited access to physical stores.
“For example, what happened last time [were] The blockade, when it first originated in China-Tencent, Alibaba, JD.com, Pinduoduo all did a good job,” he said. “Look at Alibaba, I think these blockades are a good opportunity. “
The investor also stated that he was “impressed” with how Alibaba responded to some macro headwinds.
In addition to concerns that the slowdown in consumer spending in China may affect the sales of companies such as Alibaba, China’s domestic technology industry is also under heavy pressure during the months-long regulatory review in Beijing.
Asia lags behind
The CEO pointed out that the Asian market, especially the Hong Kong Hang Seng Index, will be a “difficult year” in 2021.
The city’s benchmark index fell by approximately 14% in 2021, making it the worst performing market in the Asia-Pacific region.
He explained: “The price-to-book ratio of this market is at a 30-year low or almost historical low. If you look at its composition, you will find a lot of…undervalued and oversold positions.” Price is compared with its book value and is usually used to measure the value of stocks.
As major U.S. stock indexes hit record highs, the broader Asian region also appears to be “relatively undervalued.”
Therefore, Le Cornu stated that there may be a shift from developed markets to emerging markets, noting that this is because China seems to be in the middle of policy easing, and the Fed hints that the start of the tightening cycle is in the United States.
After the release of the minutes of the Fed’s December meeting, the US market plummeted on Wednesday. The minutes showed that central bank officials were prepared to actively reduce policy assistance. Selling in Asia and Europe continued on Thursday, with technology stocks and cryptocurrencies falling sharply.
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