Alibaba, Earnings Will Likely Give Stocks Little Help

(Bloomberg) — As China’s post-Covid recovery loses steam, earnings are unlikely to provide the boost that the country’s tech stocks could really use.

Most Read from Bloomberg Inc. starts the reporting season on Thursday with analysts projecting less than 1% revenue growth for the first quarter, which would be the slowest pace on record, Bloomberg-compiled data show. Next week, Alibaba Group Holding Ltd. will likely report a sub-3% sales increase, while Tencent Holdings Ltd. may still trail the double-digit pace of the past, according to estimates.

The lackluster expectations are fueling traders to snap up bearish bets in the options market. The put-to-call ratio for Alibaba’s Hong Kong shares rose to the highest level since October, according to data compiled by Bloomberg. Earnings consensus for members of the Hang Seng Tech Index has barely moved from record lows reached in March.

Tech stocks have languished since hitting January peaks as China’s consumption-led rebound turned out to be more muted than expected. While upside surprise to earnings can help lift sentiment, the sector faces headwinds from amped up US-China tensions and high global interest rates, meaning a sustained rebound would be hard to come by.

The market had “potentially gotten ahead of itself earlier in the year,” said Robert Lea, an analyst for Bloomberg Intelligence. “Internet stocks rallied in anticipation of better times to come, with hopes pinned on the potential upside from re-opening and more benign regulatory environment. However, this did not lead to a change in the earnings outlook for most companies.”

Part of the issue is that spending after the country’s reopening hasn’t matched expectations. During the recent Golden Week holiday, booking volumes rose while spending remained lackluster. Investors are also worried about an uncertain economic outlook, especially after a surprise contraction in the manufacturing sector.

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There is some pick up in activity, though. Gross merchandise value growth in China’s e-commerce industry accelerated to 11%…


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