Asia Tea Time - #86 ☕

Alibaba's monster rally and how to invest in gold

Author

Tim Phillips
February 22, 2025 • Estimated Reading Time: 6 minutes

This week I talk Alibaba’s monster rally and how to go about investing in gold.

Macro in Asia

Alibaba stock rallies hard as earnings impress investors

Alibaba Group Holding Ltd (NYSE: BABA) (HKEX: 9988) came out with its latest Q3 FY2025 earnings on Thursday (20 February) and they spurred more gains for the company’s stock, which have been on fire in recent months.

So far in 2025, Alibaba’s Hong Kong-listed shares are up 70%.

Why it’s happening

  • Alibaba has been on a roll in 2025 and its latest earnings gave it an even bigger boost. Bigger-than-expected cloud computing revenue for the e-commerce giant helped its Hong Kong shares soar nearly 15% on Friday.

  • While its overall revenue growth wasn’t exactly that hot – up 8% year-on-year – it was the recovery of its core e-commerce business in China that gave investors hope that the much-awaited turnaround in its main business was starting to play out.

  • The broader rally in Alibaba has also been helped by news that came out a few weeks ago that the kinda small tech company – Apple Inc (NASDAQ: AAPL) – will incorporate Alibaba’s Artificial Intelligence (AI) technology into its iPhones that it sells in China.

Why it matters

  • Alibaba had been the poster child for the government crackdown on technology in China and, as a result, its shares had taken a battering.

  • In fact, from Alibaba’s peak share price in October 2020 to the end of 2024, its Hong Kong shares were down around 70%. After the recent rally, they’re only down around 50% or so from that all-time high.

  • Talk of China’s government finally easing up on its tech platform companies suggests that Alibaba could be back in the good graces of the government.

What’s next?

  • Can other tech giants like Tencent (HKEX: 700) and Meituan (HKEX: 3690) follow in Alibaba’s footsteps by reporting better-than-expected earnings? They’ll be reporting next month and their numbers will be closely watched by investors.

Tim’s Take

Alibaba has shocked most investors with the ferocity of its rally so far in 2025. It’s added over US$100 billion in value to its market capitalisation this year alone..

But what’s driving it? Well earnings obviously helped but there have been a host of other factors too. The whole DeepSeek revelation – that also sank a lot of US tech companies’ shares – is highlighting just how good Chinese AI really is.

That also applies to Alibaba, with its Alibaba Cloud unit having developed a very well-respected large language model (LLM) in Qwen. Indeed, Alibaba has claimed its latest Qwen 2.5 AI model that can outperform DeepSeek-V3 and ChatGPT-4o.

On the business side, though, Alibaba’s core China e-commerce business – the Taobao and Tmall Group – is starting to bounce back and it recorded 5% year-on-year revenue growth in the latest quarter.

Even better was the company’s International e-commerce business, which has consistently been posting double-digit growth. The unit, which includes Lazada and overseas marketplaces like Ali Express, saw impressive 32% year-on-year revenue growth during the quarter.

And with President Xi Jinping also meeting Alibaba founder Jack Ma in an event where the Chinese leader hosted tech bigwigs, the hope among investors is that Alibaba is now back in from the cold.

With the feeling that the Chinese government is trying to woo the Chinese tech private sector, hopes are running high that Alibaba will start to benefit more materially in the next six to 12 months.

It’s been a very long – and at times dark – road for China tech investors but it finally appears like there are reasons to be optimistic.

Tim’s Money Tip of the Week

Gold has never appealed to a lot of investors given it doesn’t actually do anything except look pretty – unlike stocks or bonds which generate cash flows or interest.

Yet in these uncertain times, gold has actually become one of the best-performing assets in recent years.

Traditionally, gold rises when interest rates fall and the US dollar weakens. In that sense, it has a strong correlation (i.e. moves in line) with bonds. However, that correlation started to break down in 2022 when the US Federal Reserve raised interest rates.

While bond prices fell sharply, the price of gold actually held up relatively well. That in itself tells you something. With inflation looking like it’s now entrenched somewhat in the global economy and with huge uncertainty on many fronts globally – from President Trump’s tariffs to geopolitical tensions – many are looking at gold as a shiny alternative asset to hold.

So, what the best way to actually tap into gold? Besides buying physical gold, it’s easy to purchase a gold exchange-traded fund (ETF). You can do this via the SPDR Gold Trust (NYSE: GLD) that’s listed on the New York Stock Exchange.  

There are also USD and SGD share classes of the same ETF available to buy on the Singapore Exchange (SGX) as well as in USD and HKD shares classes on the Hong Kong Stock Exchange.

One little known gold ETF, which has the lowest expense ratio out there at just 0.10% per annum (p.a.), is actually the SPDR Gold Minishares Trust (NYSE: GLDM). That compares to the 0.40% p.a. annual expense ratio for the flagship SPDR Gold Trust.

With a lower share price, GLDM is designed to be a more cost-friendly way for investors to get into gold.