Hong Kong Tech Stocks Help Bolster Asian Equities

Alibaba announced a major restructuring to split the tech giant into six business groups on Wednesday, sending Hong Kong-listed shares up 15%.

Alibaba rose 14.26% on Wall Street overnight. After-hours prices rose 0.71%.

Each unit will have its own leadership and executive board and can pursue independent fundraising and IPOs after splitting.

“Unlock shareholder value,” the company said.

Six companies are:

Cloud Intelligence Group: includes company's cloud and artificial intelligence activities; Taobao Tmall Commerce Group: online shopping platforms including Taobao and Tmall; Local Services Group: covers Alibaba's food delivery service Ele.me and its mapping; Cainiao Smart Logistics: Alibaba's logistics service; Global Digital Commerce Group: includes Alibaba's international e-commerce businesses like AliExpress and Lazada; Digital Media and Entert

The Chinese tech giant's overhaul comes after it lost $600 billion from its peak in October 2020 due to the Chinese government's crackdown on tech companies.

Value investor and Warren Buffett disciple Guy Spier told CNBC's Tanvir Gill that investors' stock moves reflect relief rather than business hopes.

Spier said, “The rally in the shares is not so much because the market expects greater profitability, rather than relief that tensions with the regulator seem to have resolved.” The company will face less pressure going forward.

Alibaba's overhaul would benefit Chinese consumers, not investors, he added.

“This sets the stage for a more innovative Chinese tech sector and far more competition – so very good for Chinese consumers,” he said. “It reduces concentration and the power of one business within China – which was making Chinese regulators uncomfortable.”

‘Used by others’

In morning trade, Tencent, JD.com, and Baidu rose 3%, 5%, and 3%, respectively. In its first hour, the Hang Seng Tech index rose 3.3%, leading Asia-Pacific gains.

Alibaba's peers' Wall Street stock prices showed that other Chinese technology companies may take similar business measures.

“I think investors are saying what we saw in Alibaba, really the leader in China tech, that their plans might be utilized by others,” said KraneShares CIO Brendan Ahern, citing ADR moves in Tencent, JD.com, and Baidu.

The company's announcement showed that Alibaba founder Jack Ma, who returned to China after months abroad, was involved.