Singles Day raises $9.3 billion for Alibaba Group

Chinese e-commerce company, Alibaba Group, generated $9.3 billion (€7.5 billion) this week through a Chinese anti-Valentine’s day festival that has become the world’s biggest shopping holiday.

Originally a celebration of China’s singletons, ‘Singles Day’ has now become a relentless spending spree, with uncoupled shoppers splurging on expensive gifts for themselves.

Held on the 11th day of the 11th month, this year’s Singles Day saw Alibaba raise US$9.3 billion, an increase of just over 60% on last year’s festival, which leaves record sales from the beginning of the Christmas shopping season on Black Friday or Cyber Monday far behind.

Alizila, the news a commentary branch of Alibaba, reported sales of 1.2 million large home appliances, 3 million lighting products, 200,000 bottles of laundry detergent and 50,000 new cars over the 24-hour period.

Investing in Alibaba is not straightforward, however, and many investors have yet to fully understand the regulatory, shareholder and operational risks posed by the set up of Chinese internet companies. []

Dale Nicholls, portfolio manager of Fidelity China Special Situations PLC, says the appeal of the company is clear; in its 15-year existence, Alibaba has built a dominant position in a market that represents one of the biggest commercial opportunities around.

He says: “The shift from offline to online commerce is a global trend, but is occurring even faster in China, partly because traditional bricks and mortar infrastructure in lower tier cities has not been built out to levels common in the west. Alibaba is at the heart of this change.”

Nicholls says the company, which uses a platform-based business model, is rapidly growing its gross merchandise value. Alibaba is currently on track to exceed $300 billion this financial year, which amounts to more than Amazon and eBay combined.

“Alibaba is clearly on track to be a globally recognised name and will be a company investors cannot ignore. A key thing to follow will be how it allocates capital going forward, including investments outside of China,” he adds.

He concludes that for Fidelity, the company is likely to remain a long-term portfolio holding, provided that valuations remain reasonable relative to the growth and returns of the business.

Despite Alibaba’s impressive gains, Singles Day was not a success for everyone, with one Chinese man spending over £50,000 on 99 iPhones, arranged in a heart shape as a dramatic gesture in proposing to his girlfriend. Sadly, she said no.

A young man in China bought 99 iPhone 6s to propose to his girlfriend on #SinglesDay today, only to be rejected!

— Malay Mail Online (@themmailonline) November 11, 2014

©2014 funds europe



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