In February 2021, China issued “Anti-Monopoly Guidelines of the Anti-Monopoly Commission of the State Council on the Platform Economy,” which are rules for so-called “platform operators”--essentially e-commerce businesses.
These rules aimed to end the monopolistic behaviours of the largest players, and addressed other malpractices in the industry, such as prohibiting firm from giving undue preference to certain vendors, and forbidding the platforms from funneling users through affiliated channels or websites, among other restrictions.
Market watchers believe that growth is set to decelerate in these names. However, while the wobbly sentiment remains the overtone in the market, medalist managers are slowly accumulating stakes in these companies.
Alibaba Group
Value Partners entered the last quarter of 2021 with a stronger conviction in Alibaba. Its US$1.5 billion Classic Fund accumulated 1.52 million shares of Alibaba’s shares listed in Hong Kong. Morningstar data shows that the fund liquidated its ADR position in the quarter of June 2020 and did not rebuild the position until recently.
Meanwhile, JPM Greater China A Fund had axed its Alibaba ADR holdings since February, later liquidating the entire ADR exposure in August, according to Morningstar data. That means, the fund’s 5.7% assets in Alibaba represent shares listed in Hong Kong only.
In August (the latest data available), Morningstar's records show that the Invesco fund liquidated the position of Alibaba (both ADR and Ordinary Shares), which amounted to 9.9% of the fund's assets at the end of July.
At the end of September, the aggregate position of Alibaba (both ADR and Ordinary Shares) amounted to slightly more than 8% in the UBS China Opportunity Equity Fund (Bronze rated, under the China Equity Category), down from the 9.5% level maintained throughout the first two quarters. The fund couldn’t avoid the hit by the market retreat.
Meituan
There’s another online platform that the Value Partners manager prefers. The fund topped up 1.42 million shares in Meituan between July and September, which doubled the count recorded in the past three quarters, translating into an exposure to 6.28% in the third quarter, increasing from a 4% level maintained since the end of 2020.
The buy-sell decisions show that the fund manager felt less favorably towards the lower-tier platforms. The fund completely exited its position in online discount retailer, Vipshop Holdings (VIPS). The fund also trimmed shares in Pinduoduo by more than half in June from the previous quarter. The position ended the third quarter with a 2.83% weight in the fund, significantly lower than the 9% level at the beginning of 2021.
Like Value Partners, the JPM portfolio also accumulated cheapened shares in Meituan, which accounted for 4.55% of the portfolio in October. While the stock price of the food delivery platform has been down 15% year-to-date, the number of shares in the fund doubled.
JD.com
Morningstar’s analysts painted a brighter outlook on Alibaba’s rival, JD.com (JD, 09618). Other medalist Greater China managers that we track, like Invesco and FSSA, have been holding their JD shares through July (the latest data available).
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