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Battle of the tech titans: Alibaba vs. Tencent share price

All the latest from the market rivalry on home soil between Chinese tech giants Alibaba and Tencent.

Source: Bloomberg

Chinese technology companies Alibaba Group Holding Limited (HKG: 9988) and Tencent Holdings Limited (HKG: 0700) are the two biggest Asian corporations today, by market capitalisation.

Alibaba currently has a market value of US$549 billion, while Tencent claims a share cap of US$422 billion.

The two are not only considered the most financially successful Asian companies, but also among the most innovative when it comes to product offerings and business practices.

Fear of cannibalisation?

Alibaba’s historic initial public offering (IPO) on the Hong Kong Exchanges and Clearing Limited last month raised over US$11 billion at a retail price of US$24 per share.

Although this is the biggest share sale in Hong Kong in a decade, it is less than half of the US$25 billion raised in its primary listing on the New York Stock Exchange (NYSE).

On the other hand is rival Tencent, who approached things in the reverse. The Shenzhen-based entity listed first in Hong Kong in 2004, before its music division’s (Tencent Music Entertainment Group) US$1.1 billion IPO on the NYSE late last year.

If there was any fear that the market competition would affect stock value in the short run, that has so far been allayed, at least based on the performance of each company’s share price.

It’s been three weeks since Alibaba shares went on sale in Hong Kong, and share price is now trading above its debut level by 7.33% at US$25.76 per share.

Comparatively, Alibaba’s rival Tencent has also managed to see its stock increase roughly three percent in value in the same time frame.

Alibaba Hong Kong share price trend: Nov - Dec 2019 (Source: IG)

This lack of negative impact is further emphasised by the fact that Alibaba’s share price on the New York Stock Exchange has also remained relatively robust. Trades are currently priced at US$26.25 apiece, up 5.4% from three weeks ago.

This trend is in line with the sentiments of IG Asia Market Strategist Jingyi Pan, who had noted that the Hong Kong listing could, in fact, boost its primary US listing.

Where will share prices go from here?

Despite the recent revival, in part due to excitement drummed up by the healthy competition, Tencent shares – priced higher than Alibaba’s by around 42% - are down around 16.4% year-on-year.

A lot of this has to do with the US-China trade war, which has shaken investor confidence in the last 12 months.

As noted by Pan, much of global trading sentiment will rest on December 15, when the new round of US tariffs on US$160 billion worth Chinese goods (including smartphones) will be imposed. This will indicate if there is a trade deal on the table, or if the two countries are closing in on one.

Still, in terms of the latest broker ratings, 37 analysts polled by CNN Business held a ‘buy’ position on Tencent stock, with four pointing to ‘outperform’, and four on ‘hold’.

As for Alibaba, a group of Goldman Sachs analysts gave a ‘buy’ rating overall, predicting a 30% growth in value over the next one year.

Practise going long or short on Hong Kong-listed shares with an IG Bank demo account

Tencent share price trend: Nov - Dec 2019 (Source: IG)

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