Daily Investment Strategy
Daily focus：Alibaba（9988）
The emergence of large models like DeepSeek can accelerate AI and cloud adoption in China. Alibaba Cloud, with a 36% market share, remains the leader in China’s cloud market. Leveraging financial strength, Alibaba invests heavily in large model development, enhancing its operational efficiency and ecosystem. Recently, Alibaba launched Qwen2.5-Max, claiming it outperforms DeepSeek. According to SuperCLUE’s benchmark, Alibaba’s AI technology is impressive. The market response towards Qwen2.5-Max is positive when it was launched, showing investors’ confidence towards Alibaba’s AI development. In fact, Alibaba’s “Cloud + AI” strategy pays off, with public cloud revenue growing double digits and AI related products revenue seeing triple-digit growth in last quarter. With Alibaba’s ability to monetize AI advancements, it is possible for the capital market to revalue the stock. Meanwhile, we think the removal of de minimis trade exemption has minimal impact on Alibaba. The U.S. measures will affect Alibaba’s overseas sales, but its U.S. revenue is minimal. "Taobao Overseas" GMV in 2024 is around $20 billion, a small share of total sales, also, the AIDC only account for 12% of the revenue. According to Bloomberg and industry data, approximately 20% of Alibaba’s overseas GMV comes from the U.S., and only 31% of last-mile deliveries reply on USPS. The impact is therefore moderate, and any hiccup provides a buying opportunity. Target price is HK$113.
S&P 500 edged up, but rate cut expectations cooled
The S&P 500 index edged up slightly on Tuesday, even as many worried that President Trump's tariffs could exacerbate inflation and Federal Reserve Chairman Powell stated that the Federal Reserve is not in a hurry to cut interest rates.“With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to adjust our policy stance,” Powell said. These remarks echoed those of recent Federal Reserve members and Powell's remarks at the FOMC January press conference, when the Federal Reserve held interest rates steady. After these remarks, Treasury yields climbed as bets on rate cuts decreased, and the Federal Reserve is now expected to hold interest rates steady at the March meeting. Powell is scheduled to testify before Congress on Wednesday, where he is expected to respond to multiple questions regarding the impact of Trump's policies on the economy and inflation. Trump recently warned that metal tariffs may be higher and that he is considering tariffs on automobiles, chips, and pharmaceuticals. The President also stated plans to increase U.S. import tariffs to match foreign tariffs on U.S. goods.
Hong Kong Stock Connect had a net outflow of HK$8.89bn on Tuesday of which Geely (175) had the largest net inflow, reaching HK$0.47bn; followed by China Mobile (941). Tracker Fund (2800) recorded the largest net outflow at $5.0bn, followed by HSCEI ETF (2828).
Wen Kit Kenny is a SFC licensed person accredited to KGI Group to carry on regulated activities (for details, please refer to:https://apps.sfc.hk/publicregWeb/indi/AJF244/details). He and/or his associate do not have any financial interest in the recommended issuer or new listing applicant.
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