Alibaba and Tencent Stocks Thrive amid Coronavirus, China Aims to Become Stabilizing Force

UTC by Steve Muchoki · 4 min read
Alibaba and Tencent Stocks Thrive amid Coronavirus, China Aims to Become Stabilizing Force
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Alibaba and Tencent stocks indicate resilience amid the coronavirus stock market effect. China, the first country to be hit by the deadly coronavirus in early December, now aims to be a stabilizing force in the global market.

Coronavirus has almost become the order of the day in mainstream media since it was first reported in Wuhan, China. The virus has pushed beyond the ground zero to infect countries almost in all continents. As a result, it’s not only the human health status that has been adversely affected but also the stock market at large, since it has experienced the worst sell-off in recent times. With the number of those infected and the death toll rising, the volatility on the stock market is expected to continue. However, the volatility and recession possibility are not gnarling at some stock markets. This includes internet based markets like Alibaba Group Holding Ltd (NYSE: BABA) and Tencent Holdings Ltd (HKG: 0700) in China, where there is minimal human contact. China has been not only being the ground zero, but it has also been the most negatively affected by the virus so far. 

It has resulted in the country issuing strict measures to prevent further spread of the disease. As a result, in the past few weeks, there has been a slowdown in the number of newly reported cases in the country. With other countries fighting the high-rate spread of the virus and the growing number of covidiots, the debate on whether China is providing the correct information on infection rate remains unsolved.

Despite that, it has not stopped Alibaba (NYSE: BABA) and Tencent (OTC: TCEHY) from flourishing in these dark times.

Alibaba and Tencent Stocks amid Coronavirus

Before the outbreak of coronavirus, both Alibaba and Tencent recorded a steady rise in the quarterly net earnings. On one hand, Alibaba’s total revenue during the last quarter of 2019 increased by a whopping 38% to clinch on $23.2 billion. As a result, both adjusted and unadjusted earnings per share rose by nearly half.

On the other hand, Tencent’s total revenue for the same period rose by 25% to hit $15.1 billion. The earnings per share also rose by slightly above 50%. Other sectors of the company’s operation that rose included the advertising segment which grew by 19%, while the fintech segment rose by 39%.

However, a slowdown in the sales is expected due to the ongoing coronavirus outbreak and lockdown. During a recent announcement by Alibaba, it is expecting mixed results for the quarterly earnings. By February, travel bookings, retail and restaurant ordering went down significantly. On the greener side, the grocery shopping and delivery experienced a sharp uptick, so did the video chat services and digital communication tools.

A similar situation has been observed with Tencent which gave its earnings report on March 18. Although not figures to elaborate on the situation on the ground, the company expects the digital payments to be down. In addition, its cloud services are expected to hit the lows in sales. However, the digital entertainment and advertising sector are expected to rise in the coming quarters.

Both companies have invested heavily in the fight against coronavirus. Alibaba has presented its cloud-based coronavirus diagnostic tool to the European countries that have turned to be the epicenter of the virus. Tencent has invested in digital healthcare providing millions of Chinese a place to check in with doctors using social and video tools to combat coronavirus.

The Bigger Picture of the Chinese Market 

As the world struggles to combat the coronavirus, China has outlined its goal to become a stabilizing force. This is expected to begin with its market and then venture into the global market, especially in the developing economies. After all, the virus will have made China a stronger economic state than before.

To help control the China stock and bond markets which are the second-largest in the world, Chen Yulu, the Vice Governor at the People’s Bank of China said that they are aiming at maintaining the financial market stability. This is because of the stability of the Chinese financial market means a significant portion of the stability of the global financial market.

Business News, Market News, News, Stocks
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