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Alibaba's Hong Kong Debut Off To A Strong Start According To Pros

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Alibaba's Hong Kong Debut Off To A Strong Start According To Pros

Alibaba Group Holding Ltd's (NYSE: BABA) anticipated share listing on the Hong Kong exchange took place Tuesday and the stock ended the trading session higher by more than 6.5%.

BABA Validation

Alibaba's successful debut in Hong Kong "validates" not only its business model but validates the ability of the Hong Kong exchange to offer sufficient liquidity, early Alibaba investor Santosh Rao of Manhattan Venture Partners said Tuesday on CNBC's "Worldwide Exchange."

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Alibaba also gave itself a hedge against the ongoing turbulence caused by the U.S.-China trade war, Rao said. At the same time, the company raised $11 billion in fresh capital which "doesn't hurt."

Overlooked Potential

Alibaba's story is misunderstood by investors as the company's efforts to expand into lower-tier Chinese cities offers a large potential, Hao Hong, managing director and head of research at BOCOM International, said on CNBC's "Squawk Box Europe." China's population stands at around 1.4 billion, of which up to 200 million live in tier-one or tier-two cities.

Alibaba can secure access to new markets which ensures growth will continue for the years to come, Hong said. The company is already backed by a strong operating cash flow but the proceeds from the Hong Kong listing will bring its cash balance north of $40 billion.

Alibaba can proceed with multiple strategies at once, including buying out competitors. The company will likely focus on acquiring rivals who import products oversees into the Chinese market, he said.

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