November 11, at 11 a.m., marked the armistice that brought World War I to an end in 1918. Brits remember the "War to End All Wars" today with poppies as pins. In China, the 11/11 combination of very-solo digits is Singles Day, which has become the world's biggest buying spree.
Taylor Swift ushered in this year's manufactured sales event in China. Thanks to Asian expansion, that is now a "Global Shopping Festival" for Alibaba (BABA) and its e-commerce sites such as Taobao. Swift last night sang three songs from her new album, Lover, in Shanghai as the lead act in an extravaganza to raise the roof on the 24-hour event.
As I write, Alibaba's sales have already rushed to US$31.7 billion by early evening in China, with seven hours of selling left in the day. That already exceeds their US$30.8 billion record tally from last year, so this should be the single-most-active day of online sales anywhere, ever.
Taobao and Alibaba's luxury-goods counterpart Tmall face competition from JD.com (JD) , which reported US$25.6 billion in sales by early Monday afternoon, and four-year-old upstart Pinduoduo (PDD) . China's e-commerce sales should this year total US$1.94 trillion, according to research from eMarketer, which would be triple the US$586.9 billion in sales in the second-biggest online market, the United States.
Hong Kong 'Hitch'
You may be wondering why Hong Kong stocks have cratered 2.5% here in Monday's trade. That has dragged the mainland CSI 300 index of the largest stocks in Shanghai and Shenzhen down 1.8% in the process.
So, I can't help but mention that November 11 in Hong Kong for 2019 is a combination of both World War I and Singles Day. Honestly, I intended to give politics a miss today. But a strange confluence of political, economic and commercial tides keeps combining here in China, and Hong Kong.
Protests and a strike were intended to disrupt the city on Monday, after the first directly demonstration-linked death. I warned on Friday that Hong Kong protests would intensify after computer-science undergrad Chow Tsz-lok died in a fall. Demonstrators say they're going out of their way to avoid Chinese products Monday. Most mainland symbols are under attack.
Today, at least one protestor was shot at point-blank range, in an incident that the police officer -- who was walking away from demonstrators -- appeared to incite, as you can see here. The man confirmed shot went to intensive care with injuries to his kidney and liver, and is in critical but stable condition after surgery.
Another man was set on fire, based on a video clip, after an argument with anti-government protesters, in which he called them "not Chinese," and "British," to which they said "We are Hong Kongers," and told him to go back to China. Someone then squirts liquid on him and sets it alight. Hong Kong's state broadcaster RTHK says he is also in critical condition in hospital.
The 7.4 million Hong Kongers make up a tiny fraction of the 1.4 billion Chinese citizens. So, any boycott is almost completely symbolic. Still, luxury goods companies with heavy exposure to Hong Kong, such as Burberry (BURBY) and LVMH (LVMUY) , are seeing their shares flag on Monday, in European trade. Companies such as Prada (PRDSY) and LVMH "house" Louis Vuitton often open splashy flagship stores in Hong Kong that have been loss leaders to promote a high-end image into China.
Hong Kong makes up about 6% of LVMH's total sales. The figure is even higher for watch specialists. Cartier parent Richemont (CFRUY) sees around 11% of global sales come from this city.
Most mainland Chinese brands will treat Hong Kong missed sales as a rounding error on Singles Day. China's economic power is so great it blinds most in business to any ethical concerns about operating in its Communist dictatorship. The Beijing leadership would rather the populace focus on business and Singles Day sales, and leave all that complex political thinking to them.
U.S. companies such as Nike (NKE) , Dell (DELL) and Procter & Gamble (PG) have all been running advertising campaigns in China for Singles Day. But they have tended to focus on discounts, perhaps wary of the political pressure rising on overseas companies operating in China. There's political grandstanding from U.S. politicians, of course. In China, a survey by AlixPartners of Singles Day intentions showed that 78% of Chinese consumers say they would avoid U.S. goods thanks to the trade war.
Besides the online-sales sites, China's logistics sector is also a major beneficiary of the boom in e-commerce. Courier companies such as New York-listed ZTO Express (ZTO) have fleets of deliver drivers on scooters and trucks across the country.
ZTO's competitors are all listed on mainland markets. That makes them hard for overseas investors to access, unless it's through indexes. The main operators are SF Holding (SZ:002352) -- a "unicorn" that started life shipping goods back and forth across the Hong Kong border -- as well as Yunda Holding (SZ:002120) and ZTO Express's imaginatively named competitors STO Express (SZ:002468) and YTO Express (SH:600233).
Pinduoduo, founded by a former engineer from Google (GOOGL) , has carved a niche for itself by targeting China's smaller cities, which Alibaba and JD.com have largely ignored. It has found success by encouraging lower-income shoppers to group together for deals on generic goods. It is helped by operating via China's "superapp" WeChat, which is operated by Pinduoduo investor Tencent Holdings TCEHY.
Singles to 'Doubles'?
Besides China, Alibaba has had good success expanding Singles Day into Singapore and Malaysia. It has been less effective so far with its push into Indonesia and Vietnam. Alibaba has a mainly B-to-B English-language site but has also bought what's now almost total control of Lazada, the dominant online-sales marketplace in Southeast Asia.
This Singles Day will be particularly carefully watched since it is the first Alibaba has experienced "on its own." Co-founder and figurehead Jack Ma stepped down in September, leaving CEO Daniel Zhang in charge. The company's president of Taobao and Tmall, Jiang Fan, is overseeing Singles Day 2019.
Secondary Listing
Alibaba is itself going to test those turbulent political waters. It plans to launch a secondary listing in Hong Kong to raise US$10 billion to US$15 billion in the last week of November. Its US$25 billion initial public offering in New York in 2014 remains the world's biggest for now. Saudi Arabia's oil giant Aramco is going to launch a politically sensitive US$30 billion offering itself this quarter. We'll see how or indeed if Alibaba is successful with its own sale on Hong Kong's capital markets soon enough.
