Chinese technology shares jumped after strong results from internet companies, including better-than-expected sales at the e-commerce firm Alibaba despite an economic slowdown driven by Beijing’s Covid-19 lockdowns.
The Hangzhou-based company beat analysts’ forecasts with its sales and profit figures for the first quarter despite a weakening economy, and it did better than local rivals such as Tencent. Revenues rose 9 percent to 204 billion yuan in the first three months of the year.
Its resilient performance boosted confidence in the sector, which has been battered by a regulatory crackdown over the past year. Hong Kong’s Hang Seng Tech index of the 30 largest tech firms rose 3.6 percent, while wider Hang Seng index climbed 2.8 percent.
Shares in the Chinese search engine group Baidu rose almost 15% in Hong Kong after it reported a 1 percent rise in sales, led by its cloud and artificial intelligence business. Shares in JD.com, China’s biggest online retailer, increased more than 5% after it posted an 18 percent increase in quarterly revenues.
However, Alibaba also warned of the impact of restrictions on its business under Beijing’s zero-Covid policy, and declined to give a forecast for the current year because coronavirus risks clouded the outlook. It said the restrictions affected merchants’ ability to ship goods, and prompted consumers to focus on buying necessities.
Analysts at Daiwa Capital said: “As Alibaba’s large scale reflects the overall macro economy, we believe it is the key beneficiary of a potential favourable policy rollout in terms of lockdown measures and consumption stimulus.”
After two months of Covid lockdowns led to a squeeze on consumer spending, Beijing announced measures to shore up the economy this week.
Richard Hunter, the head of markets at interactive investor, said: “The wave of cautious optimism filtered through to the Asian markets and were consolidated after revenue growth from Alibaba beat expectations, boosting tech shares. In addition, the reported cooling of tensions between China and the US, and the likelihood of more stimulus from the former to support the local economy underpinned the positive moves.”
The strong results from the technology sector come after a series of warnings from Chinese policymakers about the health of the economy. The premier, Li Keqiang, said this week that conditions were “to some degree worse” than they were at the start of the coronavirus pandemic in 2020.