Wall Street positive on China's e-commerce amid Alibaba enthusiasm

Updated: 2014-09-18 16:25


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Wall Street positive on China's e-commerce amid Alibaba enthusiasm
Jack Ma shows up in Singapore for Alibaba IPO roadshow
Wall Street positive on China's e-commerce amid Alibaba enthusiasm
After the IPO euphoria, what will Alibaba do to justify share price?
NEW YORK -- As China's e-commerce giant Alibaba Group poised to claim the crown as the biggest initial public offering in US history, concerns arise about what implications it may have on other China-based e-commerce companies in the US market.

Although some argued that investors could sell high-flying tech shares, especially other Chinese e-commerce stocks, to make room for Alibaba, many analysts expressed optimism about their growth potential in the long run.

Gain or pain?

With the massive deal approaching, Alibaba-related companies have been either reaping gains or feeling pain.

On the one hand, Alibaba's IPO has put some of its rival Chinese e-commerce stocks under selling pressure.

JD.com, Dangdang, Jumei International Holding and Vipshop Holdings, four of the relatively large China-based e-commerce firms listed in the United States, experienced remarkable declines in August, ranging roughly from 15 percent to 30 percent.

Amazon.com, Alibaba's major US competitor with a similar market valuation of some 160 billion dollars, has dropped over 6 percent since Alibaba first announced its estimated IPO price range on Sept 5. Meanwhile, eBay declined about 8 percent from its late August peak.

Alibaba's IPO could raise an initial 21.8 billion dollars at the top of its newly proposed price range of $66 to $68 per American depositary share (ADS).

According to some traders, such a big deal could force investors to reposition their portfolio by selling high-flying tech shares to make room for Alibaba.

It's "definitely a possibility" that Alibaba's IPO would siphon off volume from other e-commerce stocks, said Mark Otto, Partner/Designated Market Maker at J. Streicher & Co., in an interview with Xinhua.

"Most people will believe that it's all dependent on the valuation that the stock comes out at."

Ilya Grozovsky, senior equity analyst at SPQR Capital, said: "Obviously, with a fixed amount of money potentially investing in China as supply grows with the same demand, there could be reallocations of assets from Chinese stocks to Alibaba."

On the other hand, Alibaba's two largest shareholders Yahoo and SoftBank have seen their shares rally on Alibaba's IPO craze. Yahoo shares closed at an eight-year high of $42.88 per share last Friday, while SoftBank shares gained more than 12 percent last week.

China's microblogging website Weibo, in which Alibaba owns certain stakes, hit a new closing high since it went public on Nasdaq in April.

"Everyone is saying if you haven't been able to tap into the shares for the IPO of Alibaba, another way in going buy it is perhaps to purchase Yahoo," said Otto.

Limited effect on China e-commerce stocks

Although Alibaba's IPO could suck money out of other US-listed Chinese companies, analysts believe its potential impacts would be temporary and limited and are not likely to cause significant selloff of those companies.

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