Chinese Singles Day 2017

Here’s a crazy question; why shouldn’t single people be able to celebrate their own version of Valentine’s Day? You may be shocked to learn that in China, they do. Single’s Day, or Bachelor’s Day, is a national holiday where single Chinese adults buy gifts for…themselves. Yes, you heard right. In China, there is one day out of the year where those without a loved one will actually buy themselves a present. Fittingly, Single’s Day falls on November 11. That’s because numerically, the date is 11/11, symbolizing that a single is only one person (we’re sure they appreciate the reminder).

How has this bizarre holiday affected markets?

To answer that question, let’s take a quick trip down memory lane. On Singles Day in 2016, Alibaba broke its shopping record by clocking growth of more than 32%. Sellers in Alibaba’s market-place recorded $17.8 billion worth of gross merchandise volume (GMV) in 2015. The bulk of that came from Singles Day which raked in a whopping $14.3 billion GMV in total.

Alibaba Group CEO Daniel Zhang further notes how “Back in 2013, $5.14 billion was our one-day GMV. Now we can achieve it in one hour”. He also pointed out how in the initial hour of Singles’ Day, products were being ordered at a frequency of 175,000 per second. In 2016, Single’s day reached $17.8 billion in sales, up over $3 billion from the previous year (2016). In other words, the amount of online sales in just one 24-hour period beat Brazil’s total e-commerce sales for all of 2016. Consider this-if Single’s day was its own autonomous country, its annual sales revenue would be ranked no.11 worldwide.

But do the sales profits necessarily increase the Alibaba’s valuation?

The truth is that as much as Singles Day boosts sales for Alibaba, it doesn’t necessarily mean their stock will follow suit. Case and point- in 2015, shares of Alibaba closed at 2% lower to $79.85 even though they beat the 2014 Singles Day sales record of $9 billion in China. They also topped industry tracker IDC’s estimate which was $13 billion to $13.8 billion in sales.

And even though these two situations don’t necessarily lead to a trend, this was the second consecutive time in BABA’s fourteen-month history as a public company whereby shares have risen during the weeks leading up to Singles Day, and then dropped immediately afterwards.

Leading up to this unusual holiday back in 2014, Alibaba enjoyed a 39% run-up of their shares from mid-October to Nov. 11. Then, the day before Singles Day the same year, Alibaba’s shares hit a (then) record high of $119.15. It fell 3.8% on Single’s Day, and then was hit with a 6 month-long drop through April 2015. In 2015, BABA’s shares climbed 49% from an all-time-low of $57.39 on September 28, but then peaked at $85.40 on Nov. 4, just to fall another 2% on Singles Day.

What’s the cause?

The share-price drop may have something to do with profit-taking. This happens when a share price rises significantly and shareholders choose to sell it en masse in order to make a profit. They do this right before an anticipated price decline otherwise known as a ‘short interest’-something that has more than doubled year-over-year for Alibaba. The company is also struggling with increased competition in China from sites like JD.com.

Conclusion

So whether the next Singles Day will cause Alibaba to rise or drop remains unknown. But consider this: If the market believes that an event’s results are predictable, the volatility may not generate too much appeal for traders. As always, stay informed and take advantage of market volatility as it appears.

 

 

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Any indication of past performance of a financial instrument is not a reliable indicator of current and/or future performance of such financial instrument.

Any indication of past performance of a financial instrument is not a reliable indicator of current and/or future performance of such financial instrument.

 

 

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