Temasek buys stake

Chinese Internet stocks are under the spotlight this week with a stream of robust earnings and news that Alibaba has been gearing up for a September IPO.

China business district
Source: Bloomberg, China’s second largest e-commerce site and Alibaba’s rival, will be in focus today.

It has received a $17.2 million investment from Singapore state-owned investment firm Temasek, according to a filing with the U.S. Securities and Exchange Commission. This translates to a stake of 0.06% for Temasek, based on Bloomberg data.

The Temasek backing will likely further boost investor confidence over The Chinese company had its US IPO in May, which raised $1.78 million. Its stock price has gained 58% in the last three months since debuting on Nasdaq.

Click to enlarge


For Temasek, this is another foray to tap on the booming Chinese e-commerce market. It was an early investor in Alibaba and in April it had also invested in one of China’s largest warehouse developers, Shanghai Yupei Group.

Chinese e-commerce gets more attention

Another recent high profile investment in had also gotten analysts excited over its prospects. In March, China’s largest Internet company, Tencent, bought a 15% stake. The partnership is expected to ramp up’s expansion and reduce its operating costs.

Investors should note that operates more as a direct seller, rather than a pure marketplace model like Alibaba’s Taobao to connect buyers and sellers. This adds a bit of a risk in holding inventory and it has a relatively narrow revenue pool, over 80% was estimated to be contributed by electronics and appliances.

Chinese Internet stocks have been among the outperforming stocks this year. The Kraneshares CSI China Internet ETF, which tracks a sample of Chinese e-commerce companies, has seen a 53% gain over the past 12 months. Whereas S&P 500’s only had an 18% increase, Nasdaq’s with a 24% rise and China H-Shares gained 9% over the same period.

The current earnings season has also been pretty positive for this sector.

This morning, Sina Corp posted better-than-expected growth in both revenue and income. It was lifted by a robust performance from its messaging subsidiary Weibo, which helped pull in more advertising sales.

Earlier in the week, Tencent announced a robust set of Q2 numbers, with a 59% increase in net profit year-on-year.

Ahead of one of the most anticipated IPOs in history, Alibaba had been reportedly gearing up for a roadshow in September. Founder Jack Ma is also lining up meetings with potential investors in Hong Kong, Singapore, London and New York.



This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.