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Last Friday, Chinese tech shares JD.com and Alibaba put in contrasting performances post their respective earnings announcements – the former rallied 9.1%, while the latter sank more than 10%. Consequently, Macquarie’s call warrant over JD.com RNRW rose 64.7% while put warrant YNPW fell 35.4%. Alibaba call ZKDW dropped 50% while put warrant XDSW gained 62.3%. 
 
The latest results from JD.com and Alibaba may already reflect the impact of anti-monopoly measures in China which have led to a slow down in revenues for tech giants like Alibaba while allowing smaller peers like JD.com to gain ground… 

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Alibaba slashes earnings forecasts while JD.com beat estimates

In after-market announcements last Thursday, Alibaba and JD.com respectively announced their third quarter earnings. 

While Alibaba has trimmed its 2022 revenue outlook amidst intensifying competition and an earnings result which missed Bloomberg analyst forecasts for a second straight quarter after rising only 29% to US$34.4 billion in the third quarter, its smaller rival JD.com reported third quarter revenues that climbed to US$34.3 billion and beat Bloomberg forecasts. 

JD.com’s improving revenue shows that the company’s recent investments to win over users from bigger tech rivals like Alibaba is raking results. JD.com has been expanding into smaller cities by investing in new businesses such as community e-commerce to diversify its business away from consumer electronics.

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JD.com has also taken advantage of China’s anti-monopoly rules to ban merchant exclusivity, JD.com has for example, added new and returning brands like Starbucks and Estee Lauder to its platforms. 

After the recent 11 November Singles’ Day sales, JD.com said that sales on that day jumped 29% to a record 349.1 billion yuan, outpacing the 8.5% jump in sales that its bigger rival Alibaba saw on that day.

JD.com to be included in MSCI, Hang Seng Index

Adding onto the positive sentiment for JD.com listed in Hong Kong were announcements relating to its inclusion on the Hang Seng Index as well as the MSCI’s announcement to start tracking JD.com Inc. and NetEase Inc. via their Hong Kong shares rather than American Depositary Receipts. 

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The MSCI’s shift which takes effects from 2 December 2021, comes amid heightened tension between the U.S. and China over listing rules, suggests a shift in liquidity away from the US for Chinese stocks listed in Hong Kong. MSCI had also shifted away from tracking the Alibaba ADRS listed in the US to its Hong Kong shares earlier this year. 

Meanwhile, JD.com and Netease will also be included on the Hong Kong benchmark Hang Seng Index effective 6 December.