[True Insight Hong Kong Stock Experts] Alibaba Starts May Strongly, Earnings Report and AI Narrative in Focus

Hong Kong stocks kicked off the first trading day of May on a positive note, with the Hang Seng Index strongly reclaiming the 26,000-point mark. Among them, tech giant Alibaba-SW (09988.HK) performed particularly well, becoming one of the main drivers leading the blue-chip rally. The strength in its stock price reflects market optimism about the upcoming earnings report and the prospects of its AI business.

By the close, the Hang Seng Tech Index surged over 2%, while Alibaba's stock price closed up more than 4.5% at HK$131.7, with intraday gains once expanding to over 6%. From a fund flow perspective, market trading was active, with several block trades occurring just on the morning of May 4, indicating extremely high investor attention. This round of gains is not an isolated event; other tech leaders like Tencent (00700.HK) and Xiaomi (1810.HK) also strengthened simultaneously, jointly boosting overall market turnover.

The most direct catalyst for this market enthusiasm is Alibaba's scheduled release of its FY2026 results on May 13. Trading ahead of earnings reports often reflects investor expectations.

Based on previous financial guidance from the company, the market has strong confidence in this earnings report. This is mainly reflected in two aspects: First, after intense industry competition, the company expects losses in its local consumer services segment (such as food delivery) to be significantly narrowed by half in FY2026, marking a strategic shift from "burning cash for market share" to "high-quality growth." Second, its core second growth curve—cloud computing—is seeing significantly accelerated growth, with the growth rate expected to break the 40% mark for the first time. This signal is crucial, indicating that Alibaba's technology investments under its "AI-driven" strategy are entering a payback period.

Beyond short-term earnings speculation, the deeper reason for Alibaba's recent stock performance lies in the reshaping of its valuation. Under the "user-first, AI-driven" strategy, the market is re-evaluating Alibaba's transformation from an "e-commerce giant" to a "technology platform."

The integration of AI and cloud computing is seen as Alibaba's core future growth engine. Major bank reports point out that as the global AI race enters the application deployment phase, demand for cloud infrastructure is experiencing explosive growth. By integrating its Qianwen large model with existing cloud services, Alibaba Cloud maintains a leading position in the government-enterprise market and developer ecosystem. In the view of foreign investment banks, the breakthrough progress in cloud business growth rate is key to triggering a valuation recovery, which helps offset uncertainties in the e-commerce business due to the macro environment.

Looking ahead, several institutions believe the technology internet sector remains the direction with the highest "odds" in the current market. A major bank report stated that as expectations for policy catalysts heat up in May, coupled with potential external environment easing from a possible US-China summit, the window for Hong Kong stock valuation recovery may reopen. Against this backdrop, Alibaba, benefiting from AI industry catalysts and ongoing massive share buybacks, has significant room for mean reversion.

Overall, Alibaba is at a critical juncture of transitioning between old and new fundamental drivers. In the short term, the upcoming earnings report will test the logic of reduced losses and accelerated cloud growth. In the long term, the commercialization of AI technology will be key to determining whether it can return to a growth trajectory.

(Written by: Professor Li Huifen, Greater Bay Area Family Office Association) (The author holds the above stocks) Last Friday, the US Department of Justice formally dropped the criminal investigation into Federal Reserve Chairman Jerome Powell. This also directly cleared the path for Kevin Warsh, nominated by Donald Trump for the Fed chairmanship.

Current Fed Chair Powell's term expires on May 15, and this week will be Powell's last time leading an FOMC meeting as chairman. Federal funds futures traders raised the probability of an interest rate cut by year-end from 23% to 38%.

US Attorney for the District of Columbia, Jeanine Pirro, announced on social media platform X that she had decided to terminate the criminal investigation into Powell. Just on Wednesday, Pirro had said she would continue to pursue the investigation.

However, the investigation into the multibillion-dollar renovation of the Fed's headquarters had effectively stalled after a federal judge earlier ruled its motive "extremely thin and unsupported by evidence" and quashed a Justice Department grand jury subpoena to the Fed.

The Justice Department launched the criminal investigation into Powell in January. Trump had repeatedly publicly criticized him for not cutting rates faster and accused him of mismanagement and even misconduct in the Fed headquarters renovation project.

Although a Washington federal prosecutor told the court last month that no evidence of a crime had been found, the investigation continued, supported by Trump. Controversy has persisted since the investigation began. Powell had explicitly stated the investigation was politically motivated, and the subpoena issued by prosecutors caught the White House off guard and also impacted Warsh's nomination prospects.

Last month, a federal judge dismissed the related Justice Department subpoena, and Pirro said at the time she would appeal. The investigation also raised concerns that the Trump administration might be trying to undermine the Fed's independence to pave the way for political interference in interest rate policy.

Warsh, personally chosen by Trump, is widely seen as likely to push for rate cuts upon taking office. However, at a US Senate Banking Committee hearing, Warsh gave vague answers on whether he would follow Trump's wishes for significant rate cuts and how to shrink the balance sheet.

Warsh outlined his proposals for reforming the Fed, such as replacing the Fed's inflation forecasting model, reducing the frequency of external communications, and gradually shrinking its $6.7 trillion balance sheet. But Trump also reiterated he would be disappointed if a Warsh-led Fed failed to deliver rate cuts.

Although Warsh did not directly express support for rate cuts, his statements to some extent reflect a bias towards lowering rates. Warsh's policy stance is an extension of the "America First" strategy in the monetary field amid the anti-globalization wave. This shift means the narrative of persistently abundant US dollar liquidity will face revision, and assets solely reliant on liquidity-driven, "excessive dollar printing" benefits may come under pressure.

Warsh's policy stance has a neutral impact on the market, with short-term asset pricing contradictions still revolving around stagflation trades driven by Middle East conflicts. Regarding Fed policy itself, attention should be paid to the Senate's subsequent vote on Warsh's nomination; the arrangements for the Fed's communication mechanism with the market after Warsh takes office; and the development and use of open market operation tools, which to some extent can reflect the timing arrangements for balance sheet reduction.

(Written by: Professor Li Huifen, Greater Bay Area Family Office Association) (The author does not hold the above stocks)