Core Viewpoint - Douyin E-commerce has announced an upgraded plan for its "Nine Merchant Support Policies" for 2026, focusing on optimizing the e-commerce ecosystem and addressing the needs of merchants while balancing the interests of both buyers and sellers [2][3]. Group 1: Policy Upgrades - The new policies will increase investment and systematically upgrade aspects such as cost, traffic, conversion, fulfillment, technology, and governance to enhance long-term certainty for merchants [3]. - A significant change includes the reduction of technical service fees to 0.6% for merchants using the "Qianchuan·Chengfang" product, effectively lowering operational costs [3][4]. - The scope of commission exemptions has been expanded to cover all categories, allowing various business models to benefit from the policies [3]. Group 2: Marketing and Promotion - Douyin has optimized its promotion fee refund policy, reducing promotional costs for eligible orders and minimizing losses from ineffective advertising [4]. - The "Grass Planting Incentive Program" has been upgraded to encourage high-value content production through cash incentives, attracting 3.67 million creators and generating over 1 billion in GMV daily by the end of 2025 [7]. Group 3: Technology Empowerment - Douyin will continue to provide AI technology capabilities to merchants, including free AI customer service to reduce labor costs and improve efficiency in addressing customer inquiries [5][6]. - The dynamic AIGC creative capabilities will assist merchants in generating marketing content while optimizing it based on user feedback [6]. Group 4: Cash Flow and Operational Support - The platform has optimized its payment terms, allowing the shortest payment period to be reduced to 3 days after order confirmation, enhancing merchants' operational confidence [8]. - Douyin's initiatives align with national policies aimed at promoting sustainable e-commerce development and improving the online business environment [8].

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the structural changes in the global AI industry as of early 2026, particularly highlighting the divergence in AI application markets between China and the United States [1][1]. Macro Trends and Market Divergence - The AI application market in China and the U.S. is experiencing a stark contrast, described as "ice and fire" [1][1]. - U.S. software stocks have significantly declined since January 2026, primarily due to concerns raised by Anthropic's release of an Agent product capable of fully automated workflows, which has disrupted market perceptions of software development costs and value [1][1]. AI Application Ecosystem - The Chinese AI application ecosystem is more inclined towards "closed-loop integration," with leading companies leveraging their own traffic and ecosystems to rapidly implement Agent functionalities [2][2]. - Since August 2025, upstream computing power (chips, devices, storage) has shown strong performance, while downstream application sectors (internet, software companies) have exhibited weakness [2][2]. Technology Evolution and Model Landscape - Basic models are entering a linear growth phase, with the first tier consisting of Anthropic, OpenAI, and Gemini, while the second tier includes Grok, Zhiyu, and Kimi [3][3]. - Domestic models like Tongyi Qianwen are lagging, while Deepseek V4 is expected to challenge the first tier [3][3]. - There has been no breakthrough leap in capabilities, but overall abilities are steadily improving [4][4]. - Multimodal capabilities are becoming critical, with models like Google’s NanoBanana enhancing Agent performance in various applications [4][4]. - Vertical models are shifting towards a "post-training + reinforcement learning" approach, internalizing expert reasoning rather than relying on external retrieval systems [4][4]. Comparison of Domestic and International AI Applications - In China, companies like ByteDance, Tencent, and Alibaba are integrating AI into their ecosystems effectively, with Alibaba's Tongyi Qianwen being recognized as the first true consumer-facing Agent [5][5]. - In contrast, international players like Anthropic focus on programming workflows, while OpenAI and Google are still primarily chatbot-oriented, lacking in task planning capabilities [5][5]. Investment Logic and Recommendations - Upstream sectors such as storage (DRAM/HBM/SSD), semiconductor equipment, and power equipment are expected to benefit from the shift in AI inference demand and TSMC's planned capital expenditure increase of 30%-40% in 2026 [6][6]. - Platform companies that integrate ecosystems, models, and traffic are highlighted, with Alibaba and Tencent being key players in China [6][6]. - Recommendations for terminal scene companies include Meitu, Roblox, and Reddit, while ToB tool companies like Adobe and Figma are noted for their collaborations with large model companies [7][7]. Core Judgments and Outlook - The year 2026 is termed the "third year of the Agent," with high market premiums but uncertain outcomes [7][7]. - The core competitiveness of Agents is shifting from "general dialogue" to "automated workflow execution," particularly in vertical fields like programming and healthcare [7][7]. - Domestic AI applications are advancing rapidly in consumer markets due to closed ecosystems, while international markets are more disruptive in B2B workflow automation [7][7]. - Storage demand is transitioning from training to inference, with SSDs expected to become the foundational infrastructure for the next generation of Agents [7][7]. - The document emphasizes a critical turning point in the AI industry from "model competition" to "application implementation," with clear divergence in paths between China and the U.S. [7][7].

Summary of Key Points from the Conference Call Industry or Company Involved - Focus on the Asian stock market, particularly China, Japan, and South Korea, as well as the technology and resource sectors [1][3][4] Core Points and Arguments - The recent rally in Asian stock markets, including China, is attributed to three main factors: strong belief in technological innovation, liquidity support from institutional investors reallocating from bonds to stocks, and global sentiment influenced by geopolitical factors [4][5] - The technology sector, particularly AI applications, is highlighted as a key area of investment interest, with concerns about regulatory scrutiny and potential overvaluation in certain tech stocks [3][5][6] - The resource sector is also experiencing price increases, with insights from recent research in Southeast Asia indicating sustained demand [3][4] - The current market sentiment shows signs of overheating, with indicators suggesting a potential for a correction if not managed properly [5][10][21] - The Chinese government is implementing moderate regulatory measures to cool down the overheated market without stifling overall market confidence [11][12][20] - Economic indicators show that while there is optimism in the stock market, underlying economic recovery, particularly in consumer spending and the real estate sector, remains weak [9][10][49] - The recent decline in consumer retail sales growth, which fell below 1% year-on-year, raises concerns about the sustainability of the current market rally [10][49] - The central bank has room for interest rate cuts and reserve requirement ratio reductions, which could further support market liquidity [45][46] Other Important but Possibly Overlooked Content - The potential for a significant portion of household deposits, estimated at 80 trillion RMB, to mature this year, which could lead to increased investment in the stock market if economic conditions improve [51][52] - The geopolitical landscape, including trade relations with Japan and potential export controls, could impact market dynamics and investor sentiment [53][54] - The importance of monitoring the A-share market sentiment index, which has shown signs of overheating, indicating the need for regulatory intervention to maintain market stability [21][23][26] - The performance of the Hong Kong stock market and its attractiveness to foreign investors, driven by a favorable exchange rate and strong IPO activity [34][35] - The ongoing discussions about the balance between technological advancement and regulatory oversight, particularly in the context of AI and major internet platforms [56][57]

Summary of Key Points from the Conference Call on China Internet and AI Development Industry Overview - The focus of the discussion is on the **China Internet** sector, particularly the impact of **AI-enabled services** on established platforms and competition dynamics among major players like **Tencent**, **Alibaba**, and **Bytedance** [1][8][11]. Core Insights and Arguments - **AI Competition**: Leading Chinese developers are expected to be fast followers in AI model development, leveraging unique domain data and entrenched user intent to shape competition [1][8]. - **User Engagement Trends**: AI chatbots, including **Doubao**, have shown engagement patterns similar to search engines rather than being disruptive top-funnel entrants. Doubao has reached **70 million DAUs** and **227 million MAUs**, indicating significant user traction [3][31]. - **Super App Strategy**: Companies are striving to become super apps, with **WeChat** as a global template. **Alibaba** is pivoting towards a transaction-based ecosystem around its **Qwen** app, while **Bytedance** is enhancing its offerings with music and payment features [4][51]. - **Monetization Success**: **Tencent** has seen success in AI monetization within gaming and advertising, but faces sentiment challenges due to perceived delays in chatbot development [6][9]. - **Investment Implications**: The report remains bullish on the ability of Chinese Internet companies to capture market share domestically and internationally, with a focus on the evolution of super-app ecosystems [8][9]. Important Developments - **Alibaba's Qwen App**: Recent upgrades to the Qwen app aim to enhance user transactions across various services, which could drive user engagement. However, the immediate market reaction was cautious following the announcement [5][21]. - **AI Chatbot Engagement**: Current usage of AI chatbots is limited, averaging **10-12 minutes** over **5-7 sessions** daily, which is more akin to search engine usage than a new traffic source [2][33]. - **Competitive Landscape**: The competition among AI chatbots has not significantly expanded the overall market but has redistributed engagement among existing platforms. Smaller players may struggle as larger platforms dominate [83][84]. Additional Insights - **Hardware Developments**: Companies like **Alibaba** and **Bytedance** are exploring new hardware, such as smart glasses and AI-enabled smartphones, to enhance user interaction with their ecosystems [53][54]. - **Geopolitical Risks**: Ongoing geopolitical tensions and legislative changes in the US may impact access to technology and resources for Chinese companies, but there is optimism about domestic semiconductor advancements [15][16]. - **Long-term Outlook**: The report suggests that while AI chatbots have not yet disrupted the market significantly, their evolution and integration into broader ecosystems will be crucial to watch in the coming years [34][80]. Valuation and Market Performance - **Valuation Metrics**: The report includes a valuation summary for major players, indicating **Tencent** and **Alibaba** as outperformers with significant growth potential in core earnings [7][10]. - **Market Sentiment**: Despite positive fundamentals, market sentiment remains cautious, particularly regarding **Tencent's** perceived lag in AI chatbot development [9][72]. This summary encapsulates the key points discussed in the conference call, highlighting the competitive dynamics, user engagement trends, and strategic moves within the China Internet sector as it navigates the evolving landscape of AI technology.

16 January 2026 Asia Quant Strategy & Asia Semis & Internet Asia Tech in 2026: Near-term momentum intact but broaden the exposure Rupal Agarwal +65 6326 7641 rupal.agarwal@bernsteinsg.com Mark Li +852 2123 2645 mark.li@bernsteinsg.com Robin Zhu +852 2123 2659 robin.zhu@bernsteinsg.com Cheng Zhang, CFA, CQF +852 2123 2636 cheng.zhang@bernsteinsg.com Edward Hou, CFA +852 2123 2623 edward.hou@bernsteinsg.com Charles Gou +852 2123 2618 charles.gou@bernsteinsg.com Min-Joo Kang +852 2123 2644 minjoo.kang@bernstei ...

Core Insights - The report highlights the identification of 348 suspected illegal activities related to online sales in Nanning for the year 2025, aiming to regulate concentrated promotional activities and maintain fair online trading practices [1] Group 1: Monitoring Scope and Focus - The monitoring scope covered major e-commerce platforms including Taobao, Tmall, JD.com, Alibaba, and Suning.com, focusing on key products such as electric bicycles, food, and special food [1] - Key areas of monitoring included concentrated promotions, intellectual property, advertising, fair trading, and online food services [1] Group 2: Findings and Violations - Platforms such as Douyin, Meituan, Taobao, Ele.me, JD.com, 1688, and WeChat Mini Programs showed significant suspected illegal activities, with Douyin having 67 cases, Meituan 61, Taobao 45, Ele.me 38, and JD.com 30 [1] - The main types of violations identified included abnormal registration numbers/filing information, illegal advertising and false promotion, illegal modifications of electric bicycles, licensing violations, unlicensed operations, and non-compliance with labeling standards [1] Group 3: Regulatory Actions - The Nanning Market Supervision Administration has distributed all 348 suspected illegal activity cases to local market supervision departments for investigation and urged them to enhance regulatory enforcement [1]

Investment Rating - The report maintains a "Buy" rating for Alibaba-W (09988.HK) [1] Core Insights - The company is expected to continue its investment in flash sales while maintaining rapid growth in AI cloud services [1] - Revenue for FY2026Q3 is projected to reach 292.9 billion yuan, with a year-on-year growth of 4.6%, primarily due to a slowdown in e-commerce revenue growth [7] - The report anticipates that Alibaba Cloud's revenue will grow by 35.0% year-on-year, reaching 42.85 billion yuan in the same quarter, driven by strong demand for AI computing power and services [7] - The company aims to become the absolute leader in the instant retail market through its flash sales initiative, with improvements in GMV and AOV expected [7] - Non-GAAP net profit forecasts for FY2026, FY2027, and FY2028 are set at 101.53 billion, 141.56 billion, and 184.65 billion yuan respectively, with corresponding PE ratios of 28.4, 20.4, and 15.6 times [7] Financial Projections - Total revenue projections for FY2024A to FY2028E are as follows: 941.17 billion, 996.35 billion, 1,068.58 billion, 1,158.75 billion, and 1,269.02 billion yuan, with year-on-year growth rates of 8.34%, 5.86%, 7.25%, 8.44%, and 9.52% respectively [1] - The report forecasts a decline in attributable net profit for FY2026 to 82.64 billion yuan, a decrease of 36.49% year-on-year, followed by a recovery in FY2027 and FY2028 [1] - The latest diluted EPS for FY2026 is projected at 4.33 yuan per share, with a P/E ratio of 34.94 times [1]

Investment Rating - The investment rating for Alibaba-W (09988.HK) is "Buy" (maintained) [1] Core Insights - The report anticipates that Alibaba's total revenue for FY2026Q3 will reach 292.9 billion yuan, representing a year-on-year growth of 4.6%, primarily due to a slowdown in e-commerce revenue growth. The company is expected to continue investing in flash sales, which will pressure profits, with an adjusted EBITA forecast of 30.61 billion yuan and an EBITA margin of 10.5% for the quarter [7] - Alibaba Cloud is projected to achieve a revenue of 42.85 billion yuan in the same quarter, reflecting a robust year-on-year growth of 35.0%, driven by strong demand for AI computing power and services. The EBITA margin for Alibaba Cloud is expected to remain stable at around 9.0% [7] - The report maintains Non-GAAP net profit forecasts for FY2026, FY2027, and FY2028 at 101.53 billion yuan, 141.56 billion yuan, and 184.65 billion yuan, respectively, with corresponding PE ratios of 28.4, 20.4, and 15.6 times [7] Financial Projections - Total revenue projections for Alibaba are as follows: - FY2024A: 941.17 billion yuan - FY2025A: 996.35 billion yuan - FY2026E: 1,068.58 billion yuan - FY2027E: 1,158.75 billion yuan - FY2028E: 1,269.02 billion yuan - Year-on-year growth rates for total revenue are expected to be: - FY2024A: 8.34% - FY2025A: 5.86% - FY2026E: 7.25% - FY2027E: 8.44% - FY2028E: 9.52% [1][8] - The projected net profit figures are: - FY2024A: 80.01 billion yuan - FY2025A: 130.11 billion yuan - FY2026E: 82.64 billion yuan - FY2027E: 122.87 billion yuan - FY2028E: 166.01 billion yuan [1][8]

Core Viewpoint - Alibaba Group Holding Limited (NYSE:BABA) is being closely monitored by analysts as a significant player in the AI sector, with a focus on its Qwen AI assistant and its potential to enhance the company's offerings in consumer applications and agentic AI developments [1][2][3] Group 1: AI Developments and Applications - Morgan Stanley analyst Gary Yu has reiterated an Overweight rating on Alibaba with a price target of $180.00, highlighting the importance of Qwen's AI assistant in the company's strategic pivot towards agentic AI [1] - The Qwen AI assistant has integrated with the Alibaba ecosystem to perform over 400 daily tasks, achieving over 100 million monthly active users (MAU) within two months of its launch [1] - The company anticipates that 60-70% of digital-world tasks will be completed by AI in the next two years, significantly improving efficiency for the remaining tasks [2] Group 2: Market Position and Competitive Landscape - Qwen is expected to evolve into an all-in-one superapp and life assistant within Alibaba's ecosystem, leveraging various platforms such as Taobao, Eleme, Fliggy, Amap, and Alipay [3] - Competitors like Tencent are also enhancing their AI models, although their product launches may lag behind Alibaba's developments [3] - The expected growth in daily active users (DAU) and improvements in Qwen's capabilities, including the use of external tools, are anticipated to drive share price growth alongside cloud revenue, estimated to grow by over 35% in F3Q and over 40% in F27 [3]

Core Insights - Alibaba (BABA) is focusing on quick commerce as a significant growth driver, with revenues increasing by 60% year-over-year in Q2 of fiscal 2026, attributed to strong order momentum and the expansion of Taobao Instant Commerce [1][9] - The company is facing challenges in profitability due to heavy spending on subsidies, logistics, and user experience, particularly in the China e-commerce segment, which saw EBITA decline by 76% year-over-year in Q2 of fiscal 2026 [2][9] - Sales and marketing expenses have surged to nearly 27% of revenues, reflecting intense competition in the instant delivery and local commerce markets, while cash flow has deteriorated due to ongoing investments in quick commerce [3][9] Financial Performance - The adjusted EBITA is expected to fluctuate in the coming quarters due to high competition and investment levels, indicating that margin pressure may persist longer than anticipated [4] - BABA shares have increased by 37.5% over the past six months, outperforming the Zacks Internet – Commerce industry growth of 3.1% and the Zacks Retail-Wholesale sector growth of 6.4% [7] - The current forward 12-month Price/Earnings ratio for BABA is 20.04X, compared to the industry's 24.97X, with a Value Score of F [11] Competitive Landscape - JD.com poses significant competition to Alibaba with a self-operated, price-competitive model, achieving a revenue growth of 14.9% to RMB299.1 billion in Q3 of 2025, despite higher logistics costs [5] - PDD Holdings intensifies competition through a low-cost, social commerce model, demonstrating strong revenue growth and net income gains, which pressures Alibaba's core platforms [6] Earnings Estimates - The Zacks Consensus Estimate for fiscal 2026 earnings is $6.10 per share, reflecting a 32.3% year-over-year decline and a 5% decrease over the past 30 days [14]