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What can the Alibaba share price, and that of JD.com and Pinduoduo, tell us about the e-commerce market?

China’s 618 shopping festival has become a battleground for the country’s big-name e-commerce players. What might this year’s event mean for the Alibaba share prices [BABA], the JD.com share price [JD] and Pinduoduo share price [PDD]?

All three stocks have struggled to take off in 2021. The Alibaba share price is down almost 6% year-to-date through 24 June, when it closed at $218.38, and down 3.5% in the last 52 weeks. The Alibaba share price is currently trading 31.6% down from its all-time high of $319.32, which it recorded during trading on 27 October last year. 

It’s a similar story for JD.com’s stock as it is with the Alibaba share price. Though it has gained 22.2% in the last 52 weeks, it is down 16.8% since the start of the year. Having closed at $74.90 on 24 June, JD.com’s share price is trading 30.8% down its all-time high of $108.29, which it peaked at on 17 February. 

As for the Pinduoduo share price, it’s up 48.5% in the last 52 weeks but down 23.5% since the start of 2021. Though the 24 June closing price of $127.72 is 82.7% above its 52-week low of $69.89, recorded on 5 October the stock price has fallen 39.9% from its all-time high of $212.60, recorded during trading on 16 February. 

Weighing heavily on the Alibaba share price, and those of JD.com and Pinduoduo, has been a combination of both US-China tensions and Beijing’s clampdown on big tech. The country is looking to end the market dominance of the big e-commerce players.

The Alibaba share price and the share prices of JD.com and Pinduoduo are likely to remain under pressure for some time. And while the 618 festival hasn’t had a direct impact on the stocks, the companies’ performance during the event should give investors an idea of current consumer demand for e-commerce. 


Shopping frenzy

What started as a one-day festival for JD.com on 18 June 2004 has become an 18-day shopping extravaganza held across China. The 618 festival runs annually during the first 18 days of June. Last year, Alibaba and JD.com raked in a combined $136.51bn in sales. 

This year’s event didn’t get off to the smoothest start. In May, the Shanghai Consumer Council accused Pinduoduo and Meituan [3690.HK] of abusive practices that were damaging the rights of consumers. The Pinduoduo share price tumbled 9% in intraday trading when the news broke, reported Nikkei Asia.

What’s more, a number of e-commerce platforms have recently been warned about spamming consumers with unsolicited, promotional text messages, according to Beijing-based journalist Matthew Walsh. Translating a statement posted on an official Chinese government website, Walsh said the major companies had agreed to “strictly manage” such messages in the future.

Early indications are that sales during this year’s festival were strong. For instance, JD.com has reported that its total transaction volume was over RMB343.8bn. This represented a year-over-year growth rate of 27.7% on the RMB269.2bn brought in during 618 in 2020. 


JD.com's total transaction volume during 618 - a 27.7% increase


It wasn’t just standard e-commerce lines and electronics goods that were snapped up. JD.com saw a 230% growth in its online real estate business during the 18-day period and a 285% increase in car maintenance orders. Meanwhile, housekeeping and cleaning services increased 6.3 times.

The fastest-growing healthcare line was oral health, particularly teeth whitening kits, with sales increasing 447% year-over-year. And demand for its genetic testing service rose by 23 times.


Will the Alibaba share price rise with consumer confidence?

The impact of the 618 sales bonanza on the Chinese e-commerce players shouldn’t be underestimated.

Shopping holidays, including October’s Golden Week and November’s Singles’ Day, play a key part in helping these companies to beat quarterly earnings and revenue forecasts. 

As domestic consumption continues to rebound to pre-pandemic levels China Galaxy Securities is confident that retail sales will trend upwards for the rest of the year.

According to CGTN, domestic consumer confidence is returning, and Ang forecasts that consumption will grow 6% or 7% by the end of 2021. 


YTD daily return of the Amplify Online Retail ETF


That said, with the Alibaba share price as well as JD.com’s and Pinduoduo, are still very much at the mercy of Chinese regulators and intensifying relations between China and the US, the stocks could be a risky buy right now.

There are several ETFs that hold all three stocks — for example, the Amplify Online Retail [IBUY] and the iShares MSCI China ETF. The former had a year-to-date daily return of 11.74% on 24 June, however, the latter had a year-to-date daily total return of -0.52%. 

Disclaimer Past performance is not a reliable indicator of future results.

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