February 3, 2026 08:30 AM GMT China Equity Strategy | Asia Pacific Focus List Changes – China/HK and China A-share Thematic We add Chalco (601600.SS) and remove China Yangtze Power (600900.SS) in our China/HK Focus List and A-share Thematic List. We add Chalco (601600.SS) and remove China Yangtze Power (600900.SS) in our China/HK Focus List and A-share Thematic Focus List: Morgan Stanley Materials analyst Rachel Zhang believes the positive outlook for Chalco stems from the following: For more details on Cha ...

Summary of Key Points from the Conference Call Industry Overview - The conference call discusses the **China Internet** industry, focusing on the promotional campaigns by major internet companies during the **2026 Chinese New Year (CNY)** holidays, which occur from **February 15-23, 2026** [1][1]. Core Companies and Their Campaigns Tencent - Tencent announced a **Rmb1 billion** cash red-envelope campaign on **January 25, 2026**, to promote the adoption of its **Yuanbao** app, allowing users to win up to **Rmb10,000** by trying new AI features [2][2]. - The campaign is expected to enhance user engagement and drive traffic to its AI products [1][1]. Baidu - Baidu launched a **Rmb500 million** red-envelope campaign on the same day, integrating its **Ernie Assistant** into the promotional activities [3][3]. - The campaign includes various interactive activities within the Baidu app, encouraging user participation and reward claiming [3][3]. Bytedance - Bytedance's **Volcengine** was announced as the exclusive AI cloud partner for the **2026 CNY Gala**, utilizing its technology for program production and online interactions [4][4]. - The **Doubao** smart assistant will feature interactive elements during the event [4][4]. Alibaba - Alibaba has not yet detailed its CNY promotional campaign but is expected to promote its **Qwen** app, which was the exclusive title sponsor for Bilibili's **2026 New Year's Eve Gala** [6][6]. - Qwen is integrated into Alibaba's ecosystem and is anticipated to play a significant role in upcoming promotions [6][6]. User Metrics and Market Position - **Doubao** leads the market with **227 million** monthly active users (MAUs) as of December 2025, followed by **DeepSeek** (136 million), **Yuanbao** (41 million), **Qwen** (26 million), and **Wenxin** (5 million) [7][7]. - Year-over-year growth rates show Doubao at **+201%**, Yuanbao at **+47%**, and Qwen at **+1,830%** [7][7]. - Daily active users (DAUs) for Doubao reached **70 million**, with significant engagement metrics across the platforms [7][7]. Investment Insights - The report suggests a preference order for AI plays: **Tencent > Alibaba > Baidu**, based on recent share price performance [1][1]. - The competitive landscape among AI chatbots is expected to intensify as companies vie for user traffic and future monetization opportunities [1][1]. Risks and Challenges - Key risks for Alibaba include execution failures in its retail strategy, investment spending pressures, and potential regulatory challenges [15][17]. - For Baidu, risks include slower recovery in its search business, competition in advertising, and economic slowdowns affecting ad budgets [22][22]. - Tencent faces risks from revenue slowdowns in core gaming and advertising sectors, as well as regulatory changes [24][24]. Valuation Insights - Target prices are set at **HK$195.0** for Alibaba H-shares and **US$186** for Baidu shares, based on various financial metrics and market comparisons [14][16][18][19][23]. - Tencent's target price is set at **HK$783**, reflecting a sum-of-the-parts valuation approach [23][23]. This summary encapsulates the key points from the conference call, highlighting the competitive dynamics, promotional strategies, user engagement metrics, and associated risks within the China Internet industry.

U.S. stock futures fell on Tuesday following Friday’s declines. Futures of major benchmark indices were lower.The stocks extended the negative momentum seen during the holiday break as President Donald Trump's threat to impose escalating tariffs on Europe over the Greenland dispute continued to roil global markets.Meanwhile, the 10-year Treasury bond yielded 4.28%, and the two-year bond was at 3.57%. The CME Group's FedWatch tool‘s projections show markets pricing a 95% likelihood of the Federal Reserve lea ...

Index Performance - The Hang Seng Index (HSI) closed at 26,564, down 1.0% for the day and up 3.6% year-to-date (YTD) [2] - The HSCEI closed at 9,134, down 0.9% for the day and up 2.5% YTD [2] - The MSCI China index closed at 86, down 1.0% for the day and up 3.6% YTD [2] Commodity Price Performance - Brent Crude remained stable at US$64 per barrel, with a YTD increase of 5.4% [3] - Gold prices rose to US$4,671 per ounce, reflecting an 8.1% increase YTD [3] - Copper prices fell to US$12,803 per ton, down 2.3% for the day but up 3.1% YTD [3] Economic Indicators - China's GDP growth moderated to 4.5% YoY in Q4 2025, slightly above expectations, with a full-year growth of 5% for 2025 [6] - Industrial profits in China decreased by 13.1% YoY as of January 27, 2026 [4] - The 1-Year Loan Prime Rate in China remained stable at 3.0% as of January 20, 2026 [4] Sector Insights - The OTA sector is under pressure due to an antitrust probe involving Trip.com, which saw a stock price drop of over 20% [10] - Despite the probe, long-term earnings impact on Trip.com is expected to be limited, with investor confidence potentially returning by August 2026 [10] - The property market in China is showing marginal improvement, but underlying pressures persist, with expectations for stabilization by late 2026 or early 2027 [13]

Summary of Alibaba Group Holding Conference Call Company Overview - **Company**: Alibaba Group Holding (BABA.N) - **Industry**: China Internet and Other Services - **Market Cap**: US$403.539 billion - **Current Stock Price**: US$169.90 (as of January 14, 2026) - **Price Target**: US$180.00, indicating a 6% upside potential Key Developments - **Launch of Qwen AI Assistant**: - Qwen AI can perform over 400 daily tasks through integration with the Alibaba ecosystem, providing one-stop solutions [1] - The Qwen App achieved over 100 million monthly active users (MAU) within two months of its launch [1] - Alibaba anticipates that 60-70% of digital-world tasks will be completed by AI in the next two years, with the remaining tasks enhanced by AI for efficiency [1] Market Position and Competition - **Ecosystem Integration**: - Qwen leverages Alibaba's ecosystem, including Taobao, Eleme, Fliggy, Amap, and Alipay, positioning it as an all-in-one AI superapp and life assistant [3] - Competitors like Tencent are enhancing their AI models, although their product launches may lag behind [3] Financial Expectations - **User Growth and Revenue**: - Expected increase in daily active users (DAU) for Qwen and improvements in its capabilities are projected to drive share price growth alongside cloud revenue, estimated to grow by over 35% in F3Q and 40% in F27 [4] - **Marketing Expenses**: - Increased marketing spending for consumer adoption may lead to higher overall losses, estimated at RMB 7 billion in F3Q [4] Risks and Opportunities - **Upside Risks**: - Better monetization in core e-commerce could drive earnings growth [18] - Faster enterprise digitalization may re-accelerate cloud revenue growth [18] - Stronger demand for AI could further boost cloud revenue [18] - **Downside Risks**: - Increased competition and higher-than-expected reinvestment costs [18] - Weaker consumer spending amid a slower post-COVID recovery [18] - Regulatory scrutiny of internet platforms could pose additional challenges [18] Financial Metrics - **Fiscal Year Ending**: March 2025 - **Revenue Estimates**: - FY 2025: RMB 996 billion - FY 2026: RMB 1,022 billion - FY 2027: RMB 1,111 billion - FY 2028: RMB 1,202 billion [8] - **Net Income Estimates**: - FY 2025: RMB 129 billion - FY 2026: RMB 111 billion - FY 2027: RMB 106 billion - FY 2028: RMB 141 billion [8] Conclusion - Alibaba Group Holding is positioned to capitalize on the growing AI market through its Qwen AI Assistant, which integrates seamlessly into its extensive ecosystem. While there are significant growth opportunities, the company must navigate competitive pressures and regulatory challenges to achieve its financial targets.

Summary of Alibaba Group Holding (BABA.N) Qwen Product Release Conference Company Overview - **Company**: Alibaba Group Holding (BABA.N) - **Market Cap**: US$405.621 billion [4] Key Industry Insights - **Product Launch**: Alibaba announced the release of Qwen Task Assistant 1.0, a universal AI agent designed to autonomously execute a wide range of digital and real-world tasks for users [1][2] - **Integration**: Qwen will be integrated across Alibaba's ecosystem, including platforms like Taobao, Alipay, and Fliggy, aiming to enhance user experience and task completion [1][7] Core Capabilities of Qwen - **Enhanced Features**: Qwen's capabilities include multi-modality understanding, AI coding, and long-context processing, allowing it to perform over 400 core digital tasks such as application development, office automation, and data analysis [2][3] - **Real-World Application**: The AI assistant is designed to assist users not only in digital tasks but also in real-life scenarios, potentially performing 60-70% of routine tasks within two years [2] User Adoption and Growth - **User Metrics**: Qwen achieved over 100 million monthly active users (MAUs) within two months of its launch, indicating strong initial adoption [1] - **Promotional Strategy**: Alibaba plans to increase its promotional budget for Qwen in CY2026 to further boost user adoption and capitalize on the growing applicability of AI agents [1] Financial Projections - **Target Price**: The target price for Alibaba N-shares is set at US$197, reflecting a 16% expected share price return and a total expected return of 17.1% [4][10] - **Valuation Methodology**: The target price is based on a 10x P/E on FY2027E Ecommerce group net profit and other revenue multiples for different business segments [10][12] Risks and Challenges - **Downside Risks**: Key risks include failure in executing the new retail strategy, investment spending pressures, a slowdown in user traffic, integration risks for newly acquired entities, and regulatory risks related to product quality [11][13] Conclusion - **Investment Outlook**: The launch of Qwen Task Assistant 1.0 represents a significant step for Alibaba in the AI space, with potential for monetization in consumer AI applications in China. However, investors should remain cautious of the outlined risks that could impact the company's performance and stock price [1][11]

Summary of Conference Call Notes Industry Overview - **Industry**: Food Delivery Platforms in China - **Key Players**: Alibaba Group Holding (BABA), Meituan Core Points and Arguments 1. **Government Investigation**: The General Office of Anti-Monopoly and Anti-Unfair Competition Commission has initiated an investigation into food delivery platforms to ensure fair competition and reasonable pricing, addressing issues like excessive subsidies and aggressive price wars [2][3] 2. **Response from Companies**: Both BABA and Meituan have committed to cooperating with the investigation and adhering to relevant laws to promote orderly industry development [2] 3. **Intensified Competition**: Competition in the food delivery sector has escalated, with BABA expected to increase investments to capture market share, leading to significant cash burn concerns [4] 4. **Projected Losses**: BABA's quick commerce losses are projected to reach RMB 90 billion in fiscal year 2026 and RMB 60 billion in fiscal year 2027, raising market concerns about cash burn [4] 5. **Meituan's Financial Outlook**: Meituan is expected to incur an on-demand loss of RMB 27 billion in fiscal year 2025, followed by a profit of RMB 5 billion in 2026, although competitive pressures may impact margins [5] 6. **Investment Preferences**: The preference ranking for investments is BABA > PDD > Meituan > JD, with BABA's cloud services (Alicloud) expected to grow significantly [6] Additional Important Content 1. **Market Sentiment**: There is a growing concern regarding the cash burn of major players in the food delivery sector due to intensified competition, contrasting with earlier expectations of a more gradual competitive landscape [4] 2. **Regulatory Environment**: The investigation by the State Council is seen as a strong stance against the ongoing price wars and competitive involution in the food delivery sector [3] 3. **Future Growth Potential**: Alicloud is highlighted as a key growth driver for BABA, with expectations of revenue growth accelerating to over 35% in fiscal Q3 2026 and 40% in fiscal 2027 [6] This summary encapsulates the critical insights from the conference call regarding the food delivery industry in China, focusing on the competitive landscape, financial projections, and regulatory developments affecting key players.

Summary of Key Takeaways from China Internet Tour Industry Overview - **Industry**: China Internet - **Key Focus Areas**: AI, Cloud, Macro Environment, Competition, Regulation Core Insights 1. **Ecommerce Growth**: Soft consumption sentiment has negatively impacted ecommerce growth in the second half of Q4 2025, with expectations of continued muted macro conditions into 2026 [1][14] 2. **Regulatory Impact**: Tightening regulations and the implementation of ecommerce VAT are expected to affect the profitability of smaller merchants, which will, in turn, weigh on ecommerce platform monetization and margins [1][15] 3. **AI Cloud Demand**: Demand for AI cloud services remains robust, although supply constraints may gradually ease due to advancements in domestic chip production and selective approvals of high-end foreign chips [1][14] 4. **Competitive Landscape**: The competition in food delivery, quick commerce, and AI chatbots is intense, with increased promotional spending likely to further pressure profitability and margins [1][14] 5. **International Expansion**: Companies are increasingly focusing on overseas markets for robotaxi services, AI applications, and IDC buildout, moving beyond previous focuses on gaming and cross-border commerce [1] Company-Specific Highlights Alibaba (BABA) 1. **GMV Growth Pressure**: Macro conditions and a high base have pressured GMV growth, alongside a lapse of 0.6% fee/QZT benefit [2] 2. **Strategic Investments**: Management reiterated commitment to strategic investments in food delivery and quick commerce, aiming to increase volume and GMV market share in 2026 [2] 3. **Cloud Revenue Growth**: Strong demand for cloud infrastructure is expected to sustain high growth levels with stable margins [2] 4. **AI Integration**: Progress in user penetration of Qwen-Max-3 and future integration with Taobao and other Alibaba ecosystem components were highlighted [2] JD.com (JD) 1. **Macro Softness**: Similar to Alibaba, JD management noted macro softness and a high base affecting trade-in programs, with expectations of recovery in 2026 [3] 2. **Food Delivery Investment**: Continued investment in food delivery is seen as crucial for user growth and cross-selling synergies [3] 3. **General Merchandise Demand**: Despite macro challenges, demand for general merchandise remains solid, with growth momentum expected to continue into 2026 [3] Baidu 1. **AI and Cloud Demand**: Management emphasized strong demand for AI and cloud services, with AI-related revenues accounting for 40% of total core revenues in Q3 2025 [7] 2. **Spin-off Plans**: Commitment to improving disclosure of AI-related metrics and enhancing shareholder returns through the proposed spin-off of Kunlunxin was reiterated [7] Didi 1. **Volume Growth**: Management expects to maintain over 8% volume growth in China for 2026 despite macro headwinds [8] 2. **International Expansion**: Didi is committed to becoming a sustainable second player in Brazil, with significant investments in food delivery [8] Trip.com (TCOM) 1. **Travel Booking Performance**: Travel booking volume remained decent during New Year 2026, with expectations for hotel ADR stabilization [9] Full Truck Alliance (YMM) 1. **Order Volume Growth**: Anticipated slowdown in order volume growth to 12% in Q4 2025, with recovery expected in 2026 [10] Kanzhun 1. **Recruitment Recovery**: Continued recovery in recruitment sentiment, particularly in sectors like internet and healthcare, with growth momentum expected to sustain into 2026 [12] Bilibili (BILI) 1. **Ad Performance**: Advertising performance is on track, with expectations for decent momentum into 2026 driven by performance ads [13] Additional Insights 1. **Ecommerce VAT Impact**: JD.com is expected to be least affected by ecommerce VAT due to its large proportion of sales from 1P and large brands, while PDD and Kuaishou may face greater challenges [15] 2. **Investment Commitments**: Both Alibaba and JD are committed to high levels of investment spending, which may pressure profitability in 2026 [15] 3. **AI Competition**: The competition in AI infrastructure and models is intensifying, with Baidu's neutral position and Kunlun's compatibility with CUDA seen as advantages [14][15] Conclusion - The China internet sector is facing challenges from macroeconomic conditions and regulatory changes, but there are opportunities in AI and cloud services. Companies are focusing on strategic investments and international expansion to navigate these challenges and drive growth into 2026 [14]

Summary of Alibaba Group Holding (BABA.N) Earnings Call Company Overview - **Company**: Alibaba Group Holding (BABA.N) - **Industry**: China Internet and Other Services - **Current Price Target**: US$180.00 (previously US$200.00) [1][6] - **Market Capitalization**: US$348,554 million [8] Key Financial Metrics - **3QF26 Revenue**: Expected to be Rmb286.2 billion, a 2.2% increase YoY [14] - **Adjusted EBITA**: Expected to decline by 44.6% YoY to Rmb30.4 billion [14] - **Net Income**: Expected to decrease to Rmb31.9 billion, a 37.6% decline YoY [14] - **EBITA Margin**: Expected to be 10.6%, down from 19.6% YoY [14] Core Business Insights - **Cloud Revenue Growth**: Expected to accelerate to over 35% YoY, with a stable EBITA margin of 9% [3][11] - **Customer Management Revenue (CMR)**: Growth slowed to 3% YoY, down from 7.3% in 3Q25, attributed to weak consumer spending and high competition [4][11] - **E-commerce EBITA**: Expected to decline by 3% due to weak spending and high competition [4] Financial Performance Highlights - **Consolidated Adjusted EBITA**: Expected to decline by 45% YoY to Rmb30 billion, driven by weaker e-commerce performance and increased losses in other segments [5][11] - **Quick Commerce (QC) Loss**: Estimated at Rmb23 billion in F3Q, prioritizing market share over loss reduction [5] - **"All Others" Segment Loss**: Expected to widen to Rmb7 billion, driven by increased AI adoption costs [5] Valuation and Price Target - **Revised Price Target**: Lowered to US$180 due to weaker CMR and core EBITA performance [6] - **SOTP Valuation**: Revised to US$240, with cloud value unchanged at US$84 [6] Investment Thesis - **Overweight Rating**: Reiterated due to expected cloud growth and potential recovery in core business [6][22] - **AI Adoption**: Alibaba is positioned to benefit from the current AI cycle in China, enhancing its cloud infrastructure [26] - **Regulatory Environment**: Easing regulations may benefit Alibaba as a key player in the market [27] Risks and Considerations - **Market Competition**: Intense competition in the e-commerce sector may continue to pressure margins [4] - **Consumer Spending**: Weak consumer sentiment could impact revenue growth in the near term [4] - **Valuation Sensitivity**: Price target is sensitive to changes in market conditions and company performance [22] Additional Insights - **Cash Flow Generation**: Strong cash flow capabilities and ongoing share buybacks may provide downside support [27] - **Long-term Growth**: Expected total revenue CAGR of 8% over F25-28e, with adjusted EBITA CAGR of 6% [30] This summary encapsulates the key points from the earnings call, focusing on financial performance, market positioning, and future outlook for Alibaba Group Holding.

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