HSBC upgrades China e-commerce stocks as consumers stay home

Volume growth of three giant sites expected to outpace the industry average after Alibaba posted volume growth of 32%, PDD 110% and JD.com a 30% jump

by Umesh Desai
HSBC upgrades China e-commerce stocks as consumers stay home
An employee of Cainiao Network, a Chinese logistics company launched by Alibaba Group, sorts out deliveries at a logistic unit in Jinan city, east China's Shandong province, on 13 May 2020. Business is booming. Wang Feng/ Imaginechina, AFP.

(ATF) HSBC has raised the target price for shares of internet giants Alibaba, PDD and JD.com after they registered strong gross merchandise value during the June shopping festival.

An equity research report from the bank said parcel volumes had surged 49% during the festival from a year ago and it expects online retail volumes to rise 27% in the second quarter.

Volume growth at the three companies would outpace the industry average with Alibaba to post a rise of 32%, PDD 110% and JD.com a 30% jump.

Analysts Binnie Wong and Cleo Zhang raised the target price of Alibaba to US$268 from $256, and that of JD.com from $60 to $65, and on PDD from $75 to $82.

China's active and sophisticated e-commerce market will help offset some of the negative impact on retail sales, rating agency S&P Global said earlier this year, while adding that offline retailers are more vulnerable.

“China already has one of the most digitised retail markets in the world. This episode (coronavirus pandemic) should support a further transition to an e-commerce retail economy,” S&P Global said in a report.

“Online retailers will continue to gain market share, in our view, as traditional stores lose footfall amid contagion fears and travel restrictions.”

China’s e-commerce market is the largest in the world with a volume of $1.9 trillion and the online retail market is larger than the next 10 markets combined, according to consultancy McKinsey & Co.

It is three times the size of the US e-commerce market.

The global e-commerce market size is expected to rise to $8.6 trillion by 2027 from $4.25 trillion in 2019 at a Compound Annual Growth Rate of 9.4%.