Beijing’s swift reopening has raised hopes that its battered economy could follow a similar pace of recovery — and Wall Street is excited about what that means for stocks. Since the start of the year, Wall Street’s raft of banks have been increasingly bullish on the world’s second-largest economy and its stock market. One of the sectors that has excited investors the most is technology. A growing number of positive analyst calls have bolstered optimism in the sector, and recent share price gains reflect renewed interest. The Hang Seng Technology Index, which includes the 30 largest technology companies listed in Hong Kong, has risen 7.35% since the beginning of December when Beijing began to lift its measures against Covid-19. It follows a painful period for some of China’s biggest tech names following a punitive regulatory crackdown that began in 2021. How is Wall Street playing China’s tech resurgence? Alibaba emerged as the top choice among several investment banks. Earlier this month, Goldman Sachs added Alibaba to its coveted doom list. In a Jan. 9 note, analyst Ronald Keung said the “worst is behind us” for Alibaba and that it now has the “biggest room to evaluate multiple fixes” among China’s internet mega-caps. Goldman gives the stock a $138 price target. It is currently trading around $120. Morgan Stanley also named Alibaba its “top pick” in China’s technology sector — for the first time in three years. “Alibaba – China’s Internet industry top pick in 2023. We see multiple catalysts (reopening, cost optimization, easing regulatory environment, cloud re-acceleration and valuation) driving the industry’s most attractive risk reward,” Morgan Stanley analysts led by Gary Yu, he wrote in a note this month. Yu added that Alibaba is well-positioned to benefit from China’s recovery in spending, while easing regulations could see the stock outperform its peers. The stock is also trading at an “attractive valuation,” given its ability to generate “strong” cash flow and its “stable” share buyback program. Morgan Stanley has a price target in a base case of $150 on Alibaba, and a rise to $200 per share in a bullish case. Interest in Alibaba has also grown among institutional and other high-net-worth investors. Billionaire activist-investor Ryan Cohen has bought a stake in Alibaba worth hundreds of millions of dollars starting in the second half of 2022, according to reports. Cohen is reported to have told Alibaba executives that he thinks the company could achieve double-digit sales growth and nearly 20% free cash flow growth over the next five years. Fund manager Brian Arcese is also a fan of Alibaba. “We’ve been invested for a long time and the biggest positions we have in China are focused on technology platforms,” Arcese, a portfolio manager at Foord Asset Management, told CNBC on Jan. 16. More than 12% of the $368 million Foord Global Equity Fund managed by Arcese is allocated to the shares of three Chinese companies: Tencent, Alibaba and JD.com. Alibaba is the fund’s second largest holding company. King Lip, chief strategist at Baker Avenue Asset Management, is also bullish on Alibaba’s prospects. “Just 18 months ago, I would have said that institutional investors like us wouldn’t touch a stock like Alibaba with a 10-foot pole, but now, a lot of these situations, like the government crackdown on Ant Group, a lot of these boxes are starting to get checked.” So we think these names are much more investable than they were just a few months ago,” he told CNBC on Jan. 6. He said he “wouldn’t be surprised” to see Alibaba’s share price rise to $140 to $150 — “significant growth” from current levels. His firm, however, does not currently own shares in Alibaba. Instead, he said he prefers exposure to China through ETFs as a first step, before buying individual stocks with low multiples such as Alibaba. Luca Casoldi, senior portfolio manager at private boutique bank Reil Intesa Sanpaolo, also listed Alibaba among his “top calls for condemnation.” which is under-owned by foreign investors. There is some sort of clear visibility that the country is opening up again so we will have earnings per share We like China relative to the rest of the world,” Casoldi told CNBC. — CNBC’s Michael Bloom Contributes is about reporting
