Asia report: Markets mixed as Alibaba announces six-way split

Stock markets in the Asia-Pacific region were mixed on Wednesday, with technology shares in particular focus.

The moves came after Chinese tech giant Alibaba announced that it would split into six separate business groups.

“Asian equity markets are mainly in the green on the session following a somewhat benign range-bound session on Wall Street, given the lack of macro catalysts as investors position for the quarter’s end,” said Patrick Munnelly, market analyst at TickMill.

“The standout performer overnight was in the Hong Kong markets which significantly outperformed, as the tech-heavy Hang Seng posted gains on the back of Alibaba’s plan for a six-way split.”

Munnelly noted that the Nikkei also posted decent gains, as the Japanese government agreed a “staggering” JPY 114trn budget for the fiscal year ahead.

“Risk sentiment also benefited from a downside surprise in Australian inflation data, falling from 7.4% to 6.8%, leading to investors repricing future rate moves from the Reserve Bank of Australia.”

Stocks mixed as Alibaba outlines plans to split

In Japan, the Nikkei 225 rose 1.33% to 27,883.78, while the Topix gained 1.46% to reach 1,995.48.

Among the leaders on Tokyo’s benchmark were SoftBank Group, which surged 6.18%, while J.Front Retailing and Isetan Mitsukoshi Holdings rose by 3.79% and 3.34%, respectively.

In China, the Shanghai Composite fell 0.16% to 3,240.06, while the Shenzhen Component rose 0.13% to reach 11,579.92.

Anhui Heli and Inesa Intelligent Tech were the biggest losers in Shanghai, falling 8.79% and 7.4%, respectively.

Meanwhile, in Hong Kong, the Hang Seng Index gained 2.06% to reach 20,192.40, driven by a surge in Alibaba's shares, which rose 12.23%.

Country Garden Services and Alibaba Health Information Technology also gained 6.67% and 5.17%, respectively.

Alibaba announced overnight it would undergo a serious reorganisation, by dividing into six business groups.

Each of the groups would have its own chief executive officer and board, and would be able to raise external funding and go public.

The move was aimed at improving market competitiveness and unlocking shareholder value.

According to CNBC, the six business groups would focus on Alibaba's strategic priorities, being Cloud Intelligence, Taobao Tmall Commerce, Local Services, Cainiao Smart Logistics, Global Digital Commerce, and Digital Media and Entertainment.

“It looks like Alibaba is seeking to assuage Beijing’s concerns about monopolistic behaviour,” said AJ Bell investment director Russ Mould.

“It is also worth noting that Alibaba’s e-commerce arm is the most profitable part of the business.”

Mould explained that its top Chinese online marketplaces, Taobao and Tmall, do not take on any inventories, and rather act as paid listing platforms linking buyers to sellers, with its logistics unit Cainiao fulfilling orders.

“This keeps the amount of money it has tied up in the business low and supports strong margins.

“Allowing the core commerce operations to stand alone rather than subsidising other growth ventures, in areas like cloud computing, digital media, entertainment and technological innovation, could enable it to achieve a higher price tag on the market.”

In South Korea, the Kospi rose by 0.37% to 2,443.92, with DB Insurance and Doosan Heavy Industries & Construction leading the gains, rising by a respective 3.47% and 3.42%.

Australia’s S&P/ASX 200 gained 0.23% to reach 7,050.30, with Deterra Royalties and Reliance Worldwide Corporation leading the gains, rising by 5.31% and 4.82%, respectively.

However, in New Zealand, the S&P/NZX 50 fell by 0.29% to reach 11,736.75, with Synlait Milk and Arvida being the biggest losers, falling by 5.96% and 3.13%, respectively.

In currency markets, the yen weakened 0.61% against the dollar to last trade at JPY 131.69, while the Aussie was off 0.51% at AUD 1.4982.

The Kiwi also retreated against the greenback, by 0.17% to change hands at NZD 1.6019.

In oil markets, Brent crude futures were last up 0.78% on ICE at $79.26 per barrel, while the NYMEX quote for West Texas Intermediate rose 1.01% to $73.94.

Australian inflation slows in February

In economic news, Australia's monthly inflation rate for February slowed to 6.8% year-on-year.

The figure was lower than January's rate of 7.4%, and below the 7.1% forecast by economists.

Housing had the most significant price rises, followed by food and non-alcoholic beverages and transport, according to data from Canberra’s statistics bureau.

“This underlines the case for the Reserve Bank of Australia to pause its hiking cycle,” noted Markets.com chief market analyst Neil Wilson.

Reporting by Josh White for Sharecast.com.